# The Four Basic Options Strategies

Save this PDF as:

Size: px
Start display at page:

## Transcription

1 1 The Four Basic Options Strategies Introduction The easiest way to learn options is with pictures so that you can begin to piece together strategies step-by-step. However, first we need to understand the four basic strategies. From that point, logic kicks in, and our learning can progress exponentially. A risk profile chart shows us our profit/loss position for each trade. It differs from a standard price/time chart that we re used to seeing to monitor stock prices. There are four easy steps to creating a risk profile chart: Step 1: Y axis for profit/loss position Profit Loss - 25

2 2 The Bible of Options Strategies Step 2: X axis for underlying asset price range Profit Loss Asset Price (\$) Step 3: Breakeven line +25 Profit + Breakeven 0 Loss Asset Price (\$) 50 Step 4: Risk Profile line Profit + Breakeven Stock Purchase Price Loss Asset Price (\$)

3 The Four Basic Options Strategies 3 This chart shows our risk profile for a long stock position. As the asset price rises above our purchase price (along the x-axis), we move into profit. Our risk is capped to what we paid, as is our breakeven point, and our potential reward is uncapped. The reverse position is when we short a stock, in which case the opposite occurs. Here, as the stock price rises above our short price, our short position shows a loss, which can be unlimited as the stock continues to rise. Our risk is uncapped as the stock rises, and our potential reward is the price we shorted at, as is our breakeven point. Profit + 0 Stock Short Price Loss - 0 Asset Price (\$) Now that we know how to interpret a risk profile chart, we can proceed with analyzing each strategy. The four basic strategies that underpin your entire options trading knowledge are: Long Call Short Call Long Put Short Put We should already know that owning an option exposes us to time decay, so typically we like to own options with expiration dates that are reasonably far away to give us a chance of our option increasing in value. With options, we have the Rule of the Opposites, where if one thing isn t true, then the opposite must be true. Therefore, if time decay hurts us when we buy options, it must help us when we sell options. Because time value decreases (or time decay increases) exponentially during the last month to expiration, we typically don t like to own options into that last month, but we do like to sell options with one month left to expiration. With these four strategies, we would buy calls and puts with at least three months (or more) left to expiration, thereby looking for the options to increase in value during that time. We would short calls and puts with a month or less to expiration, thereby looking for short-term income as the option hopefully expires worthless.

6 6 The Bible of Options Strategies Context Outlook Rationale With a Long Call, your outlook is bullish. You expect a rise in the underlying asset price. To make a better return than if you had simply bought the stock itself. Do ensure that you give yourself enough time to be right; this means you should go at least six months out, if not one- or two-year LEAPs. If you think these are expensive, then simply divide the price by the number of months left to expiration and then compare that to shorter-term option prices. You will see that LEAPs and longer-term options are far better value on a per month basis, and they give you more time to be right, thus improving your chances of success. Another method is to buy only shorter-term deep ITM options. Net Position This is a net debit transaction because you pay for the call option. Your maximum risk is capped to the price you pay for the call. Your maximum reward is uncapped. Effect of Time Decay Time decay works against your bought option, so give yourself plenty of time to be right. Don t be fooled by the false economy that shorter options are cheaper. Compare a one-month option to a 12-month option and divide the longer option price by 12. You will see that you are paying far less per month for the 12-month option. Appropriate Time Period to Trade At least three months, preferably longer, depending on the particular circumstances. Selecting the Stock Choose from stocks with adequate liquidity, preferably over 500,000 Average Daily Volume (ADV). Try to ensure that the trend is upward and identify a clear area of support.

7 The Four Basic Options Strategies 7 Selecting the Option Choose options with adequate liquidity; open interest should be at least 100, preferably 500. Strike Look for either the ATM or ITM (lower) strike below the current stock. Expiration Give yourself enough time to be right; remember that time decay accelerates exponentially in the last month before expiration, so give yourself a minimum of three months to be right, knowing you ll never hold into the last month. That gives you at least two months before you ll need to sell. Longer would be better, though Risk Profile Maximum Risk [Call premium] Maximum Reward [Uncapped] Breakeven [Call strike call premium] Greeks Risk Profile As the stock price rises, the long call moves into profit more and more quickly, particularly when the stock price is greater than the strike price. Key: Expiration Today 6 months Time(t) 1 month Risk Profile Theta Theta Theta is negative, illustrating that time decay hurts the long call position. Delta Delta (speed) is positive and increases at its fastest rate around the strike price, until it reaches 1. Notice how Delta is zero when the option is deep OTM. Gamma Gamma (acceleration) is always positive with a long call, and it peaks when Delta is at its fastest (steepest) rate. Delta Gamma Vega Rho Vega Vega is positive, illustrating that volatility is helpful to the position because higher volatility translates into higher option values. Rho Rho is positive, illustrating that higher interest rates would increase the value of the calls and therefore help the position.

