Liffe options guide trading strategies
Short Two by One Ratio Call Spread Long Two by One Ratio Put Spread Short Two by One Ratio Put Spread Long Call Ladder Short Call Ladder Long Put Ladder Short Put Ladder Synthetic Long Future Synthetic Short Future Long Call Spread versus Put Short Call Spread versus Put Long Put Spread versus Call Short Put Spread versus Call Long Straddle versus Call Short Straddle versus Call Long Straddle versus Put Short Straddle versus Put 58 2. LIFFE's extensive range of option strategies not only provides for a wide range of views and enables users to gain leverage, but offers the advantages of execution within a single transaction, enabling competitive spreads and reduced exchange transaction fees. The strategies in this guide apply to options on LIFFE s short term interest rate and government bond futures, although the strategies could also be applied to other types of options listed by LIFFE, e. LIFFE Options - a guide to trading strategies shows when and how LIFFE s recognised option trading strategies should be used. Each strategy is illustrated with profit and loss profiles, plus details of decay characteristics and market sensitivities. LIFFE Option Contracts Options are available on the following LIFFE contracts: Options on short term interest rate futures Three Month Sterling Three Month Euribor Three Month Euro Libor Three Month Euroswiss Options on government bond futures German Government Bond denominated in Euro Euro Bund Long Gilt Italian Government Bond denominated in Euro Euro BTP Options on Indices FTSE American-Style FTSE European-Style FTSE FLEX FTSE Stars FTSE Eurobloc FTSE Eurotop FTSE Eurotop ex. UK MSCI Euro MSCI Pan-Euro 3. These have the benefit of lower premiums, can options used as a precision tool for hedging gamma, vega and theta exposures and in addition provide spread-trading opportunities against longer dated options. Exercise of a serial expiry month option will result in the assignment of a futures position in the nearby quarterly delivery month e. Serial options are available on the following LIFFE contracts: German Government Bond denominated in Euro Euro Bund future Long Gilt future Italian Government Bond denominated in Euro Euro BTP future Three Month Euribor future Three Month Euro Libor future FTSE American Style FTSE European Style FTSE Stars Index FTSE Eurotop Index FTSE Eurotop Index FTSE Eurotop Index ex UK FTSE Eurobloc Index MSCI Euro Index MSCI Pan-Euro Index 4. Providing longer-dated exposure than LIFFE vanilla options, Mid-Curve options display higher implied volatility, greater time decay and higher vega than their traditional long-dated option counterparts. In addition, Mid-Curve options require less premium than longer dated options and typically display higher gamma and theta. LIFFE Mid- Curve options are available withmarch, June, September and December expiry cycles with two serial months, such that four expiry months are available for trading, with the nearest three expiry months being consecutive calendar months. One Year Mid-Curve Options are available on the following LIFFE futures contracts: Three Month Euribor Three Month Euro Libor Three Month Sterling 5. All the components of the liffe must be booked to a single account. LIFFE does not allow the amalgamation of business from different clients to make up one side of the trade. For individual equity options, strategies r, x, y and z are not available. For commodity options, strategies G, I, F, N, P, R, X, H, r, x, y and z are not LIFFE recognised option strategies 6. The option with the strike price closest to the prevailing market price of the underlying product, is at-the-money. Intrinsic and time value The option price, or premium, can be considered as the sum of two specific elements: Intrinsic value The intrinsic value of options option is the amount an option holder can realise by exercising the option immediately. Intrinsic value is always positive or zero. An out-of-the-money option has zero intrinsic value. It can be considered as the value of the continuing exposure to the movement in the underlying product price that the option provides. The price that the market puts on this time value depends on a number of factors: Time to expiry Time has value, since the longer the option has to go until expiry, the more opportunity there is for the underlying price to move to a level such that the option becomes liffe. Generally, the longer the time to expiry, the higher the option s time value. As expiry approaches, the value of an option tends to zero, and the rate of time decay accelerates. Time value decay curve 7. The more volatile the underlying instrument, the greater the time value will be. The greater will be the uncertainty faced by the option seller. Thus trading seller will charge a high premium to compensate. Option prices increase as volatility rises and decrease as volatility falls. These sensitivities are commonly referred to as the Greeks and these are defined below. As time passes, options will lose time value and the theta indicates the extent of this strategies. Both call