Monday, 21 July 2014

TWO WAYS TO SELL AN OPTION

In contrast to buying options, selling stock options does come with an obligation - the obligation to sell the underlying equity to a buyer if that buyer decides to exercise the option and you are "assigned" the exercise obligation. "Selling" options is often referred to as "writing" options.
When you sell (or "write") a Call - you are selling a buyer the right to purchase stock from you at a specified strike price for a specified period of time, regardless of how high the market price of the stock may climb.
Covered Calls
One of the most popular call writing strategies is known as a covered call. In a covered call, you are selling the right to buy an equity that you own. If a buyer decides to exercise his or her option to buy the underlying equity, you are obligated to sell to them at the strike price - whether the strike price is higher or lower than your original cost of the equity. Sometimes an investor may buy an equity and simultaneously sell (or write) a call on the equity. This is referred to as a "buy-write."

Saturday, 19 July 2014

THREE WAYS TO BUY AN OPTION

When you buy equity options you really have made no commitment to buy the underlying equity. Your options are open. Here are three ways to buy options with examples that demonstrate when each method might be appropriate:
Hold until maturity....., then trade:-
This means that you hold onto your options contracts until the end of the contract period, prior to expiration, and then exercise the option at the strike price.
When would you want to do this? Suppose you were to buy a Call option at a strike price of $25, and the market price of the stock advances continuously, moving to $35 at the end of the option contract period. Since the underlying stock price has gone up to $35, you can now exercise your Call option at the strike price of $25 and benefit from a profit of $10 per share ($1,000) before subtracting the cost of the premium and commissions.
Trade before the expiration date :-
You exercise your option at some point before the expiration date.
For example: You buy the same Call option with a strike price of $25, and the price of the underlying stock is fluctuating above and below your strike price. After a few weeks the stock rises to $31 and you don’t think it will go much higher - in fact it just might drop again. You exercise your Call option immediately at the strike price of $25 and benefit from a profit of $6 a share ($600) before subtracting the cost of the premium and commissions.
Let the option expire :-
You don’t trade the option and the contract expires.
Another example: You buy the same Call option with a strike price of $25, and the underlying stock price just sits there or it keeps sinking. You do nothing. At expiration, you will have no profit and the option will expire worthless. Your loss is limited to the premium you paid for the option and commissions.
Again, in each of the above examples, you will have paid a premium for the option itself. The cost of the premium and any brokerage fees you paid will reduce your profit. The good news is that, as a buyer of options, the premium and commissions are your only risk. So in the third example, although you did not earn a profit, your loss was limited no matter how far the stock price fell.


Monday, 14 July 2014

SPOT OPTION ADVANTAGES AND DISADVANTAGES

Initially used in Europe as another way to trade currency options, single-payment options trading (SPOT) options have gained acceptance in other markets as well. Investors who are learning to invest might consider using them, as they offer another way to possibly generate profit and lower risk.
What are SPOT Options?
SPOT options allow an investor to set the conditions that must be met to receive a desired payout. Setting up this type of option involves three steps:
  1. The investor defines a trading scenario that, according to his/her analysis, has the best prospects, including the risk-reward tradeoff.
  2. The broker determines the probability the conditions will be met and proposes an appropriate premium. The price of the option or the premium quoted by the broker will depend on the likelihood of the scenario occurring.
  3. The investor can agree to either pay the premium and then buy the option or turn it down. Normally, the price of the option or premium represents a percentage of thatpayout.
SPOT options are vanilla put and call options whose value is set by the conditional scenario, not just the price and the expiration date.

The Advantages and Disadvantages
Like most investing techniques, there are advantages when using SPOT options:
  • While a bit different from normal options, SPOT options are easy to trade. With a normal option you might not be able to close out the position, since no one is willing to take the opposite side. With SPOT options, this is never a problem, since there is never a need to close out the position - it is a one-sided trade.
  • SPOT options give you the opportunity to create different scenarios that allow choosing exactly what you believe will happen in the market. In fact, investors who use SPOT options define the specifics of the trade.
  • With SPOT options, the downside risk is limited to the premium paid.
  • The option scenario defines the reward, so it is known before entering the trade. Before committing to the trade, you know the risk-reward tradeoff....