11 The Four Basic Options Strategies 11 Selecting the Option Choose options with adequate liquidity; open interest should be at least 100, preferably 500. Strike Look for OTM strikes above the current stock price. Expiration Give yourself as little time to be wrong. Remember that your short position exposes you to uncapped risk, and that time decay accelerates exponentially (in your favor when you re short) in the last month before expiration, so only short the option with a maximum of one month to expiration, preferably less Risk Profile Maximum Risk [Uncapped] Maximum Reward [Call premium] Breakeven [Call strike call premium] Greeks Risk Profile As the stock price rises, the short call loses money more and more quickly, particularly when the stock price is greater than the strike price. Delta Delta (speed) is negative and moves at its fastest (negative) rate around the strike price, until it reaches -1. Notice how Delta is zero when the option is deep. Gamma Gamma (acceleration) is always negative with a Short Call, and it peaks inversely when Delta is at its fastest (steepest) rate. Gamma is zero when the position is deep OTM or ITM (i.e., when Delta isn t moving). Key: Expiration Today 6 months Time(t) 1 month Risk Profile Delta Gamma Theta Vega Rho Theta Theta is positive, illustrating that time decay helps the short call position. As an option seller, this is of course completely logical. Vega Vega is negative, illustrating that volatility is unhelpful to the position because higher volatility translates into higher option values. As the seller of option premium, we d rather the option value decreases. Rho Rho is negative, illustrating that higher interest rates would harm the Short Call position.

14 14 The Bible of Options Strategies Net Position expensive, then simply divide the price by the number of months left to expiration and then compare that to shorter-term put prices. You will see that LEAPs and longer-term options are far better value per month, and they give you more time to be right, thus improving your chances of success. Another method is to buy only deep ITM options. This is a net debit transaction because you pay for the put option. Your maximum risk is capped to the price you pay for the put. Your maximum reward is uncapped until the stock falls to zero, whereupon the maximum profit is the strike price less what you paid for the put. Effect of Time Decay Time decay works against your bought option, so give yourself plenty of time to be right. Don t be fooled by the false economy that shorter options are cheaper. Compare a one-month option to a 12-month option and divide the longer option price by 12. You will see that you are paying far less per month for the 12-month option. Appropriate Time Period to Trade At least three months, preferably longer depending on the particular circumstances. Selecting the Stock Choose from stocks with adequate liquidity, preferably over 500,000 Average Daily Volume (ADV). Try to ensure that the trend is downward and identify a clear area of resistance. Selecting the Option Choose options with adequate liquidity; open interest should be at least 100, preferably 500. Strike Look for either the ATM or ITM (higher) strike above the current stock. Expiration Give yourself enough time to be right; remember that time decay accelerates exponentially in the last month before expiration, so give yourself a minimum of three months to be right, knowing you ll never hold into the last month. That gives you at least two months before you ll need to sell. Longer would be better, though.

15 The Four Basic Options Strategies Risk Profile Maximum Risk [Put premium] Maximum Reward [Put strike put premium] Breakeven [Put strike put premium] Greeks Key: Expiration Today 6 months Time(t) 1 month Risk Profile As the stock price falls, the long put moves into profit more and more quickly, particularly when the stock price is lower than the strike price. Delta Delta (speed) is negative and moves at its fastest rate around the strike price, until it reaches -1. Notice how Delta is zero when the option is deep OTM. Gamma Gamma (acceleration) is always positive with a long put, and it peaks when Delta is at its fastest (steepest) rate. Risk Profile Delta Gamma Theta Vega Rho Theta Theta is negative, illustrating that time decay hurts the long put position. Vega Vega is positive, illustrating that volatility is helpful to the position because higher volatility translates into higher option values. Rho Rho is negative, illustrating that higher interest rates would reduce the value of the puts and therefore hurt the position Advantages and Disadvantages Advantages Profit from declining stock prices. Far greater leverage than simply shorting the stock. Uncapped profit potential with capped risk.