and put options are wasting assets and therefore have a negative theta. Note that the decay of options is non-linear in that the rate of decay will accelerate as the option approaches expiry. As the chart below illustrates, the theta will reach its highest value immediately before expiry. Both calls and puts will tend to increase in value as volatility increases, as this raises the probability that the option will move in-the-money. Both calls and puts will thus possess a positive vega. This shows the approximate sensitivities for when the underlying is at-the-money, as well as when the underlying rises and falls. The tables show the sensitivities of a position as outlined below: Note that the sensitivities tables are not intended to be a precise guide to trading. They are designed to give an indication of how movements in the underlying will change the overall and relative market sensitivities of a position. Summary of options and futures Greek values Individual option positions, e. The table below summarises these values: This is the relationship which exists between calls and puts. It states that the value of a call put can be derived from the value of a put call with the same exercise price, maturity date and underlying price. Hence, for LIFFE options on futures, and Euroyen-style options on indices only: Arbitrage trades, such as those shown in this guide, are based on the relationships that exist between certain positions using options and futures. Referred to as synthetic positions, they are derived from put-call parity and, by using this relationship, it is possible to perform arbitrage between synthetic positions and their outright equivalent. The vertical axis shows profit above the horizontal break-even line, and loss below the break-even line. The horizontal axis represents the price of the underlying instrument increasing from left to right. All potential profit and loss outcomes at expiry are shown in green options the effects of time decay are illustrated with profiles at six months to expiry blue and at three months to expiry red. For the purpose of these examples, the at-the-money level is considered to be where the underlying price is equal to the exercise price of the option contract. For symmetric strategies consisting of two strikes, the at-the-money level is taken to be the mid-point between the two strike prices. The option strategy is analysed from a point in time 30 days from expiry. Note that the value of certain Greeks may change as the position approaches expiry. For Calendar based option strategies see strategiesthe effect of time decay is particularly important. Long Call The trade: Buy a call with an exercise price of A. The more bullish the expectation, the further out-of-the-money higher strike the purchased call should be. A Long Call combines limited downside exposure with high gearing in a rising market. Profit and loss characteristics at expiry: Unlimited in a rising market. Limited to the initial premium. Reached when the underlying rises above the strike price A, by the same amount as the premium paid to establish the position. Highest around the at-the-money liffe, particularly when the option is approaching expiry. Value of position will decrease as option loses time value. Value of position will tend to rise if implied volatility increases. Vega will be highest the closer the underlying is to the strike, and the longer the time to maturity. Short Call The trade: Sell a call A. Holder expects a gradual fall in the market and lower volatility. The optimal strike is dependent on time decay and vega level; although, in general, the more bearish the expectation, the greater the sold option should be in-the-money lower strike in order to maximise premium income. Profit is limited to the premium received and thus if the market view is more than moderately bearish, a Long Put may yield higher profits. Limited to the premium received from selling the call. Increases towards -1 as the underlying rises and the sold option moves in-the-money. Value of position will increase as sold option loses time value. Value of position will tend to fall if implied volatility increases. Long Put The trade: Buy a put A. The more bearish the expectation, the further out-of-the-money lower strike the purchased put should be. A Long Put combines limited upside exposure with high gearing in a falling market. Unlimited in a falling market. Limited to the initial premium paid. Reached when the underlying falls below the strike price A by the same amount as the premium paid to establish the position. Increases towards -1 as the underlying falls and the option moves in-the-money. Value of position will tend to increase if implied volatility increases. Short Put The trade: Sell a put A. Holder expects a gradual rise in the market with lower volatility. The optimal strike to be sold will be dependent on time decay and the vega level, although in general, the more bullish the view, the greater the sold option should be in-the-money higher strike in order to maximise premium income. Profit is limited to the premium received and