How to Win Clients & Protect Portfolios

Save this PDF as:
 WORD  PNG  TXT  JPG

Size: px
Start display at page:

Download "How to Win Clients & Protect Portfolios"

Transcription

1 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 Managing Director & Primary Strategist Dash Financial Scott Nations, Panelist President & CIO NationsShares Kevin Simpson, Panelist Portfolio Manager Capital Wealth Planning

2 How to Win Clients & Protect Portfolios Ugo Egbunike Moderator Director of Business Development ETF.com

3 Howard J. Atkinson Panelist Managing Director Horizons ETFs Management LLC Scott Nations Panelist President & CIO NationsShares Michael Khouw Panelist Managing Director & Primary Strategist Dash Financial Kevin Simpson Panelist Portfolio Manger Capital Wealth Planning

4 Why Look at Options? Howard J. Atkinson Panelist Managing Director Horizons ETFs Management LLC

5 Short -Term Mid-Term and Long-Term Risk of Rising Interest Rates In June 2013, Ben Bernanke suggested that the U.S. Federal Reserve would evaluate reducing its bond-buying program later in 2013 Rates subsequently rose aggressively and bond markets suffered all summer 0.40% 0.30% 0.20% 0.10% 0.00% -0.10% -0.20% -0.30% U.S. Treasury Performance: May - December 2013 Short-Term U.S. Treasuries Mid-Term U.S. Treasuries Long-Term U.S. Treasuries 2.00% 0.00% -2.00% -4.00% -6.00% -8.00% % % % -0.40% % -0.50% 4/30/13 5/31/13 6/30/13 7/31/13 8/31/13 9/30/13 10/31/13 11/30/ % Short-Term U.S. Treasuries are represented by the Barclays Capital U.S. 1-3 Year Treasury Bond Index Mid-Term U.S. Treasuries are represented by the Barclays Capital U.S Year Treasury Bond Index Long-Term U.S. Treasuries are represented by the Barclays Capital U.S. 20+ Year Treasury Bond Index Source: Bloomberg, between April 30, 2013, and December 31, 2013

6 Duration Matters More Attractive Risk/Return Profile In the 1990s, a 1% rise in interest rates put at risk approx. 6 months of yield Today: Unattractive Risk/Return Profile Today, a 1% rise in rates puts at risk close to 4 years of yield 10 9 Duration (yrs) Yield (%) Source: Fiera Capital Corporation between January 1997 and December 2013.

7 The Income Challenge Fixed Income Historically, bonds and fixed income securities have been viewed as a lower risk asset class than equities Today, bonds offer lower yields than many investors are happy with; they also face increasing risk from the possibility that interest rates could rise Equities Broad stock indices are generally viewed as offering higher returns over the long run than bonds, but also to have higher risk and generally lower yields The S&P 500 Index (Total Return) has appreciated 186.6% since Mar. 10, 2009 * Fixed Income Equities *Source: Bloomberg, from March 10, 2009 to October 31, 2013

8 A Conservative Approach A covered call-writing strategy can potentially offer a number of advantages over investing in the same portfolio of stocks without an options overlay. Key advantages: Potentially higher yield than dividends alone Can potentially reduce volatility of returns relative to the same portfolio of stocks without calls written on them Points to Keep in Mind: Can still see negative returns in certain market conditions (e.g., a bear market); negative returns may be offset by call premium generated Returns typically lag in bull markets Strategy will incur additional commissions from options trading which could decrease performance

9 Trading Abnormal Returns The strategy has the potential to trade away a low level of statistically abnormal monthly returns in exchange for additional income from call premiums, while maintaining exposure to statistically normal monthly returns. 1 Log-normal distribution: a continuous probability statistical distribution of a random variable whose logarithm is normally distributed. 2 Standard deviation or Std Dev : a statistical measure of the dispersion of a set of data (in this case, equity returns) from its average or mean.

