The SPX Size Advantage

Size: px
Start display at page:

Download "The SPX Size Advantage"

Transcription

1 SPX (SM) vs. SPY Advantage Series- Part II The SPX Size Advantage September 18, 2013 Presented by Marty

2 Disclosures Options involve risks and are not suitable for all investors. Prior to buying or selling an option, an investor must receive a copy of Characteristics and Risks of Standardized Options. Copies are available from your broker, by calling OPTIONS, or at The information in this presentation is provided solely for general education and information purposes. Any strategies discussed, including examples using actual securities and price data, are strictly for illustrative and educational purposes. In order to simplify the computations, commissions, fees, margin interest and taxes have not been included in the examples used in this presentation. These costs will impact the outcome of all stock and options transactions and must be considered prior to entering into any transactions. Multiple-leg strategies involve multiple commission charges. No statement within the presentation should be construed as a recommendation to buy or sell a security or to provide investment advice. CBOE, Chicago Board Options Exchange, CBOE Volatility Index, OEX, VIX and XEO are registered trademarks and Execute Success, Quarterlys, SKEW, SPX, SPXpm, The Options Institute, Weeklys and XSP are service marks of Chicago Board Options Exchange, Incorporated (CBOE). S&P, S&P100 and S&P 500 are trademarks of Standard & Poor s Financial Services, LLC and have been licensed for use by CBOE. S&P does not sponsor, endorse, sell, or promote any S&P index-based investment product. All other trademarks and service marks are the property of their respective owners. Under section 1256 of the Tax Code, profit and loss on transactions in certain exchange-traded options, including SPX, SPXpm and XSP are entitled to be taxed at a rate equal to 60% long-term and 40% short-term capital gain or loss, provided that the investor involved and the strategy employed satisfy the criteria of the Tax Code. Investors should consult with their tax advisors to determine how the profit and loss on any particular option strategy will be taxed. Tax laws and regulations change from time to time and may be subject to varying interpretations. Copyright 2013 CBOE. All rights reserved. CBOE OPTIONS INSTITUTE 2

3 Presentation Outline Review: The Mechanics of Index Options Size of SPX versus SPY Option Contract Tax Considerations Example Long Bullish Call Spread Smaller SPX the XSP SPX Option Pricing Summary Additional Resources CBOE OPTIONS INSTITUTE 3

4 Mechanics of Index Options SPX options function much like SPY (ETF) options Both calls and puts are available for trading There are several major differences: SPX options settle in cash, not in shares SPX options are European style Covered in Part I yesterday Size of the contract A potential tax benefit exists for index option traders CBOE OPTIONS INSTITUTE 4

5 The Cash Settlement Process Example: SPX is at expiration Cash Value of a 1600 Call? SPX Value Less Strike Price 1600 Difference x Multiplier x $100 Cash from Seller to Buyer $ CBOE OPTIONS INSTITUTE 5

6 Index Options - SPX Ticker Symbol SPX Underlying S&P 500 Stock Index Multiplier $100 Exercise Style European Settlement AM Full Contract Size 10 x SPY Tax Treatment (Broad-based index) CBOE OPTIONS INSTITUTE 6

7 Potential Tax Advantage of Index Options

8 Index Options Potential Tax Advantage ETF Options Are treated like stock options* Broad Based Index Options Receive Tax Treatment** 1256 Contracts *Consult your tax advisor **According to Taxes and Investing, published by The Options Industry Council, available from Note: Under Section 1256 of the Tax Code, profit and loss on transactions in certain exchange-traded options, including SPX, SPXpm and XSP, are entitled to be taxed at a rate equal to 60% long-term and 40% short-term capital gain or loss, provided that the investor involved and the strategy employed satisfy the criteria of the Tax Code. Investors should consult with their tax advisors to determine how the profit and loss on any particular option strategy will be taxed. Tax laws and regulations change from time to time and may be subject to varying interpretations. CBOE OPTIONS INSTITUTE 8