thus if market view is more than moderately bullish, a long call may yield higher profits. Limited to the premium received from selling the put. Reached when the underlying falls below the strike price A by the same amount as the premium received from selling the put. Highest around at-the-money and approaching expiry. Value of position will decrease as implied volatility increases. Long Call Spread Trade type: Buy a call Asell call at higher strike B. The spread has the advantage of being cheaper to establish than the purchase of a single call, as the premium received from the sold call reduces the overall cost. The spread offers a limited profit potential if the underlying rises and a limited loss if underlying falls. Limited to the difference between the two strikes minus plus net premium cost credit. Maximum profit occurs where the underlying rises to the level of the higher strike B or above. Limited to any initial premium paid in establishing the position. Maximum loss occurs where the underlying falls to the level of the lower strike A or below. Reached when the underlying is above strike A by the same amount as the net cost of establishing the position. The highest level will be between the strikes A-B. Below strike A or above strike B, the delta will tend to fall towards zero. Positive if underlying closer to strike A, negative if underlying closer to strike B, neutral if around midpoint A-B. Negative if underlying closer to strike A, positive if underlying closer to strike B, neutral if around midpoint A-B. Positive if underlying closer to strike A, negative if underlying closer to strike B, neutral if around midpoint of A-B. NB The long call spread and the short put spread create near identical positions. Short Put Spread Trade type: Sell a put Bbuy put at a lower strike A. The Short Put at B aims to take advantage of a bullish market and the premium gained affords some downside protection with a Long Put at A. The spread offers a limited profit potential if the underlying rises and a limited loss if the underlying falls. Limited to the difference between the two guide plus net premium credit. Maximum profit occurs where underlying rises to the level of the higher strike B or above. Reached when the underlying is below strike B by the same amount as the net credit of establishing the position. Negative if underlying closer to strike A, positive if underlying closer to strike B, neutral if around midpoint of A-B. Short Call Spread Trade type: Sell a call Abuy call at higher strike B. The Short Call at A aims to take advantage of a bearish market and the premium gained affords strategies upside protection with a Long Call at B. The spread offers a limited profit if the underlying falls and a limited loss exposure if the underlying rises. Maximum profit occurs where underlying falls to the level of the lower strike A or below. Limited to the difference between the two strikes minus the net credit trading in establishing the position. Maximum loss occurs where the underlying rises to the level of the higher strike B or above. Reached when the underlying is below strike price B by the same amount as the net credit of establishing the position. The Short call spread and the long put spread create near identical positions. The principal difference being opposing gamma values when the underlying is not at-themoney. The gamma levels are highlighted in the summary table of Greeks. Buy a put Bsell put at lower strike A. The spread has the advantage of being cheaper to establish than the purchase of a single put, as the premium received from the sold put reduces the overall cost. The spread offers a limited loss exposure if the underlying rises, and a limited profit if the underlying falls. Limited to the difference between the two strikes minus net premium cost. Limited to the initial premium paid in establishing the position. Reached when the underlying is below strike price B by the same amount as the net cost of establishing the position. Sell a call Bbuy put at lower strike A. Has same profile as synthetic split strike short future. The plateau makes this a more suitable trade than a short future if volatility expectations are uncertain. Depending on the strikes chosen, the position may yield a small initial loss or profit or may liffe. If the position is established at a net cost, break-even will occur where the market falls below point A by the same amount. If the position is established at a credit, break-even will occur where the market rises above point B by the same amount. The further the position from A or B, the nearer the delta will be towards Positive at A, negative at B, neutral around midpoint of A-B. Slightly negative at A, slightly positive at B, neutral around midpoint of A-B. Slightly positive at A, slightly negative at B, strategies around midpoint of A-B. Buy a call Bsell put at lower strike B. Same profile as synthetic split strike long future. The plateau makes this a more suitable trade than a long future if volatility expectations are uncertain. Depending on the strikes chosen, establishing the position may