Price and Volatility Analysis for Index Options Trading
|
|
- Mavis Garrison
- 7 years ago
- Views:
Transcription
1 Price and Volatility Analysis for Index Options Trading
2 Topics Why I trade options (instead of the underlying) How volatility affects options pricing Volatility characteristics and analysis techniques Using volatility analysis to drive options trading Sample trades, methods and guidelines
3 Why I trade options Options instruments exhibit unique characteristics Options are a wasting asset Options present an asymmetric risk profile Option pricing is highly dependent on expected volatility I use combinations of options to construct positions with a superior risk/reward profile relative to the underlying. I do not trade vertical credit spreads, iron condors or naked put options Note: Option price behavior is non linear relative to the underlying security. Position and portfolio risk management require robust analytical tools.
4 Why I trade index options Liquidity Event/tail risk Selection Risk
5 Buy a Call Buy call, near ATM Profit Loss
6 Call purchase vs long stock
7 What Factors Determine the Price of an Option? Time to expiration Distance in or out of the money Anticipated or Implied Volatility
8 In Order of Importance These Options Pricing Factors Are: 1. Anticipated or Implied Volatility 2. Anticipated or Implied Volatility 3. Anticipated or Implied Volatility
9 What About The Greeks? Delta Gamma Theta Vega Rho ETC
10 What Happens When I Explain the Greeks in a 45 Minute Webinar??
11
12 Real World Impact of Volatility August 17, 2015 SPX = 2102 Nov Put Option = $1.00 August 24, 2015 SPX = 1893 Nov Put Option = $23.00 Delta of option: Vix = 13 Vix = 39 Option Price Change = $22.00 Dollar change from Delta = $ 1.86 Dollar change from Volatility = $20.22
13 Volatility Behavior is More Predictable Than Price Mean Reverting Moves Inversely to Price Stable Put Call Skew
14
15
16 The Term Structure of Volatility
17
18
19 The VXV The VXV is a 90 day VIX Observing the ratio of the VIX to the VXV can provide shorthand indicator of contango or backwardation in the volatility term structure.
20
21 Using Volatility to Construct a Trading Strategy Each option has a unique sensitivity to volatility Combinations of options or spreads aggregate those sensitivities and may in total be net long or net short volatility A simple volatility sum may be misleading due to shifts in the slope of the term structure.
22
23
24 Using Volatility to Construct a Trading Strategy Mean reversion: Use short volatility positions when volatility is elevated Inverse to Price: Use short volatility positions above the market and long volatility positions below the market Term Structure: Use vertical positions when in contango and horizontal (calendar) positions when in backwardation.
25 Trade Examples My least favorite trades
26 Covered Call Profit Loss Bought 100 shares in underlying equity Sold 1 ATM call
27 Naked Put Profit Loss Sell uncovered put
28 Trade Examples Short Volatility Trades
29 Call Ratio Spread Vertical Spread Short Volatility Upside price capture without downside risk Can be done to collect premium as well Placed using term structure and price trend analysis
30 Position Example: Bull Call Spread 1 x 3 Above the Market Profit Loss Lower Price of S&P 500 Index At expiration profit zone Higher 30
31 Position Example: Bull Call Spread 1 x 2 Above the Market Profit Loss At expiration profit zone Lower Price of S&P 500 Index Higher 31
32
33
34 Trade Examples Long Volatility Trades
35 Put Calendar Spread Horizontal Spread Long volatility captures volatility expansion during erratic price movements Best in term structure backwardation Can be used to collect premium as well
36 Diagonal Put Calendar Spread Sell 1 put out of money, below the market Buy 2 puts later in year, further out of the money Profit Lower Price of S&P 500 Index Higher 36
37 Put Diagonal Spread Volatility change = +10 Sell 1 put in near month Buy 1 put one month later and ~250 points lower Volatility change = +5 Volatility change = 0 Profit Loss Price of S&P 500 Index 37
38
39
40