9 60-40 Tax Treatment - Example You bought an SPX option Monday at $5.00. Two days later you sell the option at $9.00. Taxes are due on the $400 gain. CBOE OPTIONS INSTITUTE 9

10 60-40 Tax Treatment 1256 Contracts: All Profits treated as 60% long term / 40% short term regardless of holding period Reported on Form 6781 and Schedule D Year end prices become cost basis for the new year CBOE OPTIONS INSTITUTE 10

11 Index Options Broad Based Index Options include: S&P 100 OEX, XEO S&P 500 SPX, SPXpm, XSP* CBOE Volatility Index - VIX * XSP is the 1/10 size Mini-SPX option contract, also based on the Standard & Poor's 500 Stock Index. XSP has most of the same features of SPX: Broad-Based, European Style, 1256 contract. It is the same size as SPY. CBOE OPTIONS INSTITUTE 11

12 SPX Size Matters

13 SPX Comparison to SPY Contract Comparison SPY is the SPDR S&P 500 ETF which represents ownership in a portfolio of stocks that replicates the S&P 500 Index. The underlying pricing for both SPX and SPY options is the S&P 500 Index CBOE OPTIONS INSTITUTE 13

14 SPX Comparison to SPY Size Comparison S&P 500 at SPY Option = $164 x 100 = $16,400 1 SPX Option = x $100 = $164,000 To control the same amount of market value, 10 SPY contracts need to be traded for each SPX contract CBOE OPTIONS INSTITUTE 14

15 SPX Comparison to SPY Contract Comparison Summary S&P 500 at SPY SPX Underlying Value Contract Underlying 100 Shares $ American / European American Style European Style AM / PM Style PM Both Available Settlement Buy / Sell Shares Pay / Receive Cash CBOE OPTIONS INSTITUTE 15

16 Long SPX Debit Spread

17 Trading Example S&P 500 quoted at We have a bullish outlook over the next three weeks and expect market to rally +2% to by quarter end (September 30 th ). SPXQ options expire on last day of June, September, December and March CBOE OPTIONS INSTITUTE 17

18 Long SPX Call Spread Example S&P 500 at To trade this positive outlook for the S&P 500 we decide to do the following: Buy 1 SPXQ (9/30/13) 1670 Call at Sell 1 SPXQ (9/30/13) 1700 Call at db. CBOE OPTIONS INSTITUTE 18

19 Long SPX Call Spread S&P 500 at Long SPXQ Call Spread at $11.80 Breakeven: (1670 plus $11.80) Risk: $11.80 Potential gain: $18.20 Difference in strikes ($30) less $11.80 premium paid = Prices as of 9/6/13 Excludes transaction costs CBOE OPTIONS INSTITUTE 19

20 Debit Spread Long 1 SPX 9/ Short 1 SPX 9/ (5.00) (10.00) Current Price & 1700 Calls Expire OTM 1670 Call ITM 1700 Call OTM 1670 & 1700 Calls Both ITM (15.00) (20.00) CBOE OPTIONS INSTITUTE 20

21 Long SPX Bull Call Vertical Spread Long 1 SPXQ Call Spread at $11.80 Payoff Table SPX at Expiration SPXQ Spread Call Premium Profit / Loss 0.00 (11.80) (11.80) 0.00 (11.80) (11.80) 0.00 (11.80) (11.80) 0.00 (11.80) (11.80) (11.80) (1.80) (11.80) (11.80) (11.80) (11.80) CBOE OPTIONS INSTITUTE 21

22 More SPX & SPY Differences SPY commission 10 contracts in and out SPX commission 1 contracts in and out Tax consequences on gain: SPX 1256 (60/40) SPY tax status uncertain SPY position turns into SPY shares if not closed, SPX settle in cash CBOE OPTIONS INSTITUTE 22

23 SPX & SPY Settlement SPX at 1,664 goes to 1,694 at expiration The SPX spread now worth $2,400 SPX spread settles in cash, $2,400 A comparable SPY position (if not closed out before expiration) turns into 1,000 SPY shares CBOE OPTIONS INSTITUTE 23