19 The Four Basic Options Strategies Greeks Risk Profile As the stock price falls, the naked put moves into loss more and more quickly, particularly when the stock price is lower than the strike price. Key: Expiration Today 6 months Time(t) 1 month Risk Profile Theta Theta Theta is positive, illustrating that time decay helps the naked put position. Delta Delta (speed) is positive and falls to zero after the position reaches its maximum profit potential after the stock has risen above the strike price. Gamma Gamma (acceleration) is always negative with a naked put (because you are net seller of options), and it peaks inversely when Delta is at its fastest (steepest) rate, which is when the position is ATM. Delta Gamma Vega Rho Vega Vega is negative, illustrating that volatility is harmful to the position because higher volatility translates into higher option values. Rho Rho is positive, illustrating that higher interest rates would help the naked put position Advantages and Disadvantages Advantages Disadvantages If done correctly, you can use Naked Puts to gain a regular income from rising or rangebound stocks. The Naked Put is an alternative way of buying a stock at a cheaper price than in the current market. This is because if you re exercised, you re obligated to buy stock at the low strike price, having already received a premium for selling the puts in the first place. Naked Puts expose you to uncapped risk (as the stock falls to zero) if the stock falls. Not a strategy for the inexperienced. You must only use this strategy on stocks you d love to own at the put strike price you re selling at. The problem is that if

### The Bible of Options Strategies

The Bible of Options Strategies In an increasingly competitive world, it is quality of thinking that gives an edge an idea that opens new doors, a technique that solves a problem, or an insight that simply

### FINANCIAL ENGINEERING CLUB TRADING 201

FINANCIAL ENGINEERING CLUB TRADING 201 STOCK PRICING It s all about volatility Volatility is the measure of how much a stock moves The implied volatility (IV) of a stock represents a 1 standard deviation

### 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

### ETF Trend Trading. Option Basics Part Two The Greeks

ETF Trend Trading Option Basics Part Two The Greeks Option Basics Separate Sections 1. Option Basics 2. The Greeks 3. Pricing 4. Types of Option Trades The Greeks A simple perspective on the 5 Greeks 1.

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

### Vertical Spreads If past history was all there was to the game, the richest people would be librarians.

Chapter 17 Vertical Spreads If past history was all there was to the game, the richest people would be librarians. Selling Vertical Call Spreads (Bear Call Spread): A bear call spread is a combination

### Chapter 3.4. Forex Options

Chapter 3.4 Forex Options 0 Contents FOREX OPTIONS Forex options are the next frontier in forex trading. Forex options give you just what their name suggests: options in your forex trading. If you have

### 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

### Protect your shares. Course 7

Course 7 Protect your shares Topic 1: Introduction... 3 The put buyer's rights... 3 Topic 2: How does it work?... 5 Outcome 1 - share price falls... 5 Outcome 2 - share price rises... 6 Profits and losses...

### Risk / Reward Maximum Loss: Limited to the premium paid up front for the option. Maximum Gain: Unlimited as the market rallies.

Bullish Strategies Bullish options strategies are employed when the options trader expects the underlying stock price to move upwards. It is necessary to assess how high the stock price can go and the

### 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,

### THE POWER OF FOREX OPTIONS

THE POWER OF FOREX OPTIONS TOPICS COVERED Option basics Call options Put Options Why trade options? Covered call Covered put Hedging your position using options How to repair a trading position THE POWER

### 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

### Underlier Filters Category Data Field Description

Price//Capitalization Market Capitalization The market price of an entire company, calculated by multiplying the number of shares outstanding by the price per share. Market Capitalization is not applicable

### 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

### 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

### 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

### Class 5: Options Trading - Part 2 Trading Options Like Stock. Review Basic Options. Right to buy stock @ certain price

Today s Class Review basic options Trading options like stock Class 5: Options Trading - Part 2 Trading Options Like Stock How options prices move with stock Choosing the right options Stock Option Basics

### BONUS REPORT#5. The Sell-Write Strategy

BONUS REPORT#5 The Sell-Write Strategy 1 The Sell-Write or Covered Put Strategy Many investors and traders would assume that the covered put or sellwrite strategy is the opposite strategy of the covered

### 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

### 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

### INDEPENDENT. OBJECTIVE. RELIABLE. Options Basics & Essentials: The Beginners Guide to Trading Gold & Silver Options

INDEPENDENT. OBJECTIVE. RELIABLE. 1 About the ebook Creator Drew Rathgeber is a senior broker at Daniels Trading. He has been heavily involved in numerous facets of the silver & gold community for over