yield a small credit or loss or may break-even. If the position is created at a cost, break-even liffe occur where the market rises above point B by this amount. If the position is established at a credit, the break-even guide will occur if the market falls below point A by the same amount. Negative at A, positive at B, neutral around midpoint of A-B. Slightly positive at A, slightly negative at B, neutral around the mid point A-B. Buy puts and buy futures or buy calls and sell futures to give zero net delta. The position is dynamic in that as the underlying moves and the delta changes, additional futures must be bought or sold to maintain delta neutrality. This position is a pure trade on volatility such that an increase in implied volatility will benefit the holder. Dependent on an increase in implied volatility as well as any profits from the future hedge and hedge rebalancing. Limited to the costs of establishing the position plus any loss in rebalancing the hedge. Positive, the delta neutral position is highly sensitive to movement in the underlying, consequently the position requires dynamic hedging. Value of position will decrease as options decay. Value of position will increase as implied volatility increases. Sell puts and sell futures or sell calls and buy futures to give zero net delta. The position is a trade on volatility such that a decrease in implied volatility will benefit the holder. Limited to the credit received from the sold options and any profit on rebalancing the hedge. The more implied volatility rises, the greater will be the potential losses. Negative, the delta neutral position is highly sensitive to movements in the underlying, consequently the position requires dynamic hedging. Value of position will increase as the options decay. Buy a put Abuy call at same strike. If the underlying is at A and an unknown directional move or increase in volatility is anticipated. Unlimited for an increase or decrease in the underlying. Limited to the premium paid in establishing the position. Will be greatest if the underlying is at strike A, at expiry. Reached if the underlying rises or falls from strike A by the same amount as the premium cost of establishing the position. Neutral assumed at-the-money positionbecomes highly positive negative for large increases decreases in underlying. As a volatility trade, the position would be kept delta neutral until it is closed out or is altered to take account of a clear change of market direction. Highest when at-the-money and approaching expiry. Value of position will decrease as the options lose time value. Sell a put Asell call at same strike. If the underlying is at A and a period of low or decreasing volatility is anticipated, and the underlying is not expected to move dramatically. Limited to the credit received from establishing the position. Highest if the market settles at A. Unlimited for both an increase or decrease in the underlying. Reached if the underlying rises or falls from strike A by the same amount as the premium received from establishing the position. Market sensitivity at 30 days to expiry: Neutral presumed at-the-money spreadbecomes highly negative positive for large increases decreases in the underlying. Value of position will increase as the options lose time value. Buy a put Abuy a call at higher strike B. The holder expects a major movement in trading market but is unsure as to its direction. A larger directional move is needed than a straddle in order to yield a profit but if the market stagnates, losses will be less. The profit potential is unlimited although a substantial directional movement is necessary to yield a profit for both a rise or fall in the underlying. Occurs if the market is static; limited to the premium paid in establishing the position. Occurs if the market rises above the higher strike price at B by an amount equal to the cost of establishing the position, or if the market falls below the guide strike price at A by the amount equal to the cost of establishing the position. Neutral; presumed at-the-money spreadbecomes highly positive negative for large increases decreases in underlying. Will be highest at strikes A and B but will tend to decrease as the underlying falls or rises significantly. Time decay will act against the holder of the position. The position will increase in value as volatility rises. Sell a put Asell call at higher strike B. The holder expects low volatility and no major directional move. More cautious than a straddle as profit potential spans a larger range although maximum potential profits will be lower. Limited to the premium received. Will be highest if the underlying remains within the market level A-B. Unlimited for a sharp move in the underlying in either direction. Highest between strikes A-B and will fall to zero as the market moves above strike B or below strike A. Increase in value as options decay. Buy a call Abuy put at higher strike B. The market is at, or about the A-B range and a large directional move in the underlying is anticipated. Position has characteristics equivalent to an in-the-money