The Financial Times Guide to Options: The Plain and Simple Guide to Successful Strategies (2nd Edition) (Financial Times Guides)_13 docx

... components. The first of these is the amount equal to the difference between the strike price and the price of the underlying, and it is termed the intrinsic value. The second component is the time ... consider the profit/loss position of the investor who sells the XYZ put. After all, you may decide that the put sale is the best strategy to pursue. Becaus...

Ngày tải lên: 20/06/2014, 20:20

... options theory takes a back seat. I went to the floor and wedged my way into the crowd, and I waited, knowing that I was covered. The bell sounded and the shouting began, and after a few brief stops ... money, then the long is credited with one tick times the contract multiplier, and the short is debited one tick times the contract multiplier. The multiplie...

Ngày tải lên: 20/06/2014, 20:20

... know about theory.) Then together we devised trade recommendations which the brokers passed on to their clients. The clients did well. One of them took one of our recommendations and bought ... If the underlying suddenly moves to the short strike that was formerly furthest out-of -the- money, the first solution is to buy back that strike. The second solution is to bu...

Ngày tải lên: 20/06/2014, 20:20

... 5. The profit on the long 95–100 call spread pairs off against the loss on the short 100–105 call spread. The butterfly is then worth- less, and the cost of the butterfly is taken as a loss. There ... with the butterfly There are other risks with the butterfly. The first is pin risk, which is unlikely, but possible. The two short strikes may expire at -the- money. It...

Ngày tải lên: 20/06/2014, 20:20

... months, and during this time they are exposed to risk. In order to cover their risk, the market-makers need to widen their bid–ask spreads. Under these circumstances, to ask the market-makers to ... wildly, then the options market-makers cannot hedge. In order to cover their risk, they need to widen their markets to correspond to the wide range of the underlyin...

Ngày tải lên: 20/06/2014, 20:20

... on the other hand, you sell the call at 34.40 and pay 33.70 for the put, then you have sold the synthetic future at 1140.70. Here, you have the obligation to sell the future above 1140, and the ... Futures, synthetics and put–call parity 223 On the other hand, the holder of the long futures position forgoes the dividends payable for the next six weeks, and...

Ngày tải lên: 20/06/2014, 20:20

... more to be said about options in terms of theory and in terms of trading. The Financial Times Guide to Options, and its pre- cursor, Options Plain and Simple, are intended to be a practical guide ... trade them close to expiration in order to clear options off our books and to avoid pin risk. But then again, the arbs try to pay 19.75 for the above box,...

Ngày tải lên: 20/06/2014, 20:20

... Given the following May options on Marks and Spencer, determine the price of the synthetic futures contract and the prices of the missing options. Bear in mind that these are settlements and ... of the following statements true or false? (a) If the implied volatility increases, then the delta and theta of the January 47.50 put will also increase. (b) If the impl...

Ngày tải lên: 20/06/2014, 20:20

... for a specified time period. The put buyer has the right, but not the obligation, to sell the underlying. The put seller has the obligation to buy the underlying at the put buyer’s discretion. Put ... out-of -the- money call plus an out-of -the- money put, both either long or short. Strike price The price of the underlying that forms the basis of an options contra...

Ngày tải lên: 20/06/2014, 20:20

... expiration, the stock closes below the put strike, or 45, you will be assigned on the short put, and you will be obli- gated to buy the stock at the strike price, or 45. The cost of your stock purchase ... than the call, unless you are convinced that the stock has bottomed out. Use the technicals to find a support area. If at expiration the stock closes between 4...

Ngày tải lên: 21/06/2014, 00:20

... the loss on the short 100–105 call spread. The butterfly is then worth- less, and the cost of the butterfly is taken as a loss. There are other, less common risks, and they are discussed at the ... closes at 100, then the 95–100 call spread is worth 5, and the 100–105 call spread is worth zero. The cost of the butterfly is then subtracted from 5 to calculate the...

Ngày tải lên: 21/06/2014, 00:20

... buy stock and write the call, and if there are no dividends involved, and if you’re a short-term investor, then just sell the in the money put and save yourself commissions. You’ll have the ... 15 The interaction of the Greeks The Greeks, the time until expiration and the implied volatility interact with each other in ways that work together and in ways that...

Ngày tải lên: 21/06/2014, 00:20

... options The exceptions to Table 15.3 are the deep in -the- money and far out-of- the- money options, such as the December 320 calls and puts, and the December 440 calls and puts. When these options ... pressure their traders for weekly or monthly results. This leads to traders trying to meet short-term targets, and then to over- trading, and then to racking up...

Ngày tải lên: 21/06/2014, 00:20

... markets. If the under- lying is leaping wildly, then the options market-makers cannot hedge. In order to cover their risk, they need to widen their markets to correspond to the wide range of the underlying’s ... underperforming Occasionally a stock or stock index sells off, and long, out-of -the- money puts underperform. This is often due to the fact that the stock...

Ngày tải lên: 21/06/2014, 00:20

... contract simply expires to the current cash value of the index. There, the holder of the long futures contract pays the cash value of all the stocks in the index. The holder of the short futures ... stock index. Then the dividend outweighs the interest amount and the future trades at a discount to the index. Once the dividend or dividends are paid, then th...

Ngày tải lên: 21/06/2014, 00:20