Table of Contents Bullish Strategies 1. Long Call 03 2. Synthetic Long Call 04 3. Short Put 06 4. Covered Call 07 5. Long Combo 08 6. The Collar 09 7. Bull Call Spread 10 8. Bull Put Spread 11 9. Call

### 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

### FINANCIAL ENGINEERING CLUB TRADING 201

FINANCIAL ENGINEERING CLUB TRADING 201 GREG PASTOREK OPTIONS REVIEW A call (put) option with strike K expiring on date T gives the owner the right to buy (sell) the underlying security for price K until

### Dimensions Trading Lab. 2004. Sean Tseng. Trading Greeks. Greeks based trading strategies. Sean Tseng s presentation

Trading Greeks Greeks based trading strategies Position and Greeks position Delta Gamma Theta Vega Long + 0 0 0 Short - 0 0 0 Long call + (0 to 1) + - + Long put Short call - (-1 to 0) + - + - (0 to 1)

### PUTS AND CALLS FOR THE CONSERVATIVE INVESTOR Common Sense Strategies

PUTS AND CALLS FOR THE CONSERVATIVE INVESTOR Common Sense Strategies By Edward M. Wolpert Oconee Financial Planning Services www.oconeefps.com Conservative investors can enhance their earnings or reduce

### 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 and more people are now including options in their investments as a smart way to get ahead of the market.

Introduction Welcome Congratulations on getting started with the Options Trader. Did you know that in spite of all the turmoil in the financial markets as of late (or partly maybe because of it), the growth

### Understanding Options Gamma to Boost Returns. Maximizing Gamma. The Optimum Options for Accelerated Growth

Understanding Options Gamma to Boost Returns Maximizing Gamma The Optimum Options for Accelerated Growth Enhance Your Option Trading Returns by Maximizing Gamma Select the Optimum Options for Accelerated

Pairs Trading Pairs trading refers to opposite positions in two different stocks or indices, that is, a long (bullish) position in one stock and another short (bearish) position in another stock. The objective

### Chapter 7 - Find trades I

Chapter 7 - Find trades I Find Trades I Help Help Guide Click PDF to get a PDF printable version of this help file. Find Trades I is a simple way to find option trades for a single stock. Enter the stock

### Trading System Design. The Option Selling Model

Trading System Design The Option Selling Model And Other Trading System Analysis J. Murakami 1 Headings 1. Introduction 2. The Debate 3. Objective 4. Markets 5. Trade Structure 6. Technology 7. Entry 8.

### Volatility as an indicator of Supply and Demand for the Option. the price of a stock expressed as a decimal or percentage.

Option Greeks - Evaluating Option Price Sensitivity to: Price Changes to the Stock Time to Expiration Alterations in Interest Rates Volatility as an indicator of Supply and Demand for the Option Different

### Beginner s Guide to Stock Options

Beginner s Guide to Stock Options Chapters 1.1-1.7 www.trader.ge Stock Options Chapter 1.1 / Introduction Introduction Welcome to this Academy introduction to stock options course. In this course, we will

### INTRODUCTION TO WEEKLY OPTIONS

INTRODUCTION TO WEEKLY OPTIONS Kerry W. Given, Ph.D. (Dr. Duke) Parkwood Capital, LLC Weekly options have grown dramatically in popularity over the past year or two. In one sense, you could say weekly

### Wednesday, September 25, 13. Trading Apple Algos Using Weekly Options

Trading Apple Algos Using Weekly Options Using Options with Signals Trade Signals provide a definitive edge Options allow us to taylor our risk Time decay adds juice to this edge Primary Strategy During

### Strategies for a moderate price decrease

Course #: Title Module 6 Strategies for a moderate price decrease Topic 1: Strategy overview... 3 Construction... 3 Limited profits, low cost... 3 Volatility... 4 Time decay... 4 Bull spread, bear spread...

### Whether you re new to trading or an experienced investor, listed stock

Chapter 1 Options Trading and Investing In This Chapter Developing an appreciation for options Using option analysis with any market approach Focusing on limiting risk Capitalizing on advanced techniques

### 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,

### http://www.infinity100.com

http://www.infinity100.com THE GREEKS MANAGING AND PROFITING FROM DELTA, VEGA, THETA, GAMMA RISK THE 'GREEKS' RISK MANGEMENT GRID Line Max Profit? * VEGA POSITION 1 Long Vega 2 3, 4 Short Vega Long Vega