10 Covered Call Strategies How a typical out-of-the-money (OTM) covered call strategy may be expected to perform during various market conditions: Source: Horizons ETFs Management (USA) LLC

11 Disclaimer (1) Before investing you should carefully consider the Funds investment objectives, risks, charges and expenses. This and other information is in the prospectus. Please read the prospectus carefully before you invest. To obtain a prospectus without charge, please visit the EDGAR Database on the SEC s Internet site at Paper copies of a prospectus are also available without charge upon request from Exchange Traded Concepts ( ), or electronic copies can be downloaded in PDF format directly from Funds distributor: Foreside Fund Services. There are risks involved with investing, including possible loss of principal. The Funds are non-diversified and may invest a greater portion of their assets in securities of a small number of issuers which may have an adverse effect on Funds performance. Concentration in a particular industry or sector will subject the Funds to loss due to adverse occurrences that may affect that industry or sector. The Funds risks not benefiting from potential increases in the value of underlying securities above the exercise prices of the written covered call options, and is subject to the risk of declines in the value of such securities. See prospectus for specific risks regarding the Funds. Individual shares of the Horizons-branded exchange traded funds (the Funds ) may be purchased or sold in the secondary market throughout the regular trading day on the New York Stock Exchange through a brokerage account. However, shares are not individually redeemable directly from the Funds. Each Fund issues and redeems shares on a continuous basis, at NAV, only in blocks of at least 50,000 shares ( Creation Units ), principally in-kind for securities included in the relevant Index. The Creation Unit for HSPX is 50,000 shares and the Creation Unit for HFIN is 25,000 shares.

12 Disclaimer (2) An option is a contract sold by one party to another that gives the buyer the right, but not the obligation, to buy (call) or sell (put) a stock at an agreed upon price within a certain period or on a specific date. A covered call option involves holding a long position in a particular asset, in this case U.S. common equities, and writing a call option on that same asset with the goal of realizing additional income from the option premium.

13 Covered Calls Kevin Simpson Panelist Portfolio Manger Capital Wealth Planning

14 Covered Call Basics Covered call writing is either the simultaneous purchase of stock and the sale of a call option, or the sale of a call option covered by underlying shares currently held by an investor. Generally, one call option is written for every 100 shares of stock owned. The writer receives cash for selling the call but will be obligated to sell the stock at the call's strike price if assigned, thereby capping further upside stock price participation. In other words, an investor is "paid" for agreeing to sell his holdings at a certain level (the strike price). For this reason the covered call is considered a neutral to moderately bullish strategy. On the downside, limited stock price protection is provided by the premium received from the call's sale. The upside profit potential if assigned is limited to the premium received from the call's sale plus the difference between its strike price and the stock purchase price. If assignment is not received and the call expires out-of-the-money and with no value, the upside profit potential is any gain in share value plus the premium received. The downside loss potential is substantial and comes entirely from owning the underlying shares and is limited only by the stock declining to zero. The break-even point is an underlying stock price equal to the purchase price of the underlying shares less the premium received. As with any short option position an increase in volatility has a negative financial effect on the covered call while decreasing volatility has a positive effect. Time decay has a positive effect.

15 Covered Calls Sell Stock Options to Create Cash Flow: Buying Stock Options can be risky, however Selling Stock Options actually reduces risk it is a conservative investment strategy and is widely used by institutions and hedge funds

16 Covered Calls Cash versus Market Gains The covered call strategy helps investors sell for a profit - Market Gain Whether you sell or not, you are entitled to keep the option payment (the rent ) paid to you up front - in Cash

17 Covered Call Strategy CBOE S&P 500 Buy Write Index (BXM): Benchmark for strategy Buy portfolio of S&P 500 stocks Write (sell) cash-settled S&P 500 Index options every 3rd Friday for income Announced in 2002 study by Duke U. Data history back to June 30, 1986 Innovative Index of the Year in 2004 More than $20 billion in buy-write funds

18 Cash-Covered Puts Michael Khouw Panelist Managing Director & Primary Strategist Dash Financial

19 Cash Covered Puts What is the strategy? Answer. An investor sells puts on an underlying asset, while maintaining deposits sufficient to satisfy the unmargined purchase of the underlying at the put strike price. Isn t selling puts a risky strategy? Answer. Risk is relative. Employed correctly the total risk of loss is lower than purchasing the underlying outright, however the profile of expected returns does change.

20 Example Purchase 100 shares of IWM at the prevailing market price ($115). Total cost, $11,500 = total risk in the unlikely event that IWM goes to zero. Alternative, sell a 1 month at-the-money ($115 strike) put for $2.00, secured by $11,500 in deposits. Max risk $11,300 in the event that IWM goes to zero.