24 SPX Option Pricing

25 SPX Option Pricing SPX October 1690 Call is $12.00 bid - $12.50 offer SPY October 169 Call is $ 1.20 bid - $ 1.25 offer Which option is more expensive? That s easy.. CBOE OPTIONS INSTITUTE 25

26 SPX Option Pricing SPX options - usually more expensive than SPY? Yes, but they re 10 X the size An SPX October 1690 Call might show: $12.00 bid offered at $12.50 A SPY October 169 Call could be: $1.20 bid, offered at $1.25 One would need to buy or sell 10 X the number of contracts in SPY to equal each SPX contract CBOE OPTIONS INSTITUTE 26

27 Option Pricing Comparing SPX October 1700 Call is $3.00 bid $3.30 offer SPY October 170 Call is $0.30 bid - $0.32 offer Why wouldn t they be the same? SPY is AM settlement, SPX is PM SPY volume greater (SPX notional value larger) Quantities bid / offered on SPY could be small. Same can be seen with XSP. Marketmakers hedge in a variety of ways. Try limit orders. CBOE OPTIONS INSTITUTE 27

28 Why SPX Options? Larger notional size potentially lower commissions (10 to 1 ratio) Convenience of cash settled options versus physical delivery of shares No potential early exercise issues with SPX Preferred choice of sophisticated institutional traders Potential tax benefit CBOE OPTIONS INSTITUTE 28

29 Summary SPX Options are an excellent method of gaining exposure to the S&P 500 Index SPX Index options are eligible for 60/40 tax treatment* Three part forecast needed for option trades: underlying / time / implied volatility Spreads offer unique trade-offs *Note: Under Section 1256 of the Tax Code, profit and loss on transactions in certain exchangetraded options, including SPX, SPXpm and XSP, are entitled to be taxed at a rate equal to 60% long-term and 40% short-term capital gain or loss, provided that the investor involved and the strategy employed satisfy the criteria of the Tax Code. Investors should consult with their tax advisors to determine how the profit and loss on any particular option strategy will be taxed. Tax laws and regulations change from time to time and may be subject to varying interpretations. CBOE OPTIONS INSTITUTE 29

30 Additional Resources At go to the Index Micro-Site This site includes information on SPX, XSP, SPXPM, as well as Dow Jones Indexes, Russell Indexes, NASDAQ Indexes, VIX, Skew and Custom Indexes as well as Weekly and Quarterly options. CBOE OPTIONS INSTITUTE 30

31 Archived Webinars For additional webinars on SPX or other Index products including VIX & credit spreads, go to: Credit Spreads - Weeklys(SM) Iron Condors - The Holy Grail of Trading Iron Condors: CBOE OPTIONS INSTITUTE 31

32 Additional Webinars VIX and SPX - First Quarter VIX Trading Review - Trading Index Options: Popular Strategies for Today s Markets - SPX vs SPY - CBOE OPTIONS INSTITUTE 32

33 Upcoming Seminars New Trends in Trading VIX Chicago, IL or Online September 28, 2013 Options Profits, Option Pit and the Options Institute at CBOE are teaming up for a full day of education covering what is new in the world of trading options, futures and exchange-traded products on VIX and other volatility related markets and how VIX products can be utilized in this current low volatility environment. Simply the Basics Chicago, IL October 30, 2013 Simply the Basics is a half-day seminar led by CBOE Options Institute instructors, Peter Lusk and Russell Rhoads, that helps you understand the basic concepts of options -- such as what are calls and puts, what are the factors that influence the price of options contracts and what makes values change? Options Initiative- Level 1 Beginner Chicago, IL or Online December 2 & 3, 2013 This 2-day classroom experience plus 10 hours of distance coaching will introduce you to the basics of options and the basics of market timing, stock selection and risk management. For more information or to register go to: CBOE OPTIONS INSTITUTE 33