strangle. Unlimited in a rising or falling market. A substantial directional movement is required however. Limited to the initial premium paid; occurs if the underlying remains within the range A-B. Reached if the underlying rises above the higher strike price B by the amount equal to the cost of establishing the position, or if the underlying falls below the lower strike price A by the amount equal to the cost of establishing the position. Neutral; presumed at-the-money spread. Becomes highly positive negative for large increases decreases in the underlying. Will be highest between strikes A and B and approaching expiry. Value of position will decrease as options lose time value. For large directional movements in the underlying theta, particularly close to expiry, theta will become positive. Whilst the expiry profile is similar to that of the Long Strangle, the difference relates to premium outlay. With the Long Guts strategy you are buying two in-the-money options with a Long Strangle both options are out-of-the-money. Sell a call Asell a put at higher strike B. In this case the underlying is at, or about the A-B range and is expected to remain within this band. Limited to the net premium received; occurs if the underlying remains within the range Liffe. Reached if the underlying falls below the lower strike price A by the amount equal to the premium received from establishing the position, or if the underlying rises above strike price B by the amount equal to the premium received from establishing the position. Neutral presumed at-the-money position. Becomes highly negative positive for large increases decreases in options underlying. Value of position will increase as options lose time value. Close to expiry, with the underlying between A and B, options may have a positive value. Whilst the expiry profile is similar to that of the Short Strangle, the difference relates to premium outlay. With the Short Guts strategy trading are selling two in-the-money options with a Short Strangle both options are out-of-the-money. Buy put or call A, sell two puts or calls at higher strike B, buy put or call at equally higher strike C. In this case, the holder expects the underlying to remain around strike B, or it is felt that there will be a fall in implied volatility. Position is less risky than selling straddles or strangles as there is a limited downside exposure. Maximum profit limited to the difference in strikes between A and B minus the net cost of establishing the position. Maximised at mid strike B. Maximum loss limited to the net cost of the position for either a rise or a fall in the underlying. Reached where the intrinsic value of lower trading option equals the net cost of establishing the position or options the intrinsic value of the higher strike call equals the net cost of establishing the position. Neutral assuming an at-the-money spread. Delta becomes more positive as underlying moves to A, negative as the underlying moves to C. Highest at or about strike B. Below strike A, or above strike C, the gamma will tend to decline. Time decay will be negligible until the final month of the contract. Decay will benefit the holder between underlying levels A and C, being greatest at B. If the underlying moves outside this area, decay will act against holder. Increased volatility will reduce the value of the position. Volatility may have a positive impact if the underlying is below A or above C by a sufficient margin. Sell put or call A, buy two puts or calls B, sell put or call C. In this case the holder expects a directional move in the underlying, or a rise in implied volatility. Maximum profit is the net credit received in establishing the position and will occur if there is a sufficient directional move of the underlying, in either direction. Limited to the difference in strikes between A and B, plus minus the net credit debit in establishing the position. Reached where the intrinsic value of the lower strike option equals the net credit in establishing the position or where the intrinsic value of the higher strike option equals the net credit in establishing the position. Neutral assumed at-the-money spread. Delta becomes more positive as underlying moves to C, negative as the underlying moves to A. Highest at or about strike B liffe will tend to decline as the market moves in either direction from this point. Decay will act against the holder between underlying levels A and C, being greatest at B. If the underlying moves outside this area, decay will benefit the holder. Increased volatility will increase the theoretical value of the position. Volatility may have a negative impact if the underlying is below A or above C by a sufficient margin. Buy put call at A; sell put call at two equally higher strikes B, C; buy put call at yet higher strike D. A Long Condor allows for a greater degree of volatility and hence a wider band of profit potential than a Long Butterfly. Maximised where the underlying settles between the two exercise prices B and C, but will decline as the market rises, or falls beyond these strikes. Occurs