Wednesday, 9 July 2014

BINARY OPTION STRATEGIES & MANAGEMENT

As an entertaining and interesting trading method, binary option trading is becoming popular among the investors day by day.
A lot of binary option strategies are available which the traders use in order to succeed in trade. The basic concepts of all binary option strategies are the same although different investors follow different strategies. As opposed to other trades, binary option trading offers only two probable outcomes, loss or gain.
In binary option trading the turnover is fast which is yielded by calls and puts. Because of this if a good binary option strategy is used, traders would see most of their investments bringing high returns.
There are some basic strategies followed by all traders concerning the binary option strategy guide. The first one is the pairing up of an “in the money” call and money put. That’s why you can still earn money if the spot price is between the two prices at the expiration.
Another useful strategy in binary option trading is the pairing the put with a call into a hedge and double position. This binary option strategy helps to make very high profits.
Binary option betting strategy is another very popular strategy. In this strategy an investor uses a pull or call option if an unexpected move occurs on the market. This strategy is based on the fact that people put positions on indicators which have large scale impacts on the market prices.

Friday, 4 July 2014

Strategies to Help You Get Started with Binary Options Trading

It should come as no surprise that binary options trading is fast emerging as a great alternative  investment channel and a genuine one at that. With real estate prices taking in 2008 and witnessing huge fluctuations ever since, people all around have been looking to find new ways to invest their personal finances.
Binary options trading has been gaining steam in the recent times as more & more people are reading about the simplicity of the binary options trading and the potential return on investment. The fact that it can be done completely online has also seen a lot of work from home moms and even working professionals experiment with binary options trading in spare time. While binary options trading is definitely becoming a viable investment vehicle, there are some risks to binary options trading just like any other investment. Therefore, it always helps to learn the right strategies for binary options trading before you jump into it.
Here are some binary options trading strategies that should come in handy if you want to start with binary options trading:-

Wednesday, 2 July 2014

CALCULATION OF P & L IN OPTION

While it comes to calculation, there is thing we have to learn  how to calculate profits/losses are calculate. 
Let’s go with an example, nifty to understand better how profits and losses are calculated in options trading. The lot size of nifty is 50 shares in number irrespective of call or put. The profit/loss does not depend on the type of call (nifty call option or nifty put option), expiry or strike. It directly depends only on premium which trader selects while purchasing the option.

Tuesday, 1 July 2014

HEDGE A CALL OPTION WITH A PUT OPTION ?

Sometimes an investment has made substantial gains, but you're not ready to sell the assets just yet. At the same time, you don’t want to risk losing the profit you’ll get by cashing in immediately. When you face this dilemma with call options, you can hedge your position with offsetting put options.
Calls and Puts
When you purchase call options on stock or another underlying security, you receive the right to buy shares at a designated price called the strike price. You can exercise your right to buy until the option expires, but you are not required to do so. Put options work exactly the same, except you get the right to sell a security instead of buy it. Suppose you buy a call and put option contract for the same stock at the same strike price. If the stock price increases, you would exercise the call to buy shares at the lower strike price, and then sell at market value, netting a profit. The call option is said to be “in the money.” The put option has no value, because you pay more to buy the shares needed to exercise the option than the strike price you are paid. However, if the price of the stock falls instead, the call option would have no value and the put option would be in the money.

Monday, 30 June 2014

OPTION TRADING STRATEGIES : HOW TO USE THEM FOR MAKING PROFIT IN ANY MARKET SITUATION

 How to Use Option Trading Strategies in any Market Situation
Option strategies are implemented by combining one or more option positions and possibly an underlying stock position.
In other words, a trading strategy is a calculated way of using options singly or in a combination, in order to make a profit from market movements.
Option strategies can give you a greater profit with less risk compared with the traditional buying and selling of stock.
One vitally important thing to consider when investing is when to get out and how. An effective exit strategy needs to be decided upon in advance, and stuck to without allowing emotions to sway you.
There are many types of option trading strategies that can be applied, depending on your opinion, or ‘prediction,’ of which direction the underlying stock is going to move.
A guideline for picking the right stocks to go with the right options strategies is available by reading “Options Strategies for Different Stock Styles”. The various stock movements are taken into account – bullish and bearish – as well as major moves, or slower, moderate moves, in either direction - and a strategy that can be applied to each of these movements.

Friday, 27 June 2014

JPASSOCIAT STRANGLE STRATEGY

Buy Jp assosiat 90 CALL @1.4       
Buy Jp assosiat 65 PUT   @ 1.4
COST =2.8
RISK PER LOT = 22400
RETURN = UNLIMITED
UPPER BREAK GIVEN POINT=92.8
LOWER BREAK GIVEN POINT=63.2
Pay off table:..