41 Conclusions Options can be a viable substitute for underlying assets in many trading environments Option Pricing is highly dependent on implied volatility Volatility exhibits extremely reliable patterns and characteristics Understanding volatility behavior can add a significant edge in options trading Analyzing the term structure of volatility is critical to options trade selection
42 Ed Walczak Sr. Portfolio Manager Catalyst Mutual Funds Catalyst Hedged Futures Strategy Fund - HFXAX Catalyst Hedged Commodity Strategy Fund CFHAX
FINANCIAL ENGINEERING CLUB TRADING 201
FINANCIAL ENGINEERING CLUB TRADING 201 STOCK PRICING It s all about volatility Volatility is the measure of how much a stock moves The implied volatility (IV) of a stock represents a 1 standard deviation
More informationUnderlier 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 informationhttp://www.infinity100.com
http://www.infinity100.com THE GREEKS MANAGING AND PROFITING FROM DELTA, VEGA, THETA, GAMMA RISK THE 'GREEKS' RISK MANGEMENT GRID Line Max Profit? * VEGA POSITION 1 Long Vega 2 3, 4 Short Vega Long Vega
More informationPairs 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 informationHow To Understand The Greeks
ETF Trend Trading Option Basics Part Two The Greeks Option Basics Separate Sections 1. Option Basics 2. The Greeks 3. Pricing 4. Types of Option Trades The Greeks A simple perspective on the 5 Greeks 1.
More informationIntroduction 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 informationClear and Simple Option Strategy PRESENTED BY: DENNIS W. WILBORN
Clear and Simple Option Strategy PRESENTED BY: DENNIS W. WILBORN Disclaimer U.S. GOVERNMENT REQUIRED DISCLAIMER COMMODITY FUTURES TRADING COMMISSION FUTURES AND OPTIONS TRADING HAS LARGE POTENTIAL REWARDS,
More informationBull Call Spread. BACK TO BASICS: Spread Yourself Around: Example. By David Bickings, Optionetics.com
Bull Call Spread BACK TO BASICS: Spread Yourself Around: Example By David Bickings, Optionetics.com Options are a fantastic investment to make money on the rise and fall of an asset. This is no surprise
More informationTrading System Design. The Option Selling Model
Trading System Design The Option Selling Model And Other Trading System Analysis J. Murakami 1 Headings 1. Introduction 2. The Debate 3. Objective 4. Markets 5. Trade Structure 6. Technology 7. Entry 8.
More informationBasics 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 informationOption Values. Option Valuation. Call Option Value before Expiration. Determinants of Call Option Values
Option Values Option Valuation Intrinsic value profit that could be made if the option was immediately exercised Call: stock price exercise price : S T X i i k i X S Put: exercise price stock price : X
More informationVANILLA OPTIONS MANUAL
VANILLA OPTIONS MANUAL BALANCE YOUR RISK WITH OPTIONS Blue Capital Markets Limited 2013. All rights reserved. Content Part A The what and why of options 1 Types of options: Profit and loss scenarios 2
More informationCaput Derivatives: October 30, 2003
Caput Derivatives: October 30, 2003 Exam + Answers Total time: 2 hours and 30 minutes. Note 1: You are allowed to use books, course notes, and a calculator. Question 1. [20 points] Consider an investor
More informationCondor Options Volatility Tracker
1/25/ Condor Options 1. Comment As I've noted on many occasions here, the relationship between spot VIX and longer-dated VIX estimates has not "worked" as a directional indicator for at least several months.
More informationHow to Trade Options: Strategy Building Blocks
How to Trade Options: Strategy Building Blocks MICHAEL BURKE Important Information and Disclosures This course is provided by TradeStation, a U.S.-based multi-asset brokerage company that seeks to serve
More informationSwing 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 informationTrading Options MICHAEL BURKE
Trading Options MICHAEL BURKE Table of Contents Important Information and Disclosures... 3 Options Risk Disclosure... 4 Prologue... 5 The Benefits of Trading Options... 6 Options Trading Primer... 8 Options
More informationw w w.c a t l e y l a k e m a n.c o m 0 2 0 7 0 4 3 0 1 0 0
A ADR-Style: for a derivative on an underlying denominated in one currency, where the derivative is denominated in a different currency, payments are exchanged using a floating foreign-exchange rate. The
More informationSteve Meizinger. FX Options Pricing, what does it Mean?