34 Webinar Survey Thank you for attending the SPX Options vs. SPY Options: Strategic Advantages webinar- please provide your feedback by taking our brief 5 minute survey! CBOE OPTIONS INSTITUTE 34

35 CBOE 400 South LaSalle Street Chicago, Illinois

SPX pm It s Here!! Presented by: The Options Institute at CBOE

SPX pm It s Here!! Presented by: The Options Institute at CBOE SPX pm It s Here!! Presented by: The Options Institute at CBOE Disclosures In order to simplify the computations, commissions and other transaction costs have not been included in the examples used in

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

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

2-Step Credit Spreads

2-Step Credit Spreads 2-Step Credit Spreads (with Weeklys SM Options) Jim Bittman Senior Instructor The Options Institute at CBOE Disclosures Options involve risks and are not suitable for all investors. Prior to buying or

More information

Russell Rhoads, CFA Instructor The Options Institute. 2010 Chicago Board Options Exchange, Incorporated. All rights reserved.

Russell Rhoads, CFA Instructor The Options Institute. 2010 Chicago Board Options Exchange, Incorporated. All rights reserved. Trading VIX Futures and Options Russell Rhoads, CFA Instructor The Options Institute 2010 Chicago Board Options Exchange, Incorporated. All rights reserved. CBOE Disclaimer Options and futures involve

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

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

TRADING VERTICAL SPREADS

TRADING VERTICAL SPREADS TRADING VERTICAL SPREADS Today s Topics Quick review of vertical spreads Entering spread orders Presentation Outline Vertical Spread Basics Bull & Bear Spreads Defined Mechanics at Expiration Important

More information

Fishing for Trades using Implied Volatility

Fishing for Trades using Implied Volatility Dan Sheridan Fishing for Trades using Implied Volatility July 31, 2013 Sheridan Options Mentoring, Inc. www.sheridanmentoring.com Page 1 Sponsored by: Disclaimer Options involve risk and are not suitable

More information

INTRODUCTION TO WEEKLY OPTIONS

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

More information

... as if the world wasn t complicated

... as if the world wasn t complicated What lies ahead??? Options on Futures and Indexes... as if the world wasn t complicated enough already!! 2014 Gary R. Evans. May be used only for non-profit educational purposes only without permission

More information

www.optionseducation.org OIC Options on ETFs

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,

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

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

BEAR: A person who believes that the price of a particular security or the market as a whole will go lower.

BEAR: A person who believes that the price of a particular security or the market as a whole will go lower. Trading Terms ARBITRAGE: The simultaneous purchase and sale of identical or equivalent financial instruments in order to benefit from a discrepancy in their price relationship. More generally, it refers

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

Introduction to Options -- The Basics

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

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

All Volatility Index Futures and Security Futures Market Participants

All Volatility Index Futures and Security Futures Market Participants CFE Information Circular IC12-04 Date: January 6, 2012 To: From: Re: All Volatility Index Futures and Security Futures Market Participants Research and Product Development Department Volatility Index Futures

More information

Index, Interest Rate, and Currency Options

Index, Interest Rate, and Currency Options CHAPTER 3 Index, Interest Rate, and Currency Options INTRODUCTION In an effort to gauge the market s overall performance, industry participants developed indexes. Two of the most widely followed indexes

More information

FREQUENTLY ASKED QUESTIONS BY INSURANCE PROFESSIONALS WHO ARE CONSIDERING FLEX OPTIONS

FREQUENTLY ASKED QUESTIONS BY INSURANCE PROFESSIONALS WHO ARE CONSIDERING FLEX OPTIONS FREQUENTLY ASKED QUESTIONS BY INSURANCE PROFESSIONALS WHO ARE CONSIDERING FLEX OPTIONS WHAT ARE FLEX OPTIONS? FLEX options are customizable options where users define their own terms. They differ from

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

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

FINANCIAL ENGINEERING CLUB TRADING 101

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

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

Binary options. Giampaolo Gabbi

Binary options. Giampaolo Gabbi Binary options Giampaolo Gabbi Definition In finance, a binary option is a type of option where the payoff is either some fixed amount of some asset or nothing at all. The two main types of binary options