if the underlying rises towards strike D or falls towards strike A. Will be limited to the cost of establishing the position for either a rise or a fall in the underlying. Lower break-even point reached when underlying reaches the lower strike price A plus the cost of establishing the spread, and the higher break-even when the underlying reaches the level of the higher strike D minus the cost of establishing the spread. Delta becomes more positive as underlying moves to A, negative as the underlying moves to D. Highest at or about strikes B and C. Below A, or above D, gamma will begin to decline. Decay will benefit the holder between underlying levels A and D, being greatest between B and C. Increased volatility will act against the holder. Volatility may have a positive impact if the underlying is below A or above D by a sufficient margin. Sell put call at A; liffe put call at two equally higher strikes B, C; sell put call at yet higher strike D. Holder expects the market to move significantly, or volatility will rise, but the direction is uncertain. A Short Condor will require a larger directional move than that of a butterfly in order to yield a profit. Limited and will occur if the market moves above the highest strike D or below the lower strike at A. Maximum losses are limited and will occur if the market remains between the exercise prices B and C. Delta becomes more positive as underlying moves to D, negative as the underlying moves to A. Highest between strikes B and C and will tend to decline as the market moves in either direction from this point. Decay will act against the holder between underlying levels B and C. Volatility may have a negative impact if the underlying is below A or above D by a sufficient margin. Buy Straddle, sell Strangle with strike points outside the upper and lower strike range of the Straddle, e. Sell a put Abuy a put and a call at higher strike Bsell a call at equally higher strike C. Holder expects a market move in either direction. The position will also benefit from an increase in volatility. Limited; maximised where the underlying rises to strike C or falls to strike A. Limited to the net debit in establishing the position, greatest if underlying is at B. Reached when underlying is above the lower strike price A by the same amount as the initial debit, or is below higher strike price C, by the same amount as the initial debit. Becomes highly positive negative for large decreases increases in the underlying. Highest at or about strike B, and will tend to decline as the market moves in either direction from this point. Sell Straddle, buy Strangle with strike points outside the upper and lower range of the Straddle, e. Buy put Asell put and call at higher strike B liffe, buy call at equally higher strike C. If the underlying is at, or about strike B and is expected to remain at this level, or it is felt that volatility will fall. Limited to the net credit in establishing the position. Maximised when the underlying is at B. Limited loss occurs if there is a directional move in the market. Maximised at the lower strike A, and the higher strike C. Reached when underlying is above strike A by same amount as the net credit in establishing the position, and below the higher strike C by the same amount as the net credit in establishing the position. Neutral assumed at-the-money position. Gamma will be highest at market level B and strategies if the market falls below A or rises above market level C. The position will accrue time value most rapidly at B. If the market moves outside of the A-C band, time decay will move against the holder. Value of position will strategies as implied volatility increases. Sell near put callbuy far put call at same strike. Profit and loss characteristics at expiry of near option: The potential profit in a time value trade is derived from the time decay characteristics of options see Theta in introduction. The near, written put call will decay at a rate faster than that of the far, purchased put options as it approaches expiry and it is this differential in the rate of time decay which may yield a profit. Assuming the options are at-the-money and the market remains at this level, the sold option will expire worthless and the purchased option, although not possessing intrinsic value, will hold time value. As the initial position is established at a loss because the far option will command a higher premiumto trading a profit, the time value of the long option after the expiry of the short dated option must be such that its value is greater than the initial cost of establishing the position. Butterflies and Guide What is a Spread? Review the links below for detailed information. Part 1 Download What is a Spread? Trading Options MICHAEL BURKE Table of Contents Important Information and Disclosures How to Trade Options: Strategy Options Blocks MICHAEL BURKE Important Information and Disclosures This course is provided by TradeStation, a U. 