21 Why is the Risk Lower?

22 Buy Low(er), Sell High(er)

23 To Buy SPY at Avg Multiple Need a NET purchase price ~ 5.5% lower than the current price, or ~ $10 lower than the current price of $ Sell the 3 month 3.5% out-of-the-money put, collect ~ 1.5% of the underlying price or 1.50.

24 Options Premiums are Volatile? How much a put seller collects, in terms of the % of the underlying for a put of a given moneyness does vary a lot. Observe the 5% otm 3 month puts for SPY since January 2005.

25 How Much Does that Matter? Implied Volatility Value of 95% moneyness 3m put Price & Multiple of SPX January %.6% $1,430, 16.7x January % 3.8% $1,465, 17.3x January % 6.5% $900, 15.3x January % 2.5% $1,110, 18x January % 2% $1,260, 15x Max 3 month Loss 9/24/ % SPX -27% Sale of 5% otm put Max gain SPX 3/9/ % SPX 13.5% <Max gain put sale 11/20/08

26 Vertical Spreads Scott Nations Panelist President & CIO NationsShares

27 Collect Premium But Define Risk Some SPY Call Options: Strike Px Option Px 183 Sell This Call, Risk is Unlimited Sell That Call & Buy 188 This Call, 0.77 Risk is Defined Soucre: Nations

28 The Resulting Call Spread Short The 184/187 Call Spread At 1.19 Collect 2.22 For Selling The 184 Call, Pay 1.03 For Buying The 187 Call. That Net Of 1.19 Is Ours To Keep Maximum Profit = 1.19 Maximum Loss = 1.81 [( )+1.19]

29 The Resulting Call Spread Short The 184/187 Call Spread At 1.19 Maximum Profit of 1.19 With SPY Below 184 At Expiration. The Likelihood Is 58%

30 Profit/Loss At Expiration $2.00 $1.00 $ $1.00 -$2.00 SPY Price At Option Expiration

31 The Resulting Call Spread Short The 184/187 Call Spread At 1.19 Maximum Profit of 1.19 With SPY Below 184 At Expiration. The Likelihood Is 58% Breakeven of The Likelihood Of Being Above Is 36%

32 Profit/Loss At Expiration Breakeven of SPY Price At Option Expiration

33 The Resulting Call Spread Short The 184/187 Call Spread At 1.19 Maximum Profit of 1.19 With SPY Below 184 At Expiration. The Likelihood Is 58% Breakeven of The Likelihood Of Being Above Is 36% Maximum Loss of 1.81 With SPY Above 187 At Expiration. The Likelihood is 26%.

34 Profit/Loss At Expiration $2.00 $1.00 $ $1.00 -$2.00 SPY Price At Option Expiration

35 The Resulting Call Spread Short The 184/187 Call Spread At 1.19 Maximum Profit of 1.19 With SPY Below 184 At Expiration. The Likelihood Is 58% Breakeven of The Likelihood Of Being Above Is 36% Maximum Loss of 1.81 With SPY Above 187 At Expiration. The Likelihood is 26%.

36 The Resulting Call Spread Short The 184/187 Call Spread At 1.19 Maximum Profit of 1.19 * 58% = 0.69 Maximum Loss of 1.81 * 26% = 0.47 At The Risk Of Oversimplifying.

37 Thank you. Questions?

38 Howard J. Atkinson Panelist Managing Director Horizons ETFs Management LLC Scott Nations Panelist President & CIO NationsShares Michael Khouw Panelist Managing Director & Primary Strategist Dash Financial Kevin Simpson Panelist Portfolio Manger Capital Wealth Planning

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

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

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

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

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

How to Collect a 162% Cash on Cash Return

How to Collect a 162% Cash on Cash Return How to Collect a 162% Cash on Cash Return Today we are going to explore one of the most profitable, low-risk income strategies I ve come across in my 27 years of trading. This income strategy produced

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

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

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

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

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

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

SLVO Silver Shares Covered Call ETN

SLVO Silver Shares Covered Call ETN Filed pursuant to Rule 433 Registration Statement No. 333-180300-03 April 15, 2014 SLVO Silver Shares Covered Call ETN Credit Suisse AG, Investor Solutions April 2014 Executive Summary Credit Suisse Silver

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

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

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

Applied Options Strategies. for Portfolio Managers

Applied Options Strategies. for Portfolio Managers 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

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

CHAPTER 8: TRADING STRATEGES INVOLVING OPTIONS

CHAPTER 8: TRADING STRATEGES INVOLVING OPTIONS CHAPTER 8: TRADING STRATEGES INVOLVING OPTIONS Unless otherwise stated the options we consider are all European. Toward the end of this chapter, we will argue that if European options were available with

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

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

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

Covered Call Investing and its Benefits in Today s Market Environment

Covered Call Investing and its Benefits in Today s Market Environment ZIEGLER CAPITAL MANAGEMENT: MARKET INSIGHT & RESEARCH Covered Call Investing and its Benefits in Today s Market Environment Covered Call investing has attracted a great deal of attention from investors

More information

INTRODUCTION TO BETASHARES YIELD MAXIMISER FUNDS ASX CODE: YMAX (Australian Equities) & UMAX (US Equities)

INTRODUCTION TO BETASHARES YIELD MAXIMISER FUNDS ASX CODE: YMAX (Australian Equities) & UMAX (US Equities) ASX CODE: YMAX (Australian Equities) & UMAX (US Equities) www.betashares.com.au One of the more enduring investment themes in recent times has been the desire for income combined with less volatility.

More information

An Option In the security market, an option gives the holder the right to buy or sell a stock (or index of stocks) at a specified price ( strike

An Option In the security market, an option gives the holder the right to buy or sell a stock (or index of stocks) at a specified price ( strike Reading: Chapter 17 An Option In the security market, an option gives the holder the right to buy or sell a stock (or index of stocks) at a specified price ( strike price) within a specified time period.

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

Covered Call Option Strategy

Covered Call Option Strategy The covered call option strategy, also known as a buy write strategy, is implemented by writing (selling) a call option contract while owning an equivalent number of shares of the underlying stock. This

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

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 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

ADVISORSHARES YIELDPRO ETF (NASDAQ Ticker: YPRO) SUMMARY PROSPECTUS November 1, 2015

ADVISORSHARES YIELDPRO ETF (NASDAQ Ticker: YPRO) SUMMARY PROSPECTUS November 1, 2015 ADVISORSHARES YIELDPRO ETF (NASDAQ Ticker: YPRO) SUMMARY PROSPECTUS November 1, 2015 Before you invest in the AdvisorShares Fund, you may want to review the Fund s prospectus and statement of additional

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

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

1 Directional Trading Strategies

1 Directional Trading Strategies 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

More information

Strategies in Options Trading By: Sarah Karfunkel

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

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

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

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

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

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

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

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

FIN-40008 FINANCIAL INSTRUMENTS SPRING 2008. Options

FIN-40008 FINANCIAL INSTRUMENTS SPRING 2008. Options FIN-40008 FINANCIAL INSTRUMENTS SPRING 2008 Options These notes describe the payoffs to European and American put and call options the so-called plain vanilla options. We consider the payoffs to these

More information

KKM ARMOR Fund Class A Shares (Symbol: RMRAX) Class I Shares (Symbol: RMRIX)

KKM ARMOR Fund Class A Shares (Symbol: RMRAX) Class I Shares (Symbol: RMRIX) KKM ARMOR Fund Class A Shares (Symbol: RMRAX) Class I Shares (Symbol: RMRIX) KKM U.S. Equity ARMOR Fund Class A Shares (Symbol: UMRAX) Class I Shares (Symbol: UMRIX) Prospectus June 2, 2014 The U.S. Securities

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

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

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

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

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

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

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

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

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

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

Principal Protected Investments

Principal Protected Investments Structured Investments Solution Series Volume I: Principal Protected Investments Profit from Potential Market Gains While Protecting Your Investment Principal at Maturity PRINCIPAL PROTECTED INVESTMENTS

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

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

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

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

BONUS REPORT#5. The Sell-Write Strategy

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

More information

Equity Investing Evolved Manage risk, stay invested

Equity Investing Evolved Manage risk, stay invested Equity Investing Evolved Manage risk, stay invested HSBC Buffered Strategies Are you on track to meet your retirement and investment goals? Have extreme market swings prevented you from investing? Would

More information

Frequently Asked Questions on Derivatives Trading At NSE

Frequently Asked Questions on Derivatives Trading At NSE Frequently Asked Questions on Derivatives Trading At NSE NATIONAL STOCK EXCHANGE OF INDIA LIMITED QUESTIONS & ANSWERS 1. What are derivatives? Derivatives, such as futures or options, are financial contracts

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

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

Factors Affecting Option Prices

Factors Affecting Option Prices Factors Affecting Option Prices 1. The current stock price S 0. 2. The option strike price K. 3. The time to expiration T. 4. The volatility of the stock price σ. 5. The risk-free interest rate r. 6. The

More information

Understanding Leveraged Exchange Traded Funds AN EXPLORATION OF THE RISKS & BENEFITS

Understanding Leveraged Exchange Traded Funds AN EXPLORATION OF THE RISKS & BENEFITS Understanding Leveraged Exchange Traded Funds AN EXPLORATION OF THE RISKS & BENEFITS Direxion Shares Leveraged Exchange-Traded Funds (ETFs) are daily funds that provide 200% or 300% leverage and the ability

More information

ishares MINIMUM VOLATILITY SUITE SEEKING TO WEATHER THE MARKET S UP AND DOWNS

ishares MINIMUM VOLATILITY SUITE SEEKING TO WEATHER THE MARKET S UP AND DOWNS ishares MINIMUM VOLATILITY SUITE SEEKING TO WEATHER THE MARKET S UP AND DOWNS Table of Contents 1 Introducing the ishares Minimum Volatility Suite... 02 2 Why Consider the ishares Minimum Volatility Suite?...

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

With interest rates at historically low levels, and the U.S. economy showing continued strength,

With interest rates at historically low levels, and the U.S. economy showing continued strength, Managing Interest Rate Risk in Your Bond Holdings THE RIGHT STRATEGY MAY HELP FIXED INCOME PORTFOLIOS DURING PERIODS OF RISING INTEREST RATES. With interest rates at historically low levels, and the U.S.

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

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

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

Greg Flower Wealth Management. Discretionary Wealth Management

Greg Flower Wealth Management. Discretionary Wealth Management Greg Flower Wealth Management Discretionary Wealth Management Disclaimer The information included in this document, including any opinion, is based on various sources believed to be reliable, but its accuracy

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

ALLOCATION STRATEGIES A, C, & I SHARES PROSPECTUS August 1, 2015

ALLOCATION STRATEGIES A, C, & I SHARES PROSPECTUS August 1, 2015 ALLOCATION STRATEGIES A, C, & I SHARES PROSPECTUS August 1, 2015 Investment Adviser: RidgeWorth Investments A Shares C Shares I Shares Aggressive Growth Allocation Strategy SLAAX CLVLX CVMGX Conservative

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

Mutual Fund Investing Exam Study Guide

Mutual Fund Investing Exam Study Guide Mutual Fund Investing Exam Study Guide This document contains the questions that will be included in the final exam, in the order that they will be asked. When you have studied the course materials, reviewed

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

June 2008 Supplement to Characteristics and Risks of Standardized Options

June 2008 Supplement to Characteristics and Risks of Standardized Options June 2008 Supplement to Characteristics and Risks of Standardized Options This supplement supersedes and replaces the April 2008 Supplement to the booklet entitled Characteristics and Risks of Standardized

More information

Wealth Management Education Series. Explore the Field of Mutual Funds

Wealth Management Education Series. Explore the Field of Mutual Funds Wealth Management Education Series Explore the Field of Mutual Funds Wealth Management Education Series Explore the Field of Mutual Funds Managing your wealth well is like tending a beautiful formal garden

More information

EQUITY LINKED NOTES: An Introduction to Principal Guaranteed Structures Abukar M Ali October 2002

EQUITY LINKED NOTES: An Introduction to Principal Guaranteed Structures Abukar M Ali October 2002 EQUITY LINKED NOTES: An Introduction to Principal Guaranteed Structures Abukar M Ali October 2002 Introduction In this article we provide a succinct description of a commonly used investment instrument

More information

Modernizing Portfolio Theory & The Liquid Endowment UMA

Modernizing Portfolio Theory & The Liquid Endowment UMA Modernizing Portfolio Theory & The Liquid Endowment UMA Michael Featherman, CFA Director of Portfolio Strategies November 2012 Modern Portfolio Theory Definition and Key Concept Modern Portfolio Theory

More information

Exchange Listed Funds Trust. Prospectus. August 28, 2015

Exchange Listed Funds Trust. Prospectus. August 28, 2015 Exchange Listed Funds Trust Prospectus August 28, 2015 Horizons S&P 500 Covered Call ETF Ticker Symbol: HSPX Horizons S&P Energy Select Sector Covered Call ETF Ticker Symbol: HENG Principal Listing Exchange

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

What is Equity Linked Note

What is Equity Linked Note What is Equity Linked Note Equity Linked Note (ELN) is a yield enhancement instrument which relates to equities & provides investors with the opportunity to attain superior yield over money market instruments.

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

Financial Markets and Institutions Abridged 10 th Edition

Financial Markets and Institutions Abridged 10 th Edition Financial Markets and Institutions Abridged 10 th Edition by Jeff Madura 1 23 Mutual Fund Operations Chapter Objectives provide a background on mutual funds describe the various types of stock and bond

More information

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

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

More information

CHAPTER 22: FUTURES MARKETS

CHAPTER 22: FUTURES MARKETS CHAPTER 22: FUTURES MARKETS PROBLEM SETS 1. There is little hedging or speculative demand for cement futures, since cement prices are fairly stable and predictable. The trading activity necessary to support

More information

Lecture 6: Portfolios with Stock Options Steven Skiena. http://www.cs.sunysb.edu/ skiena

Lecture 6: Portfolios with Stock Options Steven Skiena. http://www.cs.sunysb.edu/ skiena Lecture 6: Portfolios with Stock Options Steven Skiena Department of Computer Science State University of New York Stony Brook, NY 11794 4400 http://www.cs.sunysb.edu/ skiena Portfolios with Options The

More information

Fin 3710 Investment Analysis Professor Rui Yao CHAPTER 14: OPTIONS MARKETS

Fin 3710 Investment Analysis Professor Rui Yao CHAPTER 14: OPTIONS MARKETS HW 6 Fin 3710 Investment Analysis Professor Rui Yao CHAPTER 14: OPTIONS MARKETS 4. Cost Payoff Profit Call option, X = 85 3.82 5.00 +1.18 Put option, X = 85 0.15 0.00-0.15 Call option, X = 90 0.40 0.00-0.40

More information

IFPAC 2008 Conference. Evaluating Structured Investment Products

IFPAC 2008 Conference. Evaluating Structured Investment Products IFPAC 2008 Conference Evaluating Structured Investment Products Contents Introduction Choice of Product Strategies Examining Some Popular Structured Products Determining the Right Product Understanding

More information

RISK ASSESSMENT QUESTIONNAIRE

RISK ASSESSMENT QUESTIONNAIRE Time Horizon 6/14 Your current situation and future income needs. 1. What is your current age? 2. When do you expect to start drawing income? A Less than 45 A Not for at least 20 years B 45 to 55 B In

More information

Fixed Income Liquidity in a Rising Rate Environment

Fixed Income Liquidity in a Rising Rate Environment Fixed Income Liquidity in a Rising Rate Environment 2 Executive Summary Ò Fixed income market liquidity has declined, causing greater concern about prospective liquidity in a potential broad market sell-off

More information

decidedly different Catalyst Mutual Funds Brochure

decidedly different Catalyst Mutual Funds Brochure decidedly different Catalyst Mutual Funds Brochure Our Mission We strive to provide innovative strategies to support financial advisors and their clients in meeting the investment challenges of an ever

More information

The Art of Put Selling: A 10 year study

The Art of Put Selling: A 10 year study The Art of Put Selling: A 10 year study Options Research The search for high yield, low volatility leads to put selling We expect put selling to become an increasingly common strategy as the search for

More information

My Top 5 Rules for Successful Debit Spread Trading

My Top 5 Rules for Successful Debit Spread Trading My Top 5 Rules for Successful Debit Spread Trading Trade with Lower Cost and Create More Consistency in Your Options Portfolio Price Headley, CFA, CMT TABLE OF CONTENTS: How Debit Spreads Give You Growth

More information