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

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

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

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

Advanced Options Strategies SAMPLE INVESTING PLANS

Advanced Options Strategies SAMPLE INVESTING PLANS Advanced Options Strategies SAMPLE INVESTING PLANS 1 Important Information Neither Investools Inc. nor any of its officers, employees, representatives, agents, or independent contractors are, in such capacities,

More information

EXECUTE SUCCESS. {at work}

EXECUTE SUCCESS. {at work} EXECUTE SUCCESS TM {at work} VIX T H E C B O E V O L A T I L I T Y I N D E X 1 W H AT I S V I X & W H AT D O E S I T M E A S U R E? T H E I N D U S T R Y S TA N D A R D I N V O L AT I L I T Y MEASUREMENT

More information

36 South Breakfast. Profile of the U.S. Listed Equity Options Market. Zurich October 23, 2013

36 South Breakfast. Profile of the U.S. Listed Equity Options Market. Zurich October 23, 2013 36 South Breakfast Profile of the U.S. Listed Equity Options Market Zurich October 23, 2013 The Options Industry Council (OIC) Gary Delany www.optionseducation.org Disclaimer Options involve risk and are

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

Introduction to Options Trading. Patrick Ceresna, MX Instructor

Introduction to Options Trading. Patrick Ceresna, MX Instructor Introduction to Options Trading Patrick Ceresna, MX Instructor 1 Disclaimer The views and opinions expressed in this presentation reflect those of the individual authors/presenters only and do not represent

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

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

REASONS TO TRADE STOCK INDEX FUTURES

REASONS TO TRADE STOCK INDEX FUTURES 10 REASONS TO TRADE STOCK INDEX FUTURES 10 TEN REASONS TO TRADE STOCK INDEX FUTURES Because it s difficult for almost anyone to select only the top-performing individual stocks, even in bull market conditions,

More information

Note on New Products in F&O Segment. 2. Options Contracts with Longer Life/Tenure. 6. Exchange-traded Currency (Foreign Exchange) F&O Contracts

Note on New Products in F&O Segment. 2. Options Contracts with Longer Life/Tenure. 6. Exchange-traded Currency (Foreign Exchange) F&O Contracts Note on New Products in F&O Segment Contents 1. Mini Contracts in Equity Indices 2. Options Contracts with Longer Life/Tenure 3. Volatility Index and F&O Contracts 4. Options on Futures 5. Bond Index and

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

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

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

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 Invest In Stocks With Options

How To Invest In Stocks With Options Applied Options Strategies for Portfolio Managers Gary Trennepohl Oklahoma State University Jim Bittman The Options Institute Session Outline Typical Fund Objectives Strategies for special situations Six

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

Sheridan Options Mentoring, Inc. www.sheridanmentoring.com

Sheridan Options Mentoring, Inc. www.sheridanmentoring.com Dan Sheridan Option Trading for Income March 17, 2009 Sheridan Options Mentoring, Inc. www.sheridanmentoring.com Disclaimer The views of third party speakers and their materials are their own and do not

More information

Adjusting the Iron Condor Kerry W. Given, Ph.D. (Dr. Duke) Parkwood Capital, LLC

Adjusting the Iron Condor Kerry W. Given, Ph.D. (Dr. Duke) Parkwood Capital, LLC Adjusting the Iron Condor Kerry W. Given, Ph.D. (Dr. Duke) Parkwood Capital, LLC Disclosures and Disclaimers Buying and selling stocks and options involves risks and may not be suitable for all investors.