### FINANCIAL ENGINEERING CLUB TRADING 101

FINANCIAL ENGINEERING CLUB TRADING 101 WHAT IS TRADING TRADING/INVESTING is the act of putting capital to use, by either buying or selling securities, for the purpose of gaining profits. Buy low, sell

Brunel University Msc., EC5504, Financial Engineering Prof Menelaos Karanasos Lecture Notes: Directional Trading Strategies 1 Directional Trading Strategies With options you can pro t from correctly predicting

### WELCOME TO FXDD S BULLISH OPTIONS STRATEGY GUIDE

GLOBAL INTRODUCTION WELCOME TO FXDD S BULLISH OPTIONS STRATEGY GUIDE A bullish options strategy is one of the most common starting points for options trading beginners. Bullish options strategies are designed

### Bull Call Spread. BACK TO BASICS: Spread Yourself Around: Example. By David Bickings, Optionetics.com

Bull Call Spread BACK TO BASICS: Spread Yourself Around: Example By David Bickings, Optionetics.com Options are a fantastic investment to make money on the rise and fall of an asset. This is no surprise

### Chapter 2.3. Technical Indicators

1 Chapter 2.3 Technical Indicators 0 TECHNICAL ANALYSIS: TECHNICAL INDICATORS Charts always have a story to tell. However, sometimes those charts may be speaking a language you do not understand and you

### Week 13 Introduction to the Greeks and Portfolio Management:

Week 13 Introduction to the Greeks and Portfolio Management: Hull, Ch. 17; Poitras, Ch.9: I, IIA, IIB, III. 1 Introduction to the Greeks and Portfolio Management Objective: To explain how derivative portfolios

TRADING CREDIT SPREADS The Bull Put Spread Lesson 8 Trading a credit spread is considered to be one of the safest and most conservative of the option strategies and is the type of strategy that will work

### 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.

### Equity derivative strategy 2012 Q1 update and Trading Volatility

Equity derivative strategy 212 Q1 update and Trading Volatility Colin Bennett (+34) 91 28 9356 cdbennett@gruposantander.com 1 Contents VOLATILITY TRADING FOR DIRECTIONAL INVESTORS Call overwriting Protection

### www.optionseducation.org OIC Options on ETFs

www.optionseducation.org Options on ETFs 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,

### Option Basics: A Crash Course in Option Mechanics

1 chapter # 1 Option Basics: A Crash Course in Option Mechanics The concept of options has been around for a long time. Ancient Romans, Greeks, and Phoenicians traded options based on outgoing cargoes

### 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

### Derivative Users Traders of derivatives can be categorized as hedgers, speculators, or arbitrageurs.

OPTIONS THEORY Introduction The Financial Manager must be knowledgeable about derivatives in order to manage the price risk inherent in financial transactions. Price risk refers to the possibility of loss

Sample 2014 Trades 1 Sample 2014 Trades By Doc Severson Copyright 2015 by Doc Severson All Rights Reserved This training program, or parts thereof, may not be reproduced in any form without the prior written

### Introduction to Options -- The Basics

Introduction to Options -- The Basics Dec. 8 th, 2015 Fidelity Brokerage Services, Member NYSE, SIPC, 900 Salem Street, Smithfield, RI 02917. 2015 FMR LLC. All rights reserved. 744692.1.0 Disclosures Options

### Market Risk for Single Trading Positions

Chapter 6 Market Risk for Single Trading Positions Market risk is the risk that the market value of trading positions will be adversely influenced by changes in prices and/or interest rates. For banks,

### 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,

### ETF Liquidity More Than Meets the Eye

Vol. 2 Issue 1 2015 ETF Liquidity More Than Meets the Eye Special Feature: BlackRock shares educational tips on the liquidity of ETFs and guidelines to consider while trading. Pages 14-15 Table of Contents

Blue Capital Markets Limited 2013. All rights reserved. Content What are Options? 1 What types of forex options can I trade with easy-forex? 1 I m new to forex can I trade options? 1 How do I trade easy-forex

### 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

### Options: How About Wealth & Income? I Really Don t Care Which Way the Market Goes!

Options: How About Wealth & Income? I Really Don t Care Which Way the Market Goes! Disclaimer U.S. GOVERNMENT REQUIRED DISCLAIMER COMMODITY FUTURES TRADING COMMISSION FUTURES AND OPTIONS TRADING HAS LARGE

### No duplication of transmission of the material included within except with express written permission from the author.