Steve Meizinger FX Options Pricing, what does it Mean? For the sake of simplicity, the examples that follow do not take into consideration commissions and other transaction fees, tax considerations, or
More informationThe Greeks Vega. Outline: Explanation of the greeks. Using greeks for short term prediction. How to find vega. Factors influencing vega.
The Greeks Vega 1 1 The Greeks Vega Outline: Explanation of the greeks. Using greeks for short term prediction. How to find vega. Factors influencing vega. 2 Outline continued: Using greeks to shield your
More informationThe 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 informationCHAPTER 20 Understanding Options
CHAPTER 20 Understanding Options Answers to Practice Questions 1. a. The put places a floor on value of investment, i.e., less risky than buying stock. The risk reduction comes at the cost of the option
More informationSteve 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 informationAdjusting 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 informationEquity derivative strategy 2012 Q1 update and Trading Volatility
Equity derivative strategy 212 Q1 update and Trading Volatility Colin Bennett (+34) 91 28 9356 cdbennett@gruposantander.com 1 Contents VOLATILITY TRADING FOR DIRECTIONAL INVESTORS Call overwriting Protection
More informationArbitrage spreads. Arbitrage spreads refer to standard option strategies like vanilla spreads to
Arbitrage spreads Arbitrage spreads refer to standard option strategies like vanilla spreads to lock up some arbitrage in case of mispricing of options. Although arbitrage used to exist in the early days
More informationOption pricing in detail
Course #: Title Module 2 Option pricing in detail Topic 1: Influences on option prices - recap... 3 Which stock to buy?... 3 Intrinsic value and time value... 3 Influences on option premiums... 4 Option
More informationWeek 13 Introduction to the Greeks and Portfolio Management:
Week 13 Introduction to the Greeks and Portfolio Management: Hull, Ch. 17; Poitras, Ch.9: I, IIA, IIB, III. 1 Introduction to the Greeks and Portfolio Management Objective: To explain how derivative portfolios
More informationHedging. An Undergraduate Introduction to Financial Mathematics. J. Robert Buchanan. J. Robert Buchanan Hedging
Hedging An Undergraduate Introduction to Financial Mathematics J. Robert Buchanan 2010 Introduction Definition Hedging is the practice of making a portfolio of investments less sensitive to changes in
More informationBinary 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 informationFundamentals 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 informationReturn to Risk Limited website: www.risklimited.com. Overview of Options An Introduction
Return to Risk Limited website: www.risklimited.com Overview of Options An Introduction Options Definition The right, but not the obligation, to enter into a transaction [buy or sell] at a pre-agreed price,
More informationAdvanced 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 informationSession X: Lecturer: Dr. Jose Olmo. Module: Economics of Financial Markets. MSc. Financial Economics. Department of Economics, City University, London
Session X: Options: Hedging, Insurance and Trading Strategies Lecturer: Dr. Jose Olmo Module: Economics of Financial Markets MSc. Financial Economics Department of Economics, City University, London Option
More informationTHETA AS AN ASSET CLASS By Dominik von Eynern, Swiss Alpha Asset Management GMBH
THETA AS AN ASSET CLASS By Dominik von Eynern, Swiss Alpha Asset Management GMBH It is essential to find new ways or asset classes to deliver consistent and uncorrelated returns within the asset management
More informationMANAGING POSITIONS PRE- AND POST-TRADE. For educational purposes only. For professional and institutional clients only
MANAGING POSITIONS PRE- AND POST-TRADE For educational purposes only. For professional and institutional clients only Introduction GABRIEL MANCEAU Barclays, Volatility Trader ANTOINE DELGA Bloomberg, Equity
More informationINTRODUCTION 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 informationTrading System Design. The Option Selling Report
Trading System Design And Other Trading System Analysis Author: GoTradeSignals 1 U.S. Government Required Disclaimer: Trading financial instruments of any kind including options, futures and securities
More informationTrade 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 informationModule I Financial derivatives an introduction Forward market and products
Module I 1. Financial derivatives an introduction 1.1 Derivative markets 1.1.1 Past and present 1.1.2 Difference between exchange traded and OTC derivatives 1.2 Derivative instruments 1.2.1 Concept and