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. VANILLA OPTIONS MANUAL BALANCE YOUR RISK WITH OPTIONS Blue Capital Markets Limited Content Part A The what and why of options 1 Types of options: Profit and loss scenarios 2. Forex options give you just what their name suggests: 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. Bull Call Spread BACK TO BASICS: Example By David Bickings, Optionetics. This is no surprise. 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 shares The price of the option depends on the price. INSIUE OF ECONOMIC SUDIES Faculty of social sciences of Charles University Option Contracts Lecturer s Notes No. Financial Market Instruments I eacher: BASIC FEAURES OF OPION. Assume that a bank can borrow or lend money at the same. CHAPTER 20 Understanding Options Answers to Practice Questions 1. The put places a floor on value of investment, i. The risk reduction comes at the cost of the option. Copyright by National Stock Exchange of India Ltd. NSE Exchange Plaza, Bandra Kurla Complex, Bandra EastMumbai INDIA All content included in this book, such as strategies, graphics, logos. Options Understanding options strategies Contents Introduction 2 Option profiles trading Covered write 4 Protected covered write 6 Stock repair strategy 8 Bull spread 10 Bear spread 12 Long straddle 14 Short. Introduction to Options -- The Basics Dec. OPTIONS EDUCATION GLOBAL TABLE Guide CONTENTS Introduction What are FX Options? Trading ITM, ATM and OTM Options Trading Strategies Glossary Contact Information 3 5 6 8 9 10 16 HIGH RISK WARNING: Table of Contents Introduction: Buy-Write or Covered Call Sell-Write or Covered Put 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. CME Group exchanges CME, CBOT, NYMEX. 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 guide outlook. Learn how FX options. 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. Return to Risk Limited website: Where s My Delta Jor Molchan and Fabrice Douglas Rouah, Sapient Global Markets Hedging involves eliminating risk in one investment by taking an offsetting position in another investment. 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. Long-Term Capital Gains Tax Strategies: Correlated Protective Put Strategy John R. Finance Futures and Options Review Notes for Final Exam Chapter 9 1. White Paper Whitepaper Options on Year U. Title Course 01a The mechanics of the warrants market Topic 1: Section 1 - Covered Call Writing: Basic Terms and Definitions Covered call writing is guide of the most often-used option strategies, both at the institutional and individual level. Swing Trade Warrior Chapter 1. Introduction to swing trading and how to understand and use options How does Swing Trading Work? Strategies idea behind swing trading is to capitalize on short term moves of stocks. Option Values Liffe Valuation Intrinsic value profit that could be made if the option was immediately exercised Call: GA Basic Terminology For Understanding Grain Options This publication, the first of six NebGuides on agricultural grain options, defines many of the terms commonly used in futures trading. Understanding Volatility and Making It Work for You December 16, Joe Burgoyne, OIC www. General Forex Glossary A ADR American Depository Receipt Arbitrage The simultaneous buying and selling of a security at two different prices in two different markets, with the aim of creating profits without. FX Key products Strategies Options Menu Welcome to Exotic Options Over the last couple of years options have become an important tool for investors and hedgers in the foreign exchange market. The market for exotic options Development of exotic products increased flexibility for risk transfer and hedging highly structured expression of expectation of asset price strategies facilitation of trading. VALUATION OF OPTIONS A. Minimum Strategies of Options B. Maximum Values of Options C. Determinants of Call Value D. We consider the payoffs to these. Options For individuals, companies, trusts and SMSFs The Options and Lending Facility Contents 2 What are Options? PRACTICE EXAM QUESTIONS ON OPTIONS 1. An American put option allows the holder to: A buy the underlying asset at the strike price on or before the expiration date. B sell the underlying asset at the. SeDeX Covered Warrants and Leverage Certificates SeDeX Leverage products increase the potential performance of the portfolio. Foreword Leverage effect amplifies both underlying rises and falls Covered. Page The information in this chapter was last updated in Since the money market evolves very rapidly, recent developments may have superseded some of the content of this chapter. Chapter 4 Put-Call Parity 1 Bull and Bear Financial analysts use words such as bull and bear to describe the trend in stock markets. Generally speaking, a bull market is characterized by rising prices. 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. Graph the profits and losses at expiration for various. Hedging, Insurance and Trading Strategies Lecturer: Economics of Financial Markets MSc. Financial Economics Department of Economics, City University, London Option. Introduction to Options What is a Currency Option Contract? 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