Copyright Option Genius LLC. All Rights Reserved No duplication of transmission of the material included within except with express written permission from the author. Be advised that all information is

### Options Trading Strategies: Retirement Income from Weekly Options

Options Trading Strategies: Retirement Income from Weekly Options Introduction: What You ll Learn in this Guide... 5 Chapter 1: Option Basics.... 6 Calls and Puts... 7 Options Profits and Leverage... 8,9

### 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

### Options Trading The Pristine Way

Pristine.com Presents Options Trading The Pristine Way With Oliver L. Velez Founder of Pristine.com, and Author of the best selling book, Tools and Tactics for the Master Day Trader Copyright 2001, Pristine

### Income using credit spreads Roger Manzolini

Income using credit spreads July 26, 2012 1 Money and Investing Income using credit spreads July 26, 2012 July 26, 2012 2 Disclaimer This presentation is the creation of Roger Manzolini and is to be used

### FAQ. (Continued on page 2) An Investment Advisory Firm

FAQ An Investment Advisory Firm What is QASH Flow Advantage? It is a time-tested model that includes three strategic components: A portfolio of carefully selected Exchange-Traded Funds (ETFs) for diversification

### Options Strategies in a Bear Market

Class: Options Strategies in a Bear Market www.888options.com 1.888.678.4667 This document discusses exchange-traded options issued by The Options Clearing Corporation. No statement in this document is

### Chapter 2.3. Technical Analysis: Technical Indicators

Chapter 2.3 Technical Analysis: Technical Indicators 0 TECHNICAL ANALYSIS: TECHNICAL INDICATORS Charts always have a story to tell. However, from time to time those charts may be speaking a language you

### Options Combinations & Strategies. Andrew Wilkinson

Options Combinations & Strategies Andrew Wilkinson 1 Disclosure of Risk Options involve risk and are not suitable for all investors. For more information, read the Characteristics and Risks of Standardized

### 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

### Time Spreads. Presented by OPTIONS

Time Spreads Presented by 1-888-OPTIONS Time Spreads Options involve risks and are not suitable for everyone. Prior to buying or selling options, an investor must receive a copy of Characteristics and

### Steve Meizinger. Developing an FX Trading Strategy

Steve Meizinger Developing an FX Trading Strategy Steve Meizinger www.ise.com Smeizinger@ise.com For the sake of simplicity, the examples that follow do not take into consideration commissions and other

### 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

### 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

### Strategies in Options Trading By: Sarah Karfunkel

Strategies in Options Trading By: Sarah Karfunkel Covered Call Writing: I nvestors use two strategies involving stock options to offset risk: (1) covered call writing and (2) protective puts. The strategy

### 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

### Chapter 1.3. Technical Analysis: Trends, Support and Resistance

1 Chapter 1.3 Technical Analysis: Trends, Support and Resistance 0 Contents TECHNICAL ANALYSIS: TRENDS, SUPPORT AND RESISTANCE Stocks are rising. Stocks are falling. If you watch or read financial news

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

### Futures and Futures Options

Futures and Futures Options Halifax New Zealand New Zealand Financial Services Register 146605 AIG Building, Level 11/41 Shortland Street Auckland City 1010 New Zealand as Introducing Broker for Halifax

Brunel University Msc., EC5504, Financial Engineering Prof Menelaos Karanasos Lecture Notes: Volatility Trading Strategies 1 Volatility Trading Strategies As previously explained, volatility is essentially

THE UBIQUITOUS VERTICAL SPREAD Kerry W. Given, Ph.D. (Dr. Duke) Option spreads are created when we buy one option and simultaneously sell another option. When the two options are within the same expiration

### A Blueprint To Profitable Options Trading

You re In The Right Place If A Blueprint To Profitable Options Trading A Beginner s Guide To Success 1. You know you SHOULD be using options in your investing but you re not sure what to do. 2. You re

### 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

### Chapter 4.4. Exotic Options

1 Chapter 4.4 Exotic Options 0 Exotic Options Explore each of the following exotic options, and see if you can identify opportunities in your trading to use an exotic option: Exotic options are highly

### 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

50 Trading Rules for Option Traders Trader Psychology Rules 1. If you fail to plan, plan to fail. You must have a plan for each trade. 2. NEVER trade with money you can t afford to lose. 3. There are no

### THETA AS AN ASSET CLASS By Dominik von Eynern, Swiss Alpha Asset Management GMBH

THETA AS AN ASSET CLASS By Dominik von Eynern, Swiss Alpha Asset Management GMBH It is essential to find new ways or asset classes to deliver consistent and uncorrelated returns within the asset management

### 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