Futures and Futures Options

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1 Futures and Futures Options Halifax New Zealand New Zealand Financial Services Register AIG Building, Level 11/41 Shortland Street Auckland City 1010 New Zealand as Introducing Broker for Halifax Investment Services Australian Financial Services License No Date 25th September 2013 Halifax Trading Examples 1

New Zealand as Introducing Broker for Halifax Investment Services Australian

2 5,035 ( ) Example 1: Going Long If you expect the share price index (SPI) to perform well and anticipate the price to rise by 1% over the next five days. Open Position $25 x $ AUD $11,000 AUD $12.50 AUD $25 x $ AUD $12.50 AUD Gross Profit $25 AUD x 66 points $1, AUD (Bought & Sold) $25 AUD Net Profit $1,625 AUD SPI chart long/profit 5,075 penalties, legal action or credit agency default. c 2 Halifax NEW ZEALAND Trading Examples

50 AUD Gross Profit $25 AUD x 66 points $1,650.

3 .7 Alternatively: your expectations prove to be incorrect and your stop loss is triggered. $25 x $4,088 AUD $12.50 AUD Gross Loss $600 AUD (Bought & Sold) $25 AUD Net Profit (loss) $625 AUD penalties, legal action or credit agency default. 5,075 SPI chart long/loss 5,035 S P Halifax NEW ZEALAND Trading Examples 3

50 AUD Gross Loss $600 AUD (Bought & Sold) $25 AUD Net Profit (loss) $625 AUD

4 5,075 c Example 2: Going Short If you anticipate that oil has peaked and forecast that it could fall by as much as $3 a barrel over the next ten days. Open Position $0 US penalties, legal action or credit agency default. $0 US a Barrel x $10.00 US $8,000 US $12.50 of US Derivatives Top figure Gross Profit (Sold & Bought) Net Profit $0 US $0 US a Barrel x $10.00 US $12.50 US $3,000 US $2,975 US 5,035 Oil chart short/profit.7 c O Halifax NEW ZEALAND Trading Examples

$0 US a Barrel x $10.00 US $8,000 US $12.

5 Alternatively: your expectations prove to be incorrect and your stop loss is triggered. Gross Loss (Sold & Bought) Net Loss (loss) $ US $ US a Barrel x $10.00 US $12.50 US $3,500 US $3,5 of US Derivatives Top figure penalties, legal action or credit agency default Oil chart short/loss (-1900) (300) Halifax NEW ZEALAND Trading Examples 5

50 US $3,500 US $3,5 of US Derivatives Top figure penalties, legal action or credit agency

6 y 1 Call and Sell 1 Put at the same strike arket Outlook: Bullish k: Substantial rease in Volatility: Neutral e Decay: Neutral Sell 2 Calls, Buy 1 Call at higher strike and Buy 1 Call at lower strike Market Outlook: Neutral Increase in Volatility: Typically hurts position Time Decay: Typically helps position 5,075 Sell 1 Call and Sell 1 Put at the same strike Market Outlook: Neutral Increase in Volatility: Hurts position Time Decay: Helps position Buy 1 Put and Sell 1 Call at the same strike Market Outlook: Bearish Substantial Increase in Volatility: Neutral Time Decay: Neutral Long Call Option Examples Long Put Example 3: Buying a Put Option If you thought that Crude Oil was to drop in price by $3 us a barrel over the next 10 days. y 1 Call Buy 1 Put arket Outlook: Bullish You decide instead of selling crude oil futures directly Market Outlook: Bearish k: to buy a Put option, as this will limit the loss only to the Substantial rease in Volatility: Helps position Increase in Volatility: Helps position e Decay: Hurtsamount position you pay for the Option. Time Decay: Hurts position You attempt to pick the strike price that will be most effected (delta) and choose the 51 us strike. Call Backspread The Strike prices Put(Day Backspread 1) Open position 1.80 THE OPTIONS1 x STRATEGY 53 Put Option of Derivatives SPECTRUM Top figure Buy Date Day Bullish (Variation Neutral Margin required) Bearish Bottom figure ll 1 Call and Buy 2 Calls at a higher strike Sell 1 Put and Buy 2 Puts at a lower strike arket Outlook: Bullish 1.2 Market Outlook: Bearish k: write Substantial rease in Volatility: Typically Contract helps position Value $1,000 x $1.2 us 49 Increase in Volatility: Typically helps position 0.80 e Decay: Typically hurts position straddles or 5,035 Time Decay: Typically hurts position combinations The cost of the option ($1,200 US) Bull Spread bull bear Bear Spread spreads spreads 1 x 53 Put Option buy stock, sell call overwrite the loss, you will be required to fund the short y 1 Call (Put) and Sell 1 Call (Put) higher Sell 1 Put (Call) and Buy 1 Put (Call) at higher ike Sell Date Day 10 strike arket Outlook: Moderately Bullish buy bonds, sell put buy protectivefall put Market Outlook: Moderately Bearish k: buy call 3 buy put penalties, legal action or credit agency default. rease in Volatility or Time Decay: Increase in Volatility or Time Decay: lps or hurts depending on strikes chosen Helps or Hurts depending on strikes chosen Contact Value $1,000 x $3 us Buy Write Short Butterfly Long Straddle Short Call (Bought and Sold) $50 US Net Profit y 1000 shares and Sell 1 Call arket Outlook: Neutral to Slightly Bullish k: Substantial rease in Volatility: Hurts position e Decay: Helps position Buy 2 Puts, Sell 1 Put at higher strike and Sell 1 Put at lower strike Market Outlook: Strong move in either direction Increase in Volatility: Typically helps position Time Decay: Typically hurts position $1,750 US Buy 1 Call and Buy 1 Put at the same strike Market Outlook: Strong move in either direction Increase in Volatility: Helps position Oil chart short/profit Time Decay: Hurts position.7 Sell 1 Call Market Outlook: Neutral to Slightly Bearish Increase in Volatility: Hurts position Time Decay: Helps position c c O Halifax NEW ZEALAND Trading Examples

Volatility: Hurts position Time Decay: Helps position Buy 1 Put and Sell 1 Call at the same strike Market Outlook: Bearish Substantial Increase in Volatility: Neutral Time Decay: Neutral Long Call

7 5,035 Option Examples Example 4: Selling a Put Option If you thought that Crude Oil could not drop in price by any more than $3 us a barrel on or before the expiry in 10 days. Selling Options as more detailed in section xx can be inherently more risky as the cost can technically be unlimited and could require greater capital reserves to cover increases in both variation and initial margin. You think Crude Oil was not able to to decrease below the price of 53 us a barrel at the expirey of 10 days you could Sell a 53 US a Barrel Put Option. Open position (Variation x 53 Put Option Margin required) Bottom figure Sell Date Day $1,000 x $1.2 us.7 Can Increase up to the value of the underlying futures contract $25 us x 53 Put Option Sell Date Day 10 3 Contact Value $1,000 x $3 us (Bought and Sold) $50 US Net Loss $1,850 US Oil chart short/loss.7 Short Put Sell 1 Put Market Outlook: Neutral to bullish Increase in Volatility: Hurts position Time Decay: Helps position The Strike prices (Day 1) the loss, you will be required to fund the short fall penalties, legal action or credit agency default (-1900) (300) Halifax NEW ZEALAND Trading Examples 7

and initial margin. You think Crude Oil was not able to to decrease below the price of 53 us a barrel at the expirey of 10 days you could Sell a 53 US a Barrel Put Option. Open position 0.

TRADING EXAMPLES. Foreign Exchange. Trading examples. Halifax New Zealand

TRADING EXAMPLES. Foreign Exchange. Trading examples. Halifax New Zealand TRADING EXAMPLES 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 Investment