Learning Techniques for Stock and Commodity Options 12 doc
Learning Techniques for Stock and Commodity Options_1 docx
... in foreign interest rates. Thisis only used in foreign exchange options. It has no impact on any other options. Foreign exchange options are affected by phi because options arepriced on the forward ... drawbacks. As a result, the model is no longer the standard for options on bonds, foreign exchange, and futures, though the standardmodels for these three items are modifications of the original.Assumptions ... expirationrDividends (for options on stocks and stock indexes)Given this information, the model can be used to find the fair price ofthe option. But suppose the current price of the option was known, and what...
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Learning Techniques for Stock and Commodity Options_2 pdf
... classic forecasting techniques, such as regres-sion analysis, time series analysis, and even classic chart patterns such ashead and shoulders and trendlines. However, professional options traderswill ... volatil-ity. Usually, the value for volatility is plugged in and the formula is solved for the value of the option. Here, the situation is reversed—the formula issolved for volatility because the ... distribution pattern. For example,the price of stock index and stock options has an upward drift to it. Stock prices have moved erratically higher since stocks began trading under thebuttonwood tree in...
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Learning Techniques for Stock and Commodity Options_3 pptx
... expected rally and the risk if there isno rally.Thus, for an excellent guide to the relative risk and reward of holdingvarious options, take the implied or estimated volatility for each stock, esti-mate ... divided by the initialinvestment. The formula is:Return = (Profit or loss) ÷ initial investment For example, if you buy an IBM option for 5 and sell it for 71/2,foraprofit of 21/2, your return ... aretrading for $4 and the out-of-the-money options are trading for $2. Thismeans that you could have twice as many of the out-of-the-money options as you could of the at-the-money options. This...
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Learning Techniques for Stock and Commodity Options_4 ppt
... decline and the risk if there is no decline.Thus, for an excellent guide to the relative risk and reward of holdingvarious options, take the implied or estimated volatility for each stock, esti-mate ... by the initialinvestment. The formula is:Return = (Profit or loss) ÷ initial investment For example, if you buy an IBM put option for 5 and sell it for 71/2 ,for a profit of 21/2, your ... are trading for $4 and the out-of-the-money options are trading for $2. This means that you could have twice as many of the out-of-the-money options as you could of the at-the-money options. This...
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Learning Techniques for Stock and Commodity Options_5 pot
... down and forward—keep some of your original write, and roll down and for- ward some into the next expiration month. Note that rolling down and forward restricts the maximum profit potential for ... For example, if you’re longone UI and short two calls, you have, for margin purposes, one covered callwrite and one naked short call.Break-Even PointThe formulas for the two break-evens for ... out-of-the-money options is greater than the at-the-money options. Youcan sell the out-of-the-money options and buy the at-the-money options, expecting the volatility skew to go away or to be reduced.For...
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Learning Techniques for Stock and Commodity Options_6 pdf
... roll up and forward—keepsome of your original write and roll up and forward some into the nextexpiration month. Note that rolling up and forward restricts the maxi-mum profit potential for a ... you will select. The reasons for this are that the delta will be higher for a higher strike price than for alower strike and that the premium is higher, thus affording greater profitpotential. ... transactioncosts and carrying costs will vary. For example, a covered put program for stock indexes can theoretically have puts written against a portfolio ofstocks, against a long put with a higher...
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Learning Techniques for Stock and Commodity Options_7 doc
... puts. For example, if you short oneUI and two puts, you have, for margin purposes, one covered put write and one naked short put.Break-Even PointThe formulas for the two break-evens for a ... out-of-the-money options is greater than the at-the-money options. You can sellthe out-of-the-money options and buy the at-the-money options, expectingthe volatility skew to go away or to be reduced. For ... maximum risk and the point whereit occurs, 6477/8. Table 15.3 shows the same situation for a bull call spreadwith the 645 call purchased for 103/4 and the 650 call purchased for 77/8.The...
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Learning Techniques for Stock and Commodity Options_8 pptx
... the maximum risk and the point whereit occurs, 650. Table 16.3 shows the same situation for a bear call spreadwith the 645 call sold for 103/4 and the 650 call purchased for 77/8.TABLE ... two strike prices, in this case, 645. Table 16.1 shows theprofit and loss for each of the two options and the net profit or loss for thetotal position at different prices of the MMI when it expires.Another ... risk for a long butterfly is the net debit of the spread and occurs outside of the break-even points. The maximum risk for a shortbutterfly is the difference between the middle strike price and...
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Learning Techniques for Stock and Commodity Options_9 ppt
... Therefore, you mustcontinually adjust the ratio of the long to short options. For example, you are long 100 options on the S&P 500 futures contractwith a strike of 530 and a delta of 0.69, and ... following discussion and turn it onits head to see what the selection and follow-up strategies should be for areverse calendar spread.RISK/REWARDBreak-Even PointBreak-even points for calendar spreads ... the options on Treasury-bond futures using the September and December 960/32strikes when theprice of the underlying futures contract is 965/32. These options, being theat-the-money options, ...
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Learning Techniques for Stock and Commodity Options_10 doc
... gives a down-side break-even of $54. For another example, suppose Intel is trading at 120 1/4 and you buythe November 120 call and the November 120 put for 101/4each. The netcredit is ... net credit For example, suppose you initiated a long straddle using options onTextron for December expiration. Textron is trading at 593/4, so you buythe 60 call and the 60 put for 3 each. ... blending of ratio spreads and calendarspreads. It consists of selling nearby options and buying fewer of a far-ther option. For example, you could sell 4 of the July 40 calls and buy 2 ofthe October...
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