More informationWHS 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 informationWHAT ARE OPTIONS OPTIONS TRADING
OPTIONS TRADING WHAT ARE OPTIONS Options are openly traded contracts that give the buyer a right to a futures position at a specific price within a specified time period Designed as more of a protective
More informationVolatility Tracker: No Surprises in Gold
11/22/2 : No Surprises in Gold 1. Comment News-making price changes in gold [11] have not been accompanied by any particularly noteworthy behavior in the options market. While it would be wrong to suggest
More informationTrading 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 informationTrading 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 informationSteve Meizinger. Developing an FX Trading Strategy
Steve Meizinger Developing an FX Trading Strategy Steve Meizinger www.ise.com Smeizinger@ise.com For the sake of simplicity, the examples that follow do not take into consideration commissions and other
More informationCovered 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 informationPair Trading with Options
Pair Trading with Options Jeff Donaldson, Ph.D., CFA University of Tampa Donald Flagg, Ph.D. University of Tampa Ashley Northrup University of Tampa Student Type of Research: Pedagogy Disciplines of Interest:
More informationIPI s 2012 Fall Forum - San Francisco Hedging Portfolio Risk
IPI s 2012 Fall Forum - San Francisco Hedging Portfolio Risk Vince Gubitosi, President and CIO Mitch Livstone, Senior Portfolio Manager Geode Capital Management Outline Defining Tail Risk Tail Risk Examples
More informationChapter 3.4. Forex Options
Chapter 3.4 Forex Options 0 Contents FOREX OPTIONS Forex options are the next frontier in forex trading. Forex options give you just what their name suggests: options in your forex trading. If you have
More informationDefinition. Market. Volatility levels allocated by the Issuer. Volatility Levels allocated by JSE
Warrants Definition A warrant is a geared financial instrument which gives the warrant holder the right but not the obligation to buy, sell or participate in the performance of the underlying security,
More informationSheridan 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 informationOPTIONS 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 informationHedge Fund Index Replication - A Numerical Approach using Futures
AlphaQuest Research Series #5 The goal of this research series is to demystify hedge funds and specific black box CTA trend following strategies and to analyze their characteristics both as a stand-alone
More informationSimplified Option Selection Method
Simplified Option Selection Method Geoffrey VanderPal Webster University Thailand Options traders and investors utilize methods to price and select call and put options. The models and tools range from
More informationWednesday, September 25, 13. Trading Apple Algos Using Weekly Options
Trading Apple Algos Using Weekly Options Using Options with Signals Trade Signals provide a definitive edge Options allow us to taylor our risk Time decay adds juice to this edge Primary Strategy During
More information14 Greeks Letters and Hedging
ECG590I Asset Pricing. Lecture 14: Greeks Letters and Hedging 1 14 Greeks Letters and Hedging 14.1 Illustration We consider the following example through out this section. A financial institution sold
More informationClass 5: Options Trading - Part 2 Trading Options Like Stock. Review Basic Options. Right to buy stock @ certain price
Today s Class Review basic options Trading options like stock Class 5: Options Trading - Part 2 Trading Options Like Stock How options prices move with stock Choosing the right options Stock Option Basics
More informationDimensions Trading Lab. 2004. Sean Tseng. Trading Greeks. Greeks based trading strategies. Sean Tseng s presentation
Trading Greeks Greeks based trading strategies Position and Greeks position Delta Gamma Theta Vega Long + 0 0 0 Short - 0 0 0 Long call + (0 to 1) + - + Long put Short call - (-1 to 0) + - + - (0 to 1)
More informationSummary of Interview Questions. 1. Does it matter if a company uses forwards, futures or other derivatives when hedging FX risk?
Summary of Interview Questions 1. Does it matter if a company uses forwards, futures or other derivatives when hedging FX risk? 2. Give me an example of how a company can use derivative instruments to
More informationInvesting In Volatility
Investing In Volatility By: Anish Parvataneni, CFA Portfolio Manager LJM Partners Ltd. LJM Partners, Ltd. is issuing a series a white papers on the subject of investing in volatility as an asset class.