More information

Directional Options Trading Strategy And Position Management

Directional Options Trading Strategy And Position Management 3 rd Annual CBOE Risk Management Conference Europe Directional Options Trading Strategy And Position Management Bill Looney CBOE Global Business Development Oleg Lugovkin Volatility PM Argentiere Capital

More information

Trade Plan for Option Volatility Spreading

Trade Plan for Option Volatility Spreading Trade Plan for Option Volatility Spreading 1 Table of Contents I Overview:...3 Performance:...3 Strategy:...3 What to trade:...3 When to trade:...3 Where to trade:...4 How to trade:...4 Rules to buy:...4

More information

9 Questions Every Australian Investor Should Ask Before Investing in an Exchange Traded Fund (ETF)

9 Questions Every Australian Investor Should Ask Before Investing in an Exchange Traded Fund (ETF) SPDR ETFs 9 Questions Every Australian Investor Should Ask Before Investing in an Exchange Traded Fund (ETF) 1. What is an ETF? 2. What kinds of ETFs are available? 3. How do ETFs differ from other investment

More information

Portfolio Margining. Welcome

Portfolio Margining. Welcome Welcome Portfolio Margining How the Biggest Change in Margin Rules in 40 years is Benefiting Hedge Funds, Proprietary Trading Groups and High Net Worth Investors Doug Engmann, Senior Executive Vice President,

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

FTS Real Time System Project: Stock Index Options

FTS Real Time System Project: Stock Index Options FTS Real Time System Project: Stock Index Options Question: How do you trade stock index options using the FTS Real Time Client? In the sequence of FTS Real time option exercises you will learn all about

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 www.888options.com By Marty Kearney

central Options www.888options.com By Marty Kearney www.888options.com YOUR RESOURCE FOR OPTIONS EDUCATION SM Options central IN THIS S U M M E R 2 0 0 2 ISSUE: F E A T U R E : S E L L I N G P U T S O P T I O N S C E N T R A L M O V E S O N L I N E W H

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

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

Iron Condor Plan and a Credit Spread Plan for Weeklys (SM) Income

Iron Condor Plan and a Credit Spread Plan for Weeklys (SM) Income Dan Sheridan Iron Condor Plan and a Credit Spread Plan for Weeklys (SM) Income October 29, 2013 Sheridan Options Mentoring, Inc. www.sheridanmentoring.com Page 1 Disclaimer Options involve risk and are

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

Comparing E-minis and ETFs

Comparing E-minis and ETFs STOCK INDEXES Comparing E-minis and ETFs SEPTEMBER 15, 2012 John W. Labuszewski Managing Director Research & Product Development 312-466-7469 jlab@cmegroup.com CME Group E-mini stock index futures and

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

Trading to hedge: Static hedging

Trading to hedge: Static hedging Trading to hedge: Static hedging Trading scenarios Trading as a dealer (TRN) Strategy: post bids and asks, try to make money on the turn. Maximize profits Trading on information (F1, PD0) Strategy: forecast

More information

EVALUATING THE PERFORMANCE CHARACTERISTICS OF THE CBOE S&P 500 PUTWRITE INDEX

EVALUATING THE PERFORMANCE CHARACTERISTICS OF THE CBOE S&P 500 PUTWRITE INDEX DECEMBER 2008 Independent advice for the institutional investor EVALUATING THE PERFORMANCE CHARACTERISTICS OF THE CBOE S&P 500 PUTWRITE INDEX EXECUTIVE SUMMARY The CBOE S&P 500 PutWrite Index (ticker symbol

More information

Comparing E-minis and ETFs. John W. Labuszewski, Research and Product Development Brett Vietmeier, Equity Products April 2009

Comparing E-minis and ETFs. John W. Labuszewski, Research and Product Development Brett Vietmeier, Equity Products April 2009 RESEARCH AND product DEVELOPMENT Comparing E-minis and ETFs John W. Labuszewski, Research and Product Development Brett Vietmeier, Equity Products April 2009 13,000 cmegroup.com 12,000 10,000 9,000 8,000

More information

Mastering Options Strategies

Mastering Options Strategies Mastering Options Strategies A step-by-step guide to understanding profit & loss diagrams Because Money Doesn t Grow on Trees Written by the Staff of The Options Institute of the Chicago Board 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

Underlier Filters Category Data Field Description

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

More information

Trading VIX Derivatives. Trading and Hedging Strategies Using VIX Futures, Options, and Exchange Traded Notes. Wiley Trading

Trading VIX Derivatives. Trading and Hedging Strategies Using VIX Futures, Options, and Exchange Traded Notes. Wiley Trading Brochure More information from http://www.researchandmarkets.com/reports/2243212/ Trading VIX Derivatives. Trading and Hedging Strategies Using VIX Futures, Options, and Exchange Traded Notes. Wiley Trading

More information

Variance swaps and CBOE S&P 500 variance futures

Variance swaps and CBOE S&P 500 variance futures Variance swaps and CBOE S&P 500 variance futures by Lewis Biscamp and Tim Weithers, Chicago Trading Company, LLC Over the past several years, equity-index volatility products have emerged as an asset class

More information

Pro Picks Quick Reference

Pro Picks Quick Reference SUMMARY PAGE Asset Tabs Filter Bar Subscription Status Portfolio Performance Summary Multi-select Filter Drop-down lists Asset Performance Summary Listing Panel Asset Tabs The tabs in the upper left allow

More information

Fundamentals of Futures and Options (a summary)

Fundamentals of Futures and Options (a summary) Fundamentals of Futures and Options (a summary) Roger G. Clarke, Harindra de Silva, CFA, and Steven Thorley, CFA Published 2013 by the Research Foundation of CFA Institute Summary prepared by Roger G.

More information

January 25, 2007. Description of the CBOE NASDAQ-100 BuyWrite Index (BXN SM Index)

January 25, 2007. Description of the CBOE NASDAQ-100 BuyWrite Index (BXN SM Index) Description of the CBOE NASDAQ-100 BuyWrite Index (BXN SM Index) Index Design. The CBOE NASDAQ-100 BuyWrite Index (BXN SM ) measures the total rate of return of a NASDAQ-100 covered call strategy. This

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

FTS Real Time System Project: Stock Index Futures

FTS Real Time System Project: Stock Index Futures FTS Real Time System Project: Stock Index Futures Question: How are stock index futures traded? In a recent Barron s article (September 20, 2010) titled Futures Are the New Options it was noted that there

More information

Volatility Index (VIX) and S&P100 Volatility Index (VXO)

Volatility Index (VIX) and S&P100 Volatility Index (VXO) Volatility Index (VIX) and S&P100 Volatility Index (VXO) Michael McAleer School of Economics and Commerce University of Western Australia and Faculty of Economics Chiang Mai University Volatility Index

More information

Comparing E-minis and ETFs

Comparing E-minis and ETFs RESEARCH AND product DEVELOPMENT Comparing E-minis and ETFs John W. Labuszewski, Research and Product Development Brett Vietmeier, Equity Products April 2009 13,000 cmegroup.com 12,000 1 10,000 9,000 8,000

More information

ETF Liquidity More Than Meets the Eye

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

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

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

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

Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 ( Act ), 2 and Rule

Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 ( Act ), 2 and Rule SECURITIES AND EXCHANGE COMMISSION (Release No. 34-67936; File No. SR-BOX-2012-013) September 27, 2012 Self-Regulatory Organizations; BOX Options Exchange LLC; Notice of Filing of Proposed Rule Change

More information

Understanding ETF Liquidity

Understanding ETF Liquidity Understanding ETF Liquidity SM 2 Understanding the exchange-traded fund (ETF) life cycle Despite the tremendous growth of the ETF market over the last decade, many investors struggle to understand the

More information

CHAPTER 15 Stock Options

CHAPTER 15 Stock Options Confirm Pages CHAPTER 15 Stock Options I have no objection to the granting of options. Companies should use whatever form of compensation best motivates employees whether this be cash bonuses, trips to

More information

Chapter 14: Options Markets

Chapter 14: Options Markets Chapter 14: Options Markets Stock options can be used by speculators to benefit from their expectations and by financial institutions to reduce their risk. Options markets facilitate the trading of stock

More information

PROBABILITY & CREDIT SPREADS

PROBABILITY & CREDIT SPREADS PROBABILITY & CREDIT SPREADS 1 Risk Disclosure We Are Not Financial Advisors or a Broker/Dealer: Neither TheoTrade nor any of its officers, employees, representaaves, agents, or independent contractors

More information

S&P/ASX 200 VIX Methodology

S&P/ASX 200 VIX Methodology S&P/ASX 00 VIX Methodology S&P Dow Jones Indices: Index Methodology February 016 Table of Contents Introduction Highlights Index Construction 3 Approaches 3 Deriving VIX from ear Term and ext Term Options

More information

Russell 1000 Index Futures Contract on ICE

Russell 1000 Index Futures Contract on ICE Russell 1000 Index Futures Contract on ICE FAQ January 2009 This material may not be reproduced or redistributed in whole or in part without the express, prior written consent of IntercontinentalExchange,

More information

Memo slide our calls and puts before and after the debt deadline 25-Oct Wed Today SPY 170.69 172.90

Memo slide our calls and puts before and after the debt deadline 25-Oct Wed Today SPY 170.69 172.90 Option traders are nimble and quick... Options Trading Strategies... betting on or against volatility, hedging, leveraging (c) 2009-2013, Gary R. Evans. May be used only for non-profit educational purposes

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

Advanced Time Spread Trading: Using Volatility Skew for Edge

Advanced Time Spread Trading: Using Volatility Skew for Edge Advanced Time Spread Trading: Using Volatility Skew for Edge Dan Passarelli Market Taker Mentoring, Inc. MarketTaker.com Twitter.com/Dan_Passarelli 759741.1.0 Disclaimer In order to simplify the computations,

More information

How To Hedge or Protect Index Credit Spread Options and Iron Condor Options Against a Steep Correction or Stock Market Crash

How To Hedge or Protect Index Credit Spread Options and Iron Condor Options Against a Steep Correction or Stock Market Crash How To Hedge or Protect Index Credit Spread Options and Iron Condor Options Against a Steep Correction or Stock Market Crash This article discusses a strategy to hedge index credit spread options against

More information

CBOE would like to thank Sandy Rattray and Devesh Shah of Goldman, Sachs & Co. for their significant contributions to the development of the New VIX

CBOE would like to thank Sandy Rattray and Devesh Shah of Goldman, Sachs & Co. for their significant contributions to the development of the New VIX CBOE would like to thank Sandy Rattray and Devesh Shah of Goldman, Sachs & Co. for their significant contributions to the development of the New VIX calculation. THE NEW CBOE VOLATILITY INDEX - VIX In

More information

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

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

More information

How Wall Street Works Nightly Business Report

How Wall Street Works Nightly Business Report Notes from the PBS video How Wall Street Works Nightly Business Report The New York Stock Exchange located on Wall Street in New York City, is traders can buy and sell stocks and bonds. Two major types

More information

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

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

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

Futures Contract Introduction

Futures Contract Introduction Futures Contract Introduction 1 The first futures exchange market was the Dojima Rice exchange in Japan in the 1730s, to meet the needs of samurai who being paid in rice and after a series of bad harvests

More information

Introduction to Equity Derivatives on Nasdaq Dubai NOT TO BE DISTRIUTED TO THIRD PARTIES WITHOUT NASDAQ DUBAI S WRITTEN CONSENT

Introduction to Equity Derivatives on Nasdaq Dubai NOT TO BE DISTRIUTED TO THIRD PARTIES WITHOUT NASDAQ DUBAI S WRITTEN CONSENT Introduction to Equity Derivatives on Nasdaq Dubai NOT TO BE DISTRIUTED TO THIRD PARTIES WITHOUT NASDAQ DUBAI S WRITTEN CONSENT CONTENTS An Exchange with Credentials (Page 3) Introduction to Derivatives»

More information

Pairs Trading STRATEGIES

Pairs Trading STRATEGIES 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

More information