Monday 18 May 2015
Friday 15 May 2015
OPTION (CALL & PUT) FREE CALLS FOR MONDAY 18 MAY 2015
BUY VEDL 200 PUT @ 2.80 TGT 4.90/6.70 SL 1.20
BUY REL INFRA 440 CALL @ 8.40 TGT 12.90/16.40 SL 5.2
FOR MORE CALL FILL UP THE FORM GIVEN HERE >>>>>>>>
The calendar spread
refers to a family of spreads involving options of the same underlying stock, same strike prices, but different expiration months. They can be created
with either all calls or
all puts. Also known
as time spread or horizontal spread.
Call Calendar Spread
Using calls, the
calendar spread strategy can be setup by buying long term calls and simultaneously writing an equal number of
near-month at-the-money or
slightly out-of-the-money calls
of the same underlying security with
the same strike price.
The idea behind the
calendar spread is to sell time, which is why calendar spreads are also known
as time spreads. The options trader hopes that price of the underlying remains
unchanged at expiration of the near month options so that they expire
worthless. As the time decay of near month options is at a faster rate than
longer term options, his long term options still retain much of their value.
The options trader can then either own the longer term calls for less or write
some more calls and repeat the process.
Tuesday 12 May 2015
BANKNIFTY OPTION STRANGLE STRATEGY
BUY BANKNIFTY 17000 PUT @ 118
BUY BANKNIFTY 18500 CALL
@ 145
COST=263
TOTAL RISK
= 6575
RETURN = UNLIMITED
UPPER BREAK GIVEN POINT=18763
LOWER BREAK GIVEN POINT=16737
Pay off table:
Friday 1 May 2015
Covered Call
Aside from purchasing a naked call option, you can also engage in a basic covered call or buy-write strategy. In this strategy, you would purchase the assets outright, and simultaneously write (or sell) a call option on those same assets. Your volume of assets owned should be equivalent to the number of assets underlying the call option. Investors will often use this position when they have a short-term position and a neutral opinion on the assets, and are looking to generate additional profits (through receipt of the call premium), or protect against a potential decline in the underlying asset's value.
Saturday 25 April 2015
WHAT ARE OPTION ? AND TYPES OF OPTION
OPTION
An option is a contract that gives the buyer the
right, but not the obligation, to buy or sell an underlying asset at a specific price on or before a certain date. An option, just
like a stock or bond, is a security.
It is also a binding contract with strictly defined terms and properties.
CALLS AND
PUTS
The two
types of options are calls and puts:
A call gives the holder the right to buy an asset
at a certain price within a specific period of time. Calls are similar to
having a long position on a stock. Buyers of calls hope that the stock will
increase substantially before the option expires.
A put gives the holder the right to sell an
asset at a certain price within a specific period of time. Puts are very
similar to having a short
position on a stock. Buyers of puts hope that
the price of the stock will fall before the option expires.
Participants
in the Options Market
There are four types of participants in options markets depending on the
position they take:
·
Buyers of calls
·
Sellers of calls
·
Buyers of puts
·
Sellers of puts
People
who buy options are called holders and those who sell options are called writers;
furthermore, buyers are said to have long positions, and sellers are said to
have short positions.
Thursday 23 April 2015
Why Use Options?
There are two main reasons
why an investor would use options:
Speculation
speculation as betting on the movement of a security. The advantage of options is that you aren't limited to making a profit only when the market goes up. Because of the versatility of options, you can also make money when the market goes down or even sideways. Speculation is the territory in which the big money is made - and lost. The use of options in this manner is the reason options have the reputation of being risky. This is because when you buy an option, you have to be correct in determining not only the direction of the stock's movement, but also the magnitude and the timing of this movement. To succeed, you must correctly predict whether a stock will go up or down, and you have to be right about how much the price will change as well as the time frame it will take for all this to happen.
Speculation
speculation as betting on the movement of a security. The advantage of options is that you aren't limited to making a profit only when the market goes up. Because of the versatility of options, you can also make money when the market goes down or even sideways. Speculation is the territory in which the big money is made - and lost. The use of options in this manner is the reason options have the reputation of being risky. This is because when you buy an option, you have to be correct in determining not only the direction of the stock's movement, but also the magnitude and the timing of this movement. To succeed, you must correctly predict whether a stock will go up or down, and you have to be right about how much the price will change as well as the time frame it will take for all this to happen.
Tuesday 21 April 2015
Short Butterfly
The short
butterfly is a neutral strategy like the long butterfly but
bullish on volatility. It is a limited profit, limited risk options trading
strategy. There are 3 striking prices involved in a
short butterfly spread and it can be constructed using calls or puts.
SHORT BUTTERFLY CONSTRUCTION
Ø
SELL 1 ITM CALL
Ø
BUY 2 ATM CALLS
Ø
SELL 1 OTM CALL
Short Call
Butterfly
Using calls, the short butterfly can be constructed by writing one
lower striking in-the-money call, buying two at-the-money calls and writing
another higher striking out-of-the-money call, giving the trader a net credit
to enter the position.
Friday 17 April 2015
OPTION PLAIN VANILLA SBIN STRATEGY :UPDATE
BOOK PROFIT IN SBIN 285 CALL @12.50 CALL WAS GIVEN@4.45 IN POST
TOTAL INVESTMENT =5562
NET RETURN=15625
TOTAL INVESTMENT =5562
NET RETURN=15625
Tuesday 14 April 2015
BUYING OPTIONS
The most
basic of options strategies is to simply buy call or put
options. When you buy options, you are said to have a long position in that
option. You have a long call position when you buy calls or a long put position
if you buy puts.
Generally,
when you are bullish on the underlying asset, you can buy call options to
implement the long call strategy and when bearish, you buy put options to
implement the long put strategy.
In both
cases, you hope that the underlying stock price move far enough to cover
the premiums paid for the options and land you a profit.
Cost Considerations When
Buying Options The price you pay to own the option is called the premium which is affected by many factors such as moneyness, