OIC Options on ETFs

Size: px
Start display at page:

Download "www.optionseducation.org OIC Options on ETFs"

Transcription

1 Options on ETFs

2 1 The Options Industry Council For the sake of simplicity, the examples that follow do not take into consideration commissions and other transaction fees, tax considerations, or margin requirements, which are factors that may significantly affect the economic consequences of a given strategy. An investor should review transaction costs, margin requirements and tax considerations with a broker and tax advisor before entering into any options strategy. Options involve risk and are not suitable for everyone. Prior to buying or selling an option, a person must receive a copy of Characteristics and Risks of Standardized Options. Copies have been provided for you today and may be obtained from your broker, one of the exchanges or The Options Clearing Corporation, One North Wacker Drive, Suite 500, Chicago, IL or call OPTIONS or visit Any strategies discussed, including examples using actual securities and price data, are strictly for illustrative and education purposes and are not to be construed as an endorsement, recommendation or solicitation to buy or sell securities. LEAPS is a registered trademark of Chicago Board Options Exchange, Incorporated. Copyright The Options Industry Council. All rights reserved.

3 2 Presentation Outline Exchange Traded Funds (ETFs) o risk ETF Options Buy ETF Call Buy ETF Put Buy Protective ETF Put Covered ETF Call ETF Collar Conclusion

4 ETFs

5 4 What Is an ETF? ETF = exchange traded fund o shares of a security undivided interest in a portfolio o similar to an index fund ETFs trade like stock o on exchanges with similar commissions o may be margined and/or sold short o not all ETFs have high trading volume Objective is to track performance of underlying index

6 5 ETF Portfolios ETF portfolio designed to replicate underlying index o composition, performance and yield o referred to as a basket Full replication o index components and weighting matched Optimization o subset of components chosen via model o objective is to mirror index performance

7 6 Types of ETF Management Passive o portfolio predetermined o goal: track index only no forecasting o majority of ETFs Active o market trends are forecast o portfolios adjusted o goal: to outperform index/market

8 7 ETF Management Expenses Expenses, fees and operating costs o periodically paid from fund s assets Expense ratios o yearly expenses as percent of average daily net assets o published o generally less with passive management

9 8 Dividends Dividends from portfolio stocks paid to ETF o may be distributed to ETF shareholders Payment method o generally in cash credited to brokerage account o regularity and frequency varies among funds Expenses paid before dividend distribution made o may affect dividend amount shareholders receive

10 9 ETF Value & Pricing Net asset value (NAV) o total net assets / number of outstanding shares o published daily ETF shares not bought from fund at NAV o prices set by supply & demand in marketplace like stock o may trade close to NAV o kept in line by arbitrage opportunities

11 10 ETF Tracking Error An ETF may not track index performance exactly o any variance is tracking error o historical data available Reasons? o portfolio composition o fluctuating expenses and cash held o liquidity

12 11 ETFs vs. Mutual Funds ETFs o bought & sold on exchange o commissions o priced by supply & demand o most passive management o generally lower expenses o no minimum investment o options may be available o portfolios transparent (posted daily on Web site) Mutual Funds (open ended) o sold & redeemed by fund o no commissions (no-load) o valued at NAV end of day o most active management o generally higher expenses o often minimum investment o options not available o portfolios not transparent

13 12 Comparing ETFs Variety of underlying indexes o broad, narrow or sector Variety of asset classes o stocks, currencies, bonds, country specific Why risk of ETFs on same market or sector may vary o management o index components, calculations and weightings

14 13 Comparing ETFs Inverse & leveraged ETFs o may be significantly more volatile than others on same index o risk potentially very high o consult your broker first Understand risk of all ETF investments o study prospectus o note tracking errors and market liquidity o be familiar with the index components and their weighting

15 14 Motivations for Using ETFs Potential profit from opinion on underlying index o bullish or bearish To manage various aspects of investment risk o diversification o asset allocation o correlation To build a global strategy In either case: short-term or long-term

16 15 Investment Risk Risk is the potential for an adverse outcome o actual returns will deviate from expected returns Market risk o common to all securities within an asset class o e.g., stocks or bonds o also systematic risk Specific risk o unique to a specific security o e.g., XYZ stock or XYZ bond o also unsystematic or diversifiable risk

17 16 Managing Risk Diversification o employing a range of investments o within asset class (e.g., stocks) o within a sector (e.g., banking, internet, oil) o when making single investment or managing portfolio Asset allocation o proportioning investments among asset classes o e.g., ratio of stocks to bonds to cash o portfolio management

18 17 Managing Risk Correlation o degree to which two asset classes move together o positive = assets move in same direction o negative = assets move in opposite direction o management of portfolio market risk o affects volatility of overall portfolio returns Historical relationship between risk & reward o greater yield comes with greater risk o no investment is entirely risk-free

19 18 Benefits and Drawbacks of ETFs Benefits o diversification & asset allocation with one trade o tax efficiency & transparency o lower cost than buying/selling portfolio of stocks o exchange-listed options may be available Drawbacks o tracking error o commissions increase costs for aggressive traders

20 ETF Options

21 20 What Are ETF Options? ETF options are contracts that give o the holder the right and the writer an obligation o to buy or sell 100 underlying ETF shares o at the strike (exercise) price per share o at any time before the expiration date Considered equity options Available on a variety of ETFs listed and traded on U.S. options exchanges LEAPS may be available

22 21 ETF vs. Equity Options Contract Terms ETF Options Equity Options Underlying ETF Stock Settlement Physical Unit of trade 100 shares Expiration Saturday following third Friday of expiration month Last trade Friday before expiration date Exercise style American Trading hours May vary 8:30 am to 3:30 pm Central Multiplier 100 Premium 1 point = $100

23 22 ETF Option Example XYZ January Call at $4.20 XYZ = underlying ETF January = expiration month = strike price ($50.00 per share if exercised) Call $4.20 = option type = quoted premium ($ total)

24 23 What s In and What s Out Same as Equity Options In-the-money o call: strike price below ETF price o put: strike price above ETF price At-the-money o call & put: strike price at ETF price Out-of-the-money o call: strike price above ETF price o put: strike price below ETF price

25 24 Premium and Its Components Same as Equity Options Premium = intrinsic value (if any) + time value o time decay expiring option worth only intrinsic value ETF Calls & Puts In-the-money At-the-money Out-of-the-money Total Premium Intrinsic value + time value All time value Total premium = quoted price x 100 multiplier o price $3.50 = $ total premium

26 25 ETF Calls Long ETF call o right to buy 100 ETF shares at strike price o profit potential unlimited o loss limited to premium paid Short ETF call o obligation to sell 100 ETF shares at strike price o if assigned o profit limited to premium received o loss potential unlimited

27 26 ETF Puts Long ETF Put o right to sell 100 ETF shares at strike price o profit potential substantial o loss limited to premium paid Short ETF put o obligation to buy 100 ETF shares at strike price o if assigned o profit limited to premium received o loss potential substantial

28 27 ETF Pricing Factors Same as Equity Options Factors o o o underlying ETF price strike price volatility of ETF shares o o o time until expiration interest rate dividends Implied volatility o assumption at which option currently priced o underlying ETF volatility expected by marketplace o generally lower for index than individual components Volatility and time decay affect only time value

29 28 Advanced Pricing Calculator 60

30 29 ETF Options vs. Index Options ETF options o o o o physical settlement American-style underlying may be bought/sold smaller strike increments Index options o o o o cash settlement most are European-style no underlying to buy/sell greater strike increments LEAPS contracts may be available for both 29

31 30 Ways to Use ETF Options Capitalize on market opinion with long options o potential for leveraged profits o predefined, limited loss Short-term plays on over- or under-performance o broad market, sectors or asset classes With appropriate ETF choice, adjust with one trade o diversification, asset allocation, correlation Hedge portfolio risk or with objective to boost returns

32 31 Why ETF Options? Why bother? Wide variety of strategies are available Long Call Short Call Long Put Short Put Long Straddle Short Straddle Long Strangle Short Strangle Long Call Spread Long Put Spread Short Call Spread Short Put Spread Ratio Call Spread Ratio Put Spread Call Volatility Spread Put Volatility Spread Long Split- Strike Synthetic Collar ETF options give you options!

33 Buy ETF Call

34 33 Bullish Investor Investor bullish on an industry sector o unsure of specific stock to purchase o wants diversified long position o sector index tracked by ETF XYZ Decision: buy 1 XYZ call Possible motivations o speculation for leveraged upside profits o purchase underlying XYZ shares

35 34 Bullish Investor Choice of strike price depends on motivation In-the-money more conservative o plan to exercise and buy ETF shares Out-of-the-money more speculative o objective: sell call for profit More out-of-the-money the more speculative o set expectations accordingly

36 35 Buy Call Example Opinion: bullish on XYZ over next two months XYZ currently at $75.00 Action o buy 1 XYZ call at $2.90 o call in-the-money o total cost: $2.90 x 100 = $ Compare to XYZ purchase Available 2-month calls XYZ call $2.90 XYZ call $2.40 XYZ call $1.90 o buy 100 XYZ shares at $75.00 = $7, total Not including commissions

37 36 Buy 1 XYZ Call at $ Long XYZ at $ Break-even at Expiration: Strike Price + Premium Paid $ $2.90 = $76.90 Maximum Loss: $2.90 Premium Paid $ Total Profit Potential: Unlimited Not including commissions

38 37 Buy 1 XYZ Call at $2.90 XYZ Price at Expiration Long Call Value at Expiration Long Call Initial Cost Total Profit/(Loss) $80.00 $6.00 ($2.90) $3.10 $78.00 $4.00 ($2.90) $1.10 $76.90 $2.90 ($2.90) 0 $ ($2.90) ($2.90) $ ($2.90) ($2.90) Not including commissions

39 38 Buy 1 XYZ Call at $2.90 vs. Buy 100 XYZ at $75.00 XYZ Price at Expiration $85.00 $80.00 $70.00 $65.00 Long Call Profit/(Loss) $8.10 $3.10 ($2.90) ($2.90) Long Call % Profit/(Loss) 279% 107% (100%) (100%) Long XYZ Profit/(Loss) Per Share $10.00 $5.00 ($5.00) ($10.00) Long XYZ % Profit/(Loss) 13% $75.00 ($1.90) (66%) 0 0 7% (7%) (13%) Not including commissions

40 39 Buy 1 XYZ Call at $2.90 Exercise at expiration o buy 100 XYZ at $74.00 per share Net cost paid for XYZ shares o $74.00 strike + $2.90 premium paid = $76.90 per share o $7,690 total Risk before exercise o premium paid always at risk for all long ETF options Risk after exercise o downside on 100 long shares = $7,690 Not including commissions

41 Buy ETF Put

42 41 Bearish Investor Investor bearish on broad market o uncomfortable with risk of any short stock positions o wants diversified short position with limited risk o broad market index tracked by ETF XYZ Decision: buy 1 XYZ put Motivation o speculation for leveraged downside profits

43 42 Bearish Investor Choice of strike price depends on motivation In-the-money more conservative o has intrinsic value less vulnerable to decay Out-of-the-money more speculative o all time value total cost vulnerable to decay More out-of-the-money, the more speculative o need greater move to downside for profit o set expectations accordingly

44 43 Buy Put Example Opinion: bearish on XYZ over next two months XYZ currently at $75.00 Action o buy 1 XYZ put at $2.00 o put out-of-the-money Total cost: $2.00 x 100 = $ Available 2-month puts XYZ put $2.00 XYZ put $2.45 XYZ put $3.00 Not including commissions

45 44 Buy 1 XYZ Put at $ Break-even at Expiration: Strike Price Premium Paid $74.00 $2.00 = $ Maximum Loss: $2.00 Premium Paid $ Total 5 BEP $72.00 Profit Potential: Substantial Not including commissions

46 45 Buy 1 XYZ Put at $2.00 XYZ Price at Expiration Long Put Value at Expiration Long Put Initial Cost Total Profit/(Loss) $ ($2.00) ($2.00) $ ($2.00) ($2.00 $72.00 $2.00 ($2.00) 0 $70.00 $4.00 ($2.00) $2.00 $68.00 $6.00 ($2.00) $4.00 Not including commissions

47 46 Buy 1 XYZ Put at $2.00 Exercise at expiration o sell 100 XYZ at $74.00 per share Net received for XYZ shares o $74.00 strike $2.00 premium paid = $72.00 per share o $7,200 total Risk before exercise o premium paid always at risk for all long ETF options Risk after exercise if no shares owned o short 100 XYZ shares unlimited upside risk Not including commissions

48 Buy ETF Protective Put

49 48 Defensive Investor Investor long ETF XYZ o concerned about downside protection wanted Decision: buy XYZ protective put o 1 put for each 100 XYZ shares owned Each protective put o grants right to sell 100 shares o at strike price until expiration o as long as put is owned

50 49 Defensive Investor Upside profit potential on XYZ shares o unlimited o less cost of put Downside loss on XYZ shares o limited o may be sold at strike price upon exercise Choice of strike price depends on protection needed

51 50 Protective Put Example Opinion: bullish on XYZ o defensive over next two months Long 100 XYZ at $76.00 o XYZ currently at $75.00 Action o buy 1 XYZ put at $1.50 o put is out-of-the-money Available 2-month puts XYZ put $1.20 XYZ put $1.50 XYZ put $1.95 Total cost: $1.50 x 100 = $ Not including commissions

52 51 Buy 100 XYZ at $76.00 Buy 1 XYZ Put at $ Long XYZ at $ BEP $77.50 Not including commissions Break-even at Expiration: ETF Price Paid + Put Premium Paid $ $1.50 = $77.50 Maximum Loss: ETF Price Paid Break-even for Put $76.00 ($73.00 $1.50) = $4.50 $ total Profit Potential: Unlimited

53 52 Buy 100 XYZ at $76.00 Buy 1 XYZ Put at $1.50 XYZ Price at Expiration Long Put Profit/(Loss) Long XYZ Profit/(Loss) Net Profit/(Loss) $85.00 ($1.50) $9.00 $7.50 $80.00 ($1.50) $4.00 $2.50 $77.50 ($1.50) $ $75.00 ($1.50) ($1.00) ($2.50) $70.00 $1.50 ($6.00) ($4.50) $65.00 $6.50 ($11.00) ($4.50) Not including commissions

54 53 Buy 100 XYZ at $76.00 Buy 1 XYZ Put at $1.50 Exercise at expiration o sell 100 XYZ at $73.00 per share Net received for XYZ shares o $73.00 strike $1.50 premium paid = $71.50 per share o $7,150 total Risk before exercise o limited Not including commissions

55 Covered ETF Call

56 55 Investor Seeking Income Investor o neutral to moderately bullish on ETF XYZ o expects small price range over next few months Decision: write covered call o buy 100 XYZ shares o write 1 XYZ call

57 56 Investor Seeking Income Primary Motivation increase returns o call premium received and kept o generates additional income (over any dividends) o trade-off is upside on shares limited by short call Call premium s limited downside benefit o lowers XYZ shares break-even point o reduces cost basis o only by premium amount received

58 57 Covered ETF Calls Call writer s obligation o sell XYZ shares if assigned at any time before expiration Long XYZ shares collateralize short call obligation o if assigned shares sold already owned Risk is in the long XYZ shares Long ETF Covered Call

59 58 Covered ETF Calls Write in-the-money call o defensive and more conservative o more premium received more downside protection o less upside profit potential Write out-of-the-money call o aggressive and less conservative o less premium received less downside protection o more upside profit potential

60 59 Covered ETF Calls Strike price selection o assess your tolerance for risk o balance upside profit potential vs. limited protection o pick strike accordingly Generally considered conservative strategy o reduces (not limits) downside risk Outperforms long XYZ shares o if price declines, unchanged or rises slightly

61 60 Covered ETF Calls Maximum profit potential if assigned o limited o strike price share price paid + call premium received Break-even point o share price paid call premium received Downside loss potential substantial o risk is with XYZ shares o entire share cost less call premium received at risk

62 61 Covered ETF Call Example Opinion: neutral to moderately bullish on XYZ XYZ currently at $75.00 Expect XYZ to trade between $73.00 and $77.00 for next 90 days Action o buy 100 XYZ at $75.00 o sell 1 XYZ call at $2.10 A $0.50 dividend is expected before expiration Not including commissions Available 3-month calls XYZ call $3.95 XYZ call $3.40 XYZ call $2.90 XYZ call $2.45 XYZ call $2.10

63 62 Covered ETF Call Example Profit & Loss at Expiration BEP $ Break-even at Expiration: ETF Price Premium Received $75.00 $2.10 = $72.90 Maximum Loss: Substantial Maximum Profit if Assigned: (Strike Price ETF Price Paid) + Call Premium Received ($77.00 $75.00) + $2.10 = $4.10 $410 total Not including commissions

64 63 Covered ETF Call Example Profit & Loss at Expiration Buy 100 shares XYZ at $75.00 Sell 1 XYZ call at $2.10 XYZ Price at Expiration Long XYZ Profit/(Loss) Short Call Profit/(Loss) Net Profit/(Loss) $85.00 $10.00 ($5.90) $4.10 $80.00 $5.00 ($0.90) $4.10 $ $2.10 $2.10 $70.00 ($5.00) $2.10 ($2.90) $65.00 ($10.00) $2.10 ($7.90) Not including commissions

65 64 Early Assignment for Dividend Early assignment possible before dividend o on or just before ex-dividend date You might expect early assignment when o expiration is relatively near o dividend greater than call s time value XYZ will pay $0.50 dividend o ex-dividend date four days before expiration o day before ex-date XYZ is at $78.50 o call is at $1.60 o time value is $0.10 expect assignment

66 65 Return Calculations NOTE: Return calculations assume the same per period profit can be reached repeatedly throughout the year. This may not be possible.

67 66 Static Return Formula Static return on investment o ETF unchanged at expiration o if out-of-the-money call written expires worthless o stand still return Income Investment X Time Factor Call Premium + Dividend ETF Price X Days/Year Days to Expiration

68 67 Static Return Worksheet Call price less commissions Plus dividends + Equals income = Divided by (ETF price plus commissions) Equals % income = $2.10 $0.50 $2.60 $ % Times 365/90 (days to expiration) x 4.1 Equals annualized static return = 14.35%

69 68 If-Called Return Formula If-called return on investment o ETF price above strike price at expiration o call is assigned o ETF sold at strike price Income + ETF Gain Investment X Time Factor (Call + Dividend) + (Strike ETF) ETF price X Days/Year Days to Expiration

70 69 If-Called Return Worksheet Call price less commissions Plus dividends + Plus profit from ETF sale ($ $75.00) + Equals income = Divided by (ETF price plus commissions) Equals % income = $2.10 $0.50 $2.00 $4.60 $ % Times 365/90 (days to expiration) x 4.1 Equals annualized if-called return = 25%

71 70 Covered Call Nervous About Downside? In the previous example an investor wrote a covered ETF call Position o long 100 XYZ shares at $75.00 o short 1 XYZ call at $2.10 Time passes o XYZ increases in price a bit o investor has downside worries - doesn t want to sell shares o buy protective put convert to a collar

72 ETF Collar

73 72 What Is an ETF Collar? Collar o long 100 underlying ETF shares o long 1 put o short 1 call Ratio always 100 shares : 1 call : 1 put Call and put generally same expiration month Call strike price higher than put strike price

74 73 Collar: Two Strategies in One A collar can be considered two strategies in one o the 100 ETF shares play a part in both On the downside a protective put o out-of-the-money put is purchased o right to sell shares at strike price until expiration On the upside a covered call o out-of-the-money call is sold o upside profit potential limited by short call

75 74 Why Use a Collar? ETF buyer with unrealized gains wants o downside protection long put o some upside participation limited by short call Key benefits o put cost fully or partially paid by call premium received o objectives met whether share price up or down o receive any dividend if not assigned on short call

76 75 Before You Use a Collar Downside protection needed? o select appropriate put strike price o consider timeframe Upside participation on ETF? o select appropriate call strike price o be happy with share sale price if assigned Balance two factors: o put premium paid & protection provided - risk o call premium received & upside potential - reward

77 76 What Does All This Cost? Net Debit Net Credit Zero Cost Puts cost more than call premium received Call premium received more than cost of puts Call premium received same as put premium paid Buy put $3.00 Sell call + $2.00 Net debit $1.00 Sell call + $4.00 Buy put $1.00 Net credit + $3.00 Sell call + $4.00 Buy put $4.00 Zero Cost $0 Not including commissions

78 77 ETF Collar Example Covered call o buy 100 XYZ shares at $75.00 o sell 1 XYZ call at $2.10 Convert to collar o buy 1 XYZ put at $1.65 Position long 100 XYZ shares currently at $76.00 sell 1 XYZ call + $2.10 buy 1 XYZ put $1.65 Net credit = + $0.45 Not including commissions

79 78 ETF Collar Example Profit & Loss at Expiration + $ $

80 In Conclusion

81 80 Conclusion Among the benefits ETF shares offer o diversification & allocation with a single transaction o trade like stock on an exchange o lower management costs and certain tax advantages vs. mutual funds ETF benefits available to option investors ETF options are considered equity options o same pricing factors o similar contract terms o American-style & physical delivery unlike index options

82 81 Conclusion ETF options offer flexibility of equity options o wide range of strategies available Why use ETF options? o bullish or bearish speculation o buy or sell underlying ETF shares o generating additional income o managing portfolio risk

83 Thank You for Attending! OPTIONS

84 Continue to grow your knowledge at OptionsEducation.org your primary online source to learn about Options. All the classes, podcasts, webcasts and tools are available through 's elearning platform Education. Register for a FREE account today! Learn directly from instructors via video webcasts & podcasts Take online classes Identify appropriate strategies for your investment goals with the Strategy Screener Test your trading abilities in the Virtual Trading System Register for live seminars in your area Chat live with an Options professional

Covered Calls. Benefits & Tradeoffs

Covered Calls. Benefits & Tradeoffs 748627.1.1 1 Covered Calls Enhance ETFs with Options Strategies January 26, 2016 Joe Burgoyne, OIC Benefits & Tradeoffs Joe Burgoyne Director, Options Industry Council www.optionseducation.org 2 The Options

More information

ETF Options. Presented by The Options Industry Council 1-888-OPTIONS

ETF Options. Presented by The Options Industry Council 1-888-OPTIONS ETF Options Presented by The Options Industry Council 1-888-OPTIONS ETF Options Options involve risks and are not suitable for everyone. Prior to buying or selling options, an investor must receive a copy

More information

Buying Equity Call Options

Buying Equity Call Options Buying Equity Call Options Presented by The Options Industry Council 1-888-OPTIONS Equity Call Options Options involve risks and are not suitable for everyone. Prior to buying or selling options, an investor

More information

LEAPS LONG-TERM EQUITY ANTICIPATION SECURITIES

LEAPS LONG-TERM EQUITY ANTICIPATION SECURITIES LEAPS LONG-TERM EQUITY ANTICIPATION SECURITIES The Options Industry Council (OIC) is a non-profit association created to educate the investing public and brokers about the benefits and risks of exchange-traded

More information

THE EQUITY OPTIONS STRATEGY GUIDE

THE EQUITY OPTIONS STRATEGY GUIDE THE EQUITY OPTIONS STRATEGY GUIDE APRIL 2003 Table of Contents Introduction 2 Option Terms and Concepts 4 What is an Option? 4 Long 4 Short 4 Open 4 Close 5 Leverage and Risk 5 In-the-money, At-the-money,

More information

Who Should Consider Using Covered Calls?

Who Should Consider Using Covered Calls? Who Should Consider Using Covered Calls? An investor who is neutral to moderately bullish on some of the equities in his portfolio. An investor who is willing to limit upside potential in exchange for

More information

UNDERSTANDING INDEX OPTIONS

UNDERSTANDING INDEX OPTIONS UNDERSTANDING INDEX OPTIONS The Options Industry Council (OIC) is an industry cooperative created to educate the investing public and brokers about the benefits and risks of exchange-traded options. Options

More information

January 2001 UNDERSTANDING INDEX OPTIONS

January 2001 UNDERSTANDING INDEX OPTIONS January 2001 UNDERSTANDING INDEX OPTIONS Table of Contents Introduction 3 Benefits of Listed Index Options 5 What is an Index Option? 7 Equity vs. Index Options 9 Pricing Factors Underlying Instrument

More information

Basics of Spreading: Butterflies and Condors

Basics of Spreading: Butterflies and Condors 1 of 31 Basics of Spreading: Butterflies and Condors What is a Spread? Review the links below for detailed information. Terms and Characterizations: Part 1 Download What is a Spread? Download: Butterflies

More information

Options on. Dow Jones Industrial Average SM. the. DJX and DIA. Act on the Market You Know Best.

Options on. Dow Jones Industrial Average SM. the. DJX and DIA. Act on the Market You Know Best. Options on the Dow Jones Industrial Average SM DJX and DIA Act on the Market You Know Best. A glossary of options definitions appears on page 21. The Chicago Board Options Exchange (CBOE) was founded in

More information

Don t be Intimidated by the Greeks, Part 2 August 29, 2013 Joe Burgoyne, OIC

Don t be Intimidated by the Greeks, Part 2 August 29, 2013 Joe Burgoyne, OIC Don t be Intimidated by the Greeks, Part 2 August 29, 2013 Joe Burgoyne, OIC www.optionseducation.org 2 The Options Industry Council Options involve risks and are not suitable for everyone. Prior to buying

More information

Section 1 - Dow Jones Index Options: Essential terms and definitions

Section 1 - Dow Jones Index Options: Essential terms and definitions 1 of 17 Section 1 - Dow Jones Index Options: Essential terms and definitions Download this in PDF format. In many ways index options are similar to options on individual stocks, so it is relatively easy

More information

UNDERSTANDING EQUITY OPTIONS

UNDERSTANDING EQUITY OPTIONS UNDERSTANDING EQUITY OPTIONS The Options Industry Council (OIC) is a non-profit association created to educate the investing public and brokers about the benefits and risks of exchange-traded options.

More information

FX Options NASDAQ OMX

FX Options NASDAQ OMX FX Options OPTIONS DISCLOSURE For the sake of simplicity, the examples that follow do not take into consideration commissions and other transaction fees, tax considerations, or margin requirements, which

More information

Introduction to Options

Introduction to Options Introduction to Options By: Peter Findley and Sreesha Vaman Investment Analysis Group What Is An Option? One contract is the right to buy or sell 100 shares The price of the option depends on the price

More information

October 2003 UNDERSTANDING STOCK OPTIONS

October 2003 UNDERSTANDING STOCK OPTIONS October 2003 UNDERSTANDING STOCK OPTIONS Table of Contents Introduction 3 Benefits of Exchange-Traded Options 5 Orderly, Efficient, and Liquid Markets Flexibility Leverage Limited Risk for Buyer Guaranteed

More information

understanding options

understanding options Investment Planning understanding options Get acquainted with this versatile investment tool. Understanding Options This brochure discusses the basic concepts of options: what they are, common investment

More information

Exchange Traded Funds

Exchange Traded Funds LPL FINANCIAL RESEARCH Exchange Traded Funds February 16, 2012 What They Are, What Sets Them Apart, and What to Consider When Choosing Them Overview 1. What is an ETF? 2. What Sets Them Apart? 3. How Are

More information

Buying Call or Long Call. Unlimited Profit Potential

Buying Call or Long Call. Unlimited Profit Potential Options Basis 1 An Investor can use options to achieve a number of different things depending on the strategy the investor employs. Novice option traders will be allowed to buy calls and puts, to anticipate

More information

Understanding Stock Options

Understanding Stock Options Understanding Stock Options Introduction...2 Benefits Of Exchange-Traded Options... 4 Options Compared To Common Stocks... 6 What Is An Option... 7 Basic Strategies... 12 Conclusion...20 Glossary...22

More information

Answers to Concepts in Review

Answers to Concepts in Review Answers to Concepts in Review 1. Puts and calls are negotiable options issued in bearer form that allow the holder to sell (put) or buy (call) a stipulated amount of a specific security/financial asset,

More information

Implied Volatility and Profit vs. Loss. Presented by The Options Industry Council

Implied Volatility and Profit vs. Loss. Presented by The Options Industry Council Implied Volatility and Profit vs. Loss Presented by The Options Industry Council Implied Volatility and Profit vs. Loss Options involve risks and are not suitable for everyone. Prior to buying or selling

More information

Options Strategies. 26 proven options strategies

Options Strategies. 26 proven options strategies asx 267_cover 25/8/9 1:32 PM Page 2 Options Strategies 26 proven options strategies Information line: 131 279 www.asx.com.au HOW TO USE THIS BOOKLET This brochure details more than two dozen strategies

More information

Earn income from your shares

Earn income from your shares Course 8: Earn income from your shares Module 8 Earn income from your shares Topic 1: Introduction... 3 The call writer's obligation... 4 Topic 2: Why write covered calls?... 6 Income... 6 Example... 6

More information

Option Theory Basics

Option Theory Basics Option Basics What is an Option? Option Theory Basics An option is a traded security that is a derivative product. By derivative product we mean that it is a product whose value is based upon, or derived

More information

Option Trading for Rookies, Session I: Option Trading Terminology

Option Trading for Rookies, Session I: Option Trading Terminology Trading for Rookies, Session I: Trading Terminology Disclaimers s involve risks and are not suitable for all investors. Prior to buying or selling options, an investor must receive a copy of Characteristics

More information

Copyright 2009 by National Stock Exchange of India Ltd. (NSE) Exchange Plaza, Bandra Kurla Complex, Bandra (East), Mumbai 400 051 INDIA

Copyright 2009 by National Stock Exchange of India Ltd. (NSE) Exchange Plaza, Bandra Kurla Complex, Bandra (East), Mumbai 400 051 INDIA Copyright 2009 by National Stock Exchange of India Ltd. (NSE) Exchange Plaza, Bandra Kurla Complex, Bandra (East), Mumbai 400 051 INDIA All content included in this book, such as text, graphics, logos,

More information

Contents. 2 What are Options? 3 Ways to use Options. 7 Getting started. 8 Frequently asked questions. 13 Contact us. 14 Important Information

Contents. 2 What are Options? 3 Ways to use Options. 7 Getting started. 8 Frequently asked questions. 13 Contact us. 14 Important Information Options For individuals, companies, trusts and SMSFs The Options and Lending Facility Contents 2 What are Options? 3 Ways to use Options 7 Getting started 8 Frequently asked questions 13 Contact us 14

More information

Index Options. James Bittman. Unique Features & Strategies. Senior Instructor The Options Institute at CBOE

Index Options. James Bittman. Unique Features & Strategies. Senior Instructor The Options Institute at CBOE Index Options Unique Features & Strategies James Bittman Senior Instructor The Options Institute at CBOE Disclosures In order to simplify the computations, commissions have not been included in the examples

More information

Introduction. Part IV: Option Fundamentals. Derivatives & Risk Management. The Nature of Derivatives. Definitions. Options. Main themes Options

Introduction. Part IV: Option Fundamentals. Derivatives & Risk Management. The Nature of Derivatives. Definitions. Options. Main themes Options Derivatives & Risk Management Main themes Options option pricing (microstructure & investments) hedging & real options (corporate) This & next weeks lectures Introduction Part IV: Option Fundamentals»

More information

Chapter 5 Option Strategies

Chapter 5 Option Strategies Chapter 5 Option Strategies Chapter 4 was concerned with the basic terminology and properties of options. This chapter discusses categorizing and analyzing investment positions constructed by meshing puts

More information

Underlying (S) The asset, which the option buyer has the right to buy or sell. Notation: S or S t = S(t)

Underlying (S) The asset, which the option buyer has the right to buy or sell. Notation: S or S t = S(t) INTRODUCTION TO OPTIONS Readings: Hull, Chapters 8, 9, and 10 Part I. Options Basics Options Lexicon Options Payoffs (Payoff diagrams) Calls and Puts as two halves of a forward contract: the Put-Call-Forward

More information

Equity Option Expiration. Presented by The Options Industry Council

Equity Option Expiration. Presented by The Options Industry Council Equity Option Expiration Presented by The Options Industry Council Equity Option Expiration - Disclaimer Options involve risks and are not suitable for everyone. Prior to buying or selling options, an

More information

OPTIONS MARKETS AND VALUATIONS (CHAPTERS 16 & 17)

OPTIONS MARKETS AND VALUATIONS (CHAPTERS 16 & 17) OPTIONS MARKETS AND VALUATIONS (CHAPTERS 16 & 17) WHAT ARE OPTIONS? Derivative securities whose values are derived from the values of the underlying securities. Stock options quotations from WSJ. A call

More information

Section 1. Introduction to Option Trading

Section 1. Introduction to Option Trading Section 1. Introduction to Option Trading Trading stock options is a much different game from trading the underlying stocks. When options are traded for appreciation, it is a game of leverage, with big

More information

Advanced Strategies for Managing Volatility

Advanced Strategies for Managing Volatility Advanced Strategies for Managing Volatility Description: Investment portfolios are generally exposed to volatility through company-specific risk and through market risk. Long-term investors can reduce

More information

11 Option. Payoffs and Option Strategies. Answers to Questions and Problems

11 Option. Payoffs and Option Strategies. Answers to Questions and Problems 11 Option Payoffs and Option Strategies Answers to Questions and Problems 1. Consider a call option with an exercise price of $80 and a cost of $5. Graph the profits and losses at expiration for various

More information

CHAPTER 20. Financial Options. Chapter Synopsis

CHAPTER 20. Financial Options. Chapter Synopsis CHAPTER 20 Financial Options Chapter Synopsis 20.1 Option Basics A financial option gives its owner the right, but not the obligation, to buy or sell a financial asset at a fixed price on or until a specified

More information

How to Win Clients & Protect Portfolios

How to Win Clients & Protect Portfolios Ugo Egbunike, Moderator Director of Business Development ETF.com How to Win Clients & Protect Portfolios Howard J. Atkinson, Panelist Managing Director Horizons ETFs Management LLA Michael Khouw, Panelist

More information

central Options An Opportunistic Options Combo for QQQ, the Nasdaq 100 Index ETF www.888 options.com By Steve Ciccarello

central Options An Opportunistic Options Combo for QQQ, the Nasdaq 100 Index ETF www.888 options.com By Steve Ciccarello www.888 options.com YOUR RESOURCE FOR OPTIONS EDUCATION SM Options central IN THIS W I N T E R 2 0 0 2 ISSUE: F E A T U R E : A N O P P O R T U N I S T I C O P T I O N S C O M B O F O R Q Q Q W I N T E

More information

Index options. Module 9

Index options. Module 9 Course #: Title Module 9 Index options Index options... 1 Topic 1: Why trade index options?... 3 Trade the direction of the index... 3 Leveraged exposure... 3 Protect a share portfolio... 4 Topic 2: How

More information

Option Contract Adjustments New Methods as of September 2007. Presented by The Options Industry Council

Option Contract Adjustments New Methods as of September 2007. Presented by The Options Industry Council Option Contract Adjustments New Methods as of September 2007 Presented by The Options Industry Council Option Contract Adjustments Options involve risks and are not suitable for everyone. Prior to buying

More information

The Beginners Practical Guide to Options Investing

The Beginners Practical Guide to Options Investing The Beginners Practical Guide to Options Investing By Chuck Hughes Copyright 2010 by Legacy Publishing LLC. All Rights Reserved. Reproduction or translation of any part of this work beyond that permitted

More information

Interest Rate Options

Interest Rate Options Interest Rate Options A discussion of how investors can help control interest rate exposure and make the most of the interest rate market. The Chicago Board Options Exchange (CBOE) is the world s largest

More information

Nine Questions Every ETF Investor Should Ask Before Investing

Nine Questions Every ETF Investor Should Ask Before Investing Nine Questions Every ETF Investor Should Ask Before Investing UnderstandETFs.org Copyright 2012 by the Investment Company Institute. All rights reserved. ICI permits use of this publication in any way,

More information

Steve Meizinger. FX Options Pricing, what does it Mean?

Steve Meizinger. FX Options Pricing, what does it Mean? Steve Meizinger FX Options Pricing, what does it Mean? For the sake of simplicity, the examples that follow do not take into consideration commissions and other transaction fees, tax considerations, or

More information

Concentrated Stock Overlay INCREMENTAL INCOME FROM CONCENTRATED WEALTH

Concentrated Stock Overlay INCREMENTAL INCOME FROM CONCENTRATED WEALTH Concentrated Stock Overlay INCREMENTAL INCOME FROM CONCENTRATED WEALTH INTRODUCING RAMPART CONCENTRATED STOCK OVERLAY STRATEGY When a portfolio includes a concentrated equity position, the risk created

More information

Steve Meizinger. Understanding the FX Option Greeks

Steve Meizinger. Understanding the FX Option Greeks Steve Meizinger Understanding the FX Option Greeks For the sake of simplicity, the examples that follow do not take into consideration commissions and other transaction fees, tax considerations, or margin

More information

Guide to Options Strategies

Guide to Options Strategies RECOGNIA S Guide to Options Strategies A breakdown of key options strategies to help you better understand the characteristics and implications of each Recognia s Guide to Options Strategies 1 3 Buying

More information

BASKET A collection of securities. The underlying securities within an ETF are often collectively referred to as a basket

BASKET A collection of securities. The underlying securities within an ETF are often collectively referred to as a basket Glossary: The ETF Portfolio Challenge Glossary is designed to help familiarize our participants with concepts and terminology closely associated with Exchange- Traded Products. For more educational offerings,

More information

Trading Debit Spreads. Peter Lusk. Instructor The Options Institute at CBOE

Trading Debit Spreads. Peter Lusk. Instructor The Options Institute at CBOE Trading Debit Spreads Peter Lusk Instructor The Options Institute at CBOE Disclosures In order to simplify the computations, commissions have not been included in the examples used in these materials.

More information

Options CHAPTER 7 INTRODUCTION OPTION CLASSIFICATION

Options CHAPTER 7 INTRODUCTION OPTION CLASSIFICATION CHAPTER 7 Options INTRODUCTION An option is a contract between two parties that determines the time and price at which a stock may be bought or sold. The two parties to the contract are the buyer and the

More information

Section 1 - Overview; trading and leverage defined

Section 1 - Overview; trading and leverage defined Section 1 - Overview; trading and leverage defined Download this in PDF format. In this lesson I am going to shift the focus from an investment orientation to trading. Although "option traders" receive

More information

Puts and Calls. Equity Options. Time Decay

Puts and Calls. Equity Options. Time Decay 11 Puts and Calls Equity Options Index Options Strategies LEAPS Time Decay VIRGINIA B. MORRIS 2011 by Lightbulb Press, Inc. All Rights Reserved. 9 10 8 T he Options Industry Council (OIC) is pleased to

More information

Module 5 Index CFDs. Course #: Title. Version 1 August 2013 1

Module 5 Index CFDs. Course #: Title. Version 1 August 2013 1 Module 5 Index CFDs Course #: Title Topic 1: S&P/ASX 200 CFDs... 3 Initial margin... 3 Variation margins... 3 Cashflows... 4 Topic 2: S&P/ASX 200 CFD strategies... 6 Trade broad market movements... 6 Protect

More information

CHAPTER 20: OPTIONS MARKETS: INTRODUCTION

CHAPTER 20: OPTIONS MARKETS: INTRODUCTION CHAPTER 20: OPTIONS MARKETS: INTRODUCTION PROBLEM SETS 1. Options provide numerous opportunities to modify the risk profile of a portfolio. The simplest example of an option strategy that increases risk

More information

Understanding Volatility and Making It Work for You. The Options Industry Council

Understanding Volatility and Making It Work for You. The Options Industry Council Understanding Volatility and Making It Work for You December 16, 2013 Joe Burgoyne, OIC www.optionseducation.org 2 The Options Industry Council Options involve risks and are not suitable for everyone.

More information

Basic Option Trading Strategies

Basic Option Trading Strategies Basic Option Trading Strategies What is an option? Definition Option an intangible right bought or sold by a trader to control 100 shares of a security; it expires on a specific date in the future. The

More information

PROFUNDS GROUP INVESTOR EDUCATION GUIDE 1 GEARED INVESTING. An introduction to leveraged and inverse funds

PROFUNDS GROUP INVESTOR EDUCATION GUIDE 1 GEARED INVESTING. An introduction to leveraged and inverse funds PROFUNDS GROUP INVESTOR EDUCATION GUIDE 1 GEARED INVESTING An introduction to leveraged and inverse funds GEARED FUNDS have generated a great deal of interest in recent years. Also known as LEVERAGED AND

More information

WHS FX options guide. Getting started with FX options. Predict the trend in currency markets or hedge your positions with FX options.

WHS FX options guide. Getting started with FX options. Predict the trend in currency markets or hedge your positions with FX options. Getting started with FX options WHS FX options guide Predict the trend in currency markets or hedge your positions with FX options. Refine your trading style and your market outlook. Learn how FX options

More information

9 Questions Every ETF Investor Should Ask Before Investing

9 Questions Every ETF Investor Should Ask Before Investing 9 Questions Every ETF Investor Should Ask Before Investing 1. What is an ETF? 2. What kinds of ETFs are available? 3. How do ETFs differ from other investment products like mutual funds, closed-end funds,

More information

Individual Retirement Accounts and Keogh Plans:

Individual Retirement Accounts and Keogh Plans: Individual Retirement Accounts and Keogh Plans: Portfolio Management Strategies Using Listed Options Exploring investment options that make the most of your IRA and Keogh Plans CBOE INVESTOR SERIES NO.

More information

Complete Options Trading Program

Complete Options Trading Program TradeWithOptions.com Replace Your Income with TRADING PROFITS Complete Options Trading Program www.tradewithoptions.com Table of Contents Option Basics 6 1. Approach to Profitable Options Trading 7 2.

More information

No more stock standard choices Choose Style Options

No more stock standard choices Choose Style Options No more stock standard choices Choose Style Options DERIVATIVE MARET Equity Derivatives Style Options www.jse.co.za Johannesburg Stock Exchange The Options Strategy Spectrum BEARISH NEUTRAL BULLISH write

More information

Chicago Board Options Exchange. Margin Manual

Chicago Board Options Exchange. Margin Manual Chicago Board Options Exchange Margin Manual April 2000 TABLE OF CONTENTS INTRODUCTION... 3 INITIAL AND MAINTENANCE MARGIN REQUIREMENTS Long Put or Long Call (9 months or less until expiration)... 4 Long

More information

Derivative Products Features and Risk Disclosures

Derivative Products Features and Risk Disclosures Derivative Products Features and Risk Disclosures Table of Content Warrants... 3 Callable Bull/Bear Contracts (CBBC)... 5 Exchange Traded Fund (ETF)... 7 Listed equity linked instruments (ELI/ELN)... 9

More information

Understanding Options Trading. ASX. The Australian Sharemarket

Understanding Options Trading. ASX. The Australian Sharemarket Understanding Options Trading ASX. The Australian Sharemarket Disclaimer of Liability Information provided is for educational purposes and does not constitute financial product advice. You should obtain

More information

The SPX Size Advantage

The SPX Size Advantage SPX (SM) vs. SPY Advantage Series- Part II The SPX Size Advantage September 18, 2013 Presented by Marty Kearney @MartyKearney Disclosures Options involve risks and are not suitable for all investors. Prior

More information

Puts and Calls. Equity Options. Time Decay

Puts and Calls. Equity Options. Time Decay Puts and Calls Equity Options Index Options Strategies LEAPS Time Decay VIRGINIA B. MORRIS T he Options Industry Council (OIC) is pleased to introduce An Investor s Guide to Trading Options, a primer on

More information

Understanding Options Trading. ASX. The Australian Sharemarket

Understanding Options Trading. ASX. The Australian Sharemarket Understanding Options Trading ASX. The Australian Sharemarket Disclaimer of Liability Information provided is for educational purposes and does not constitute financial product advice. You should obtain

More information

OPTIONS EDUCATION GLOBAL

OPTIONS EDUCATION GLOBAL OPTIONS EDUCATION GLOBAL TABLE OF CONTENTS Introduction What are FX Options? Trading 101 ITM, ATM and OTM Options Trading Strategies Glossary Contact Information 3 5 6 8 9 10 16 HIGH RISK WARNING: Before

More information

Reference Manual Currency Options

Reference Manual Currency Options Reference Manual Currency Options TMX Group Equities Toronto Stock Exchange TSX Venture Exchange TMX Select Equicom Derivatives Montréal Exchange CDCC Montréal Climate Exchange Fixed Income Shorcan Energy

More information

Vision. Options Supplement

Vision. Options Supplement Vision Options Supplement If you wish to trade options in your Securities Account, please read, fill out, sign and return this Options Supplement. Please carefully read the information included in this

More information

INTRODUCTION TO OPTIONS MARKETS QUESTIONS

INTRODUCTION TO OPTIONS MARKETS QUESTIONS INTRODUCTION TO OPTIONS MARKETS QUESTIONS 1. What is the difference between a put option and a call option? 2. What is the difference between an American option and a European option? 3. Why does an option

More information

9 Questions Every ETF Investor Should Ask Before Investing

9 Questions Every ETF Investor Should Ask Before Investing 9 Questions Every ETF Investor Should Ask Before Investing 1. What is an ETF? 2. What kinds of ETFs are available? 3. How do ETFs differ from other investment products like mutual funds, closed-end funds,

More information

Exchange Traded Options Product Disclosure Statement (PDS)

Exchange Traded Options Product Disclosure Statement (PDS) Bendigo Invest Direct Exchange Traded Options Product Disclosure Statement (PDS) 1 December 2015 A service provided by CMC Markets Stockbroking Limited AFSL No. 246381 and ABN 69 081 002 851 Table of Contents

More information

w w w.c a t l e y l a k e m a n.c o m 0 2 0 7 0 4 3 0 1 0 0

w w w.c a t l e y l a k e m a n.c o m 0 2 0 7 0 4 3 0 1 0 0 A ADR-Style: for a derivative on an underlying denominated in one currency, where the derivative is denominated in a different currency, payments are exchanged using a floating foreign-exchange rate. The

More information

metals products Options Strategy Guide for Metals Products

metals products Options Strategy Guide for Metals Products metals products Options Guide for Metals Products As the world s largest and most diverse derivatives marketplace, CME Group is where the world comes to manage risk. CME Group exchanges CME, CBOT, NYMEX

More information

Swing Trade Warrior Chapter 1. Introduction to swing trading and how to understand and use options How does Swing Trading Work? The idea behind swing trading is to capitalize on short term moves of stocks

More information

OPTION TRADING STRATEGIES IN INDIAN STOCK MARKET

OPTION TRADING STRATEGIES IN INDIAN STOCK MARKET OPTION TRADING STRATEGIES IN INDIAN STOCK MARKET Dr. Rashmi Rathi Assistant Professor Onkarmal Somani College of Commerce, Jodhpur ABSTRACT Options are important derivative securities trading all over

More information

Currency Options. www.m-x.ca

Currency Options. www.m-x.ca Currency Options www.m-x.ca Table of Contents Introduction...3 How currencies are quoted in the spot market...4 How currency options work...6 Underlying currency...6 Trading unit...6 Option premiums...6

More information

Put-Call Parity and Synthetics

Put-Call Parity and Synthetics Courtesy of Market Taker Mentoring LLC TM Excerpt from Trading Option Greeks, by Dan Passarelli Chapter 6 Put-Call Parity and Synthetics In order to understand more-complex spread strategies involving

More information

There are two types of options - calls and puts.

There are two types of options - calls and puts. Options on Single Stock Futures Overview Options on single Stock Futures An SSF option is, very simply, an instrument that conveys to its holder the right, but not the obligation, to buy or sell an SSF

More information

Finance 436 Futures and Options Review Notes for Final Exam. Chapter 9

Finance 436 Futures and Options Review Notes for Final Exam. Chapter 9 Finance 436 Futures and Options Review Notes for Final Exam Chapter 9 1. Options: call options vs. put options, American options vs. European options 2. Characteristics: option premium, option type, underlying

More information

TMX TRADING SIMULATOR QUICK GUIDE. Reshaping Canada s Equities Trading Landscape

TMX TRADING SIMULATOR QUICK GUIDE. Reshaping Canada s Equities Trading Landscape TMX TRADING SIMULATOR QUICK GUIDE Reshaping Canada s Equities Trading Landscape OCTOBER 2014 Markets Hours All market data in the simulator is delayed by 15 minutes (except in special situations as the

More information

How to Trade Options: Strategy Building Blocks

How to Trade Options: Strategy Building Blocks How to Trade Options: Strategy Building Blocks MICHAEL BURKE Important Information and Disclosures This course is provided by TradeStation, a U.S.-based multi-asset brokerage company that seeks to serve

More information

For example, someone paid $3.67 per share (or $367 plus fees total) for the right to buy 100 shares of IBM for $180 on or before November 18, 2011

For example, someone paid $3.67 per share (or $367 plus fees total) for the right to buy 100 shares of IBM for $180 on or before November 18, 2011 Chapter 7 - Put and Call Options written for Economics 104 Financial Economics by Prof Gary R. Evans First edition 1995, this edition September 24, 2011 Gary R. Evans This is an effort to explain puts

More information

Exchange Traded Options Product Disclosure Statement and Application Form

Exchange Traded Options Product Disclosure Statement and Application Form CommSec Adviser Services Phone 1800 252 351 Fax 1300 668 788 Locked Bag 3005 Australia Square NSW 1215 www.commsecadviserservices.com.au advisertrading@cba.com.au Exchange Traded Options Date of Issue:

More information

SOCIETY OF ACTUARIES FINANCIAL MATHEMATICS. EXAM FM SAMPLE QUESTIONS Financial Economics

SOCIETY OF ACTUARIES FINANCIAL MATHEMATICS. EXAM FM SAMPLE QUESTIONS Financial Economics SOCIETY OF ACTUARIES EXAM FM FINANCIAL MATHEMATICS EXAM FM SAMPLE QUESTIONS Financial Economics June 2014 changes Questions 1-30 are from the prior version of this document. They have been edited to conform

More information

Chapter 15 - Options Markets

Chapter 15 - Options Markets Chapter 15 - Options Markets Option contract Option trading Values of options at expiration Options vs. stock investments Option strategies Option-like securities Option contract Options are rights to

More information

Table of Contents. Make Money Trading Options Top-15 Option Trading Strategies. RLCG Management LLC All Rights Reserved Page 2

Table of Contents. Make Money Trading Options Top-15 Option Trading Strategies. RLCG Management LLC All Rights Reserved Page 2 Table of Contents Introduction: Why Trade Options?... 3 Strategy #1: Buy-Write or Covered Call... 4 Strategy #2: Sell-Write or Covered Put... 5 Strategy #3: Protective Put... 6 Strategy #4: Collar... 7

More information

CHAPTER 11 INTRODUCTION TO SECURITY VALUATION TRUE/FALSE QUESTIONS

CHAPTER 11 INTRODUCTION TO SECURITY VALUATION TRUE/FALSE QUESTIONS 1 CHAPTER 11 INTRODUCTION TO SECURITY VALUATION TRUE/FALSE QUESTIONS (f) 1 The three step valuation process consists of 1) analysis of alternative economies and markets, 2) analysis of alternative industries

More information

CHAPTER 22 Options and Corporate Finance

CHAPTER 22 Options and Corporate Finance CHAPTER 22 Options and Corporate Finance Multiple Choice Questions: I. DEFINITIONS OPTIONS a 1. A financial contract that gives its owner the right, but not the obligation, to buy or sell a specified asset

More information

nabtrade Exchange Traded Options Product Disclosure Statement (PDS)

nabtrade Exchange Traded Options Product Disclosure Statement (PDS) nabtrade Exchange Traded Options Product Disclosure Statement (PDS) WealthHub Securities Limited ABN 83 089 718 249 AFSL No. 230704 GPO Box 4545 Melbourne VIC 3001 Telephone 13 13 80 nabtrade.com.au Preparation

More information

Options. Understanding options strategies

Options. Understanding options strategies Options Understanding options strategies Contents Introduction 2 Option profiles 3 Covered write 4 Protected covered write 6 Stock repair strategy 8 Bull spread 10 Bear spread 12 Long straddle 14 Short

More information

FX, Derivatives and DCM workshop I. Introduction to Options

FX, Derivatives and DCM workshop I. Introduction to Options Introduction to Options What is a Currency Option Contract? A financial agreement giving the buyer the right (but not the obligation) to buy/sell a specified amount of currency at a specified rate on a

More information

Chapter 20 Understanding Options

Chapter 20 Understanding Options Chapter 20 Understanding Options Multiple Choice Questions 1. Firms regularly use the following to reduce risk: (I) Currency options (II) Interest-rate options (III) Commodity options D) I, II, and III

More information

Derivatives - Options Theory September 2008

Derivatives - Options Theory September 2008 - Options Theory September 2008 Milestone International Tax Consultants Ltd 45 Clarges Street London W1J 7EP Tel: +44 (0)20 7016 5480 Fax: +44 (0)20 7016 5481 Web: www.milestonetax.com Definitions Option

More information

EXCHANGE TRADED OPTIONS

EXCHANGE TRADED OPTIONS EXCHANGE TRADED OPTIONS A SELF STUDY GUIDE TO TRADING EQUITY OPTIONS NZX EDUCATION This document is provided for general information purposes and is not intended as, and shall not constitute, investment

More information

DISCLAIMER. A Member of Financial Group

DISCLAIMER. A Member of Financial Group Tactical ETF Approaches for Today s Investors Jaime Purvis, Executive Vice-President Horizons Exchange Traded Funds April 2012 DISCLAIMER Commissions, management fees and expenses all may be associated

More information