More informationb. June expiration: 95-23 = 95 + 23/32 % = 95.71875% or.9571875.9571875 X $100,000 = $95,718.75.
ANSWERS FOR FINANCIAL RISK MANAGEMENT A. 2-4 Value of T-bond Futures Contracts a. March expiration: The settle price is stated as a percentage of the face value of the bond with the final "27" being read
More informationEXECUTE 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 informationHow 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 informationOptions/1. Prof. Ian Giddy
Options/1 New York University Stern School of Business Options Prof. Ian Giddy New York University Options Puts and Calls Put-Call Parity Combinations and Trading Strategies Valuation Hedging Options2
More informationVALUATION IN DERIVATIVES MARKETS
VALUATION IN DERIVATIVES MARKETS September 2005 Rawle Parris ABN AMRO Property Derivatives What is a Derivative? A contract that specifies the rights and obligations between two parties to receive or deliver
More informationGAMMA.0279 THETA 8.9173 VEGA 9.9144 RHO 3.5985
14 Option Sensitivities and Option Hedging Answers to Questions and Problems 1. Consider Call A, with: X $70; r 0.06; T t 90 days; 0.4; and S $60. Compute the price, DELTA, GAMMA, THETA, VEGA, and RHO
More informationContents. List of Figures. List of Tables. List of Examples. Preface to Volume IV
Contents List of Figures List of Tables List of Examples Foreword Preface to Volume IV xiii xvi xxi xxv xxix IV.1 Value at Risk and Other Risk Metrics 1 IV.1.1 Introduction 1 IV.1.2 An Overview of Market
More informationOptions Markets: Introduction
Options Markets: Introduction Chapter 20 Option Contracts call option = contract that gives the holder the right to purchase an asset at a specified price, on or before a certain date put option = contract
More informationDirectional 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 informationRisk Management and Governance Hedging with Derivatives. Prof. Hugues Pirotte
Risk Management and Governance Hedging with Derivatives Prof. Hugues Pirotte Several slides based on Risk Management and Financial Institutions, e, Chapter 6, Copyright John C. Hull 009 Why Manage Risks?
More information1 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 informationBASKET A collection of securities. The underlying securities within an ETF are often collectively referred to as a basket
Glossary: The ETF Portfolio Challenge Glossary is designed to help familiarize our participants with concepts and terminology closely associated with Exchange- Traded Products. For more educational offerings,
More informationResearch. RVX futures as a hedge for small cap specific risk
Research RVX futures as a hedge for small cap specific risk ftserussell.com June 2015 Executive summary: Volatility products can be used to hedge downside risk in equity portfolios RVX SM futures provides
More informationMastering 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 informationRT Spread Scanner. Quick overview
RT Spread Scanner RT Spread Scanner... 1 Quick overview... 1 Some hints on usage... 4 Stock filters... 5 Option filters... 5 Stock and option advanced filters... 6 Stock advanced filters... 7 Option advanced
More informationINSTITUTE OF ECONOMIC STUDIES
INSIUE OF ECONOMIC SUDIES Faculty of social sciences of Charles University Option Contracts Lecturer s Notes No. Course: Financial Market Instruments I eacher: Oldřich Dědek VII. BASIC FEAURES OF OPION
More informationDon 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 informationCSOP WTI Oil Annual Roll December Futures ER ETF. www.csopasset.com^
IMPORTANT: Investments involve risks. Investment value may rise or fall. Past performance information presented is not indicative of future performance. Investors should refer to the Prospectus and the
More informationCHAPTER 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 informationCME Options on Futures
CME Education Series CME Options on Futures The Basics Table of Contents SECTION PAGE 1 VOCABULARY 2 2 PRICING FUNDAMENTALS 4 3 ARITHMETIC 6 4 IMPORTANT CONCEPTS 8 5 BASIC STRATEGIES 9 6 REVIEW QUESTIONS
More informationBEAR: 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 informationMonthly Leveraged Mutual Funds UNDERSTANDING THE COMPOSITION, BENEFITS & RISKS
Monthly Leveraged Mutual Funds UNDERSTANDING THE COMPOSITION, BENEFITS & RISKS Direxion 2x Monthly Leveraged Mutual Funds provide 200% (or 200% of the inverse) exposure to their benchmarks and the ability
More informationUniversité d Evry Séance 6
Université d Evry Séance 6 Strategies de courbe à base de swaptions & Straddles et strangles de swaptions Philippe PRIAULET Overview An alternative to conventional bond/swap curve positions How to build
More informationThe Four Basic Options Strategies
1 The Four Basic Options Strategies Introduction The easiest way to learn options is with pictures so that you can begin to piece together strategies step-by-step. However, first we need to understand
More informationChapters 15. Delta Hedging with Black-Scholes Model. Joel R. Barber. Department of Finance. Florida International University.
Chapters 15 Delta Hedging with Black-Scholes Model Joel R. Barber Department of Finance Florida International University Miami, FL 33199 1 Hedging Example A bank has sold for $300,000 a European call option
More informationOptions: How About Wealth & Income? I Really Don t Care Which Way the Market Goes!
Options: How About Wealth & Income? I Really Don t Care Which Way the Market Goes! Disclaimer U.S. GOVERNMENT REQUIRED DISCLAIMER COMMODITY FUTURES TRADING COMMISSION FUTURES AND OPTIONS TRADING HAS LARGE
More informationHandbook FXFlat FX Options
Handbook FXFlat FX Options FXFlat Trading FX Options When you open an FX options account at FXFlat, you can trade options on currency pairs 24- hours a day, 5.5 days per week. The FX options features in
More informationIntroduction. The Index: A Proxy for the Market
Introduction What are S&P 500 futures and options on futures? Where do they come from? What can they do for you as an investor? These are some of the questions this strategy paper will help you answer.
More informationCHAPTER 22: FUTURES MARKETS
CHAPTER 22: FUTURES MARKETS 1. a. The closing price for the spot index was 1329.78. The dollar value of stocks is thus $250 1329.78 = $332,445. The closing futures price for the March contract was 1364.00,
More informationLDintelligence Market Neutral Convertible Bond Arbitrage Fixed Income Hedge Strategy
LDintelligence Market Neutral Convertible Bond Arbitrage Fixed Income Hedge Strategy MARKET NEUTRAL CONVERTIBLE BOND ARBITRAGE Written by: Calamos Investments This paper is a briefing on LDintelligence
More informationSection 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 informationHedging Illiquid FX Options: An Empirical Analysis of Alternative Hedging Strategies
Hedging Illiquid FX Options: An Empirical Analysis of Alternative Hedging Strategies Drazen Pesjak Supervised by A.A. Tsvetkov 1, D. Posthuma 2 and S.A. Borovkova 3 MSc. Thesis Finance HONOURS TRACK Quantitative
More informationDISCLAIMER. 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 informationDavid Bob Case Scenario
David Bob Case Scenario David Bob, CFA, is a derivatives analyst at Capital Inc. Capital Inc. deals mainly in arbitrage positions along with leveraged positions. David is following the options prices and
More informationHow 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 informationOne Period Binomial Model
FIN-40008 FINANCIAL INSTRUMENTS SPRING 2008 One Period Binomial Model These notes consider the one period binomial model to exactly price an option. We will consider three different methods of pricing
More informationOption Values. Determinants of Call Option Values. CHAPTER 16 Option Valuation. Figure 16.1 Call Option Value Before Expiration
CHAPTER 16 Option Valuation 16.1 OPTION VALUATION: INTRODUCTION Option Values Intrinsic value - profit that could be made if the option was immediately exercised Call: stock price - exercise price Put:
More informationFishing 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 informationFX Derivatives Terminology. Education Module: 5. Dated July 2002. FX Derivatives Terminology
Education Module: 5 Dated July 2002 Foreign Exchange Options Option Markets and Terminology A American Options American Options are options that are exercisable for early value at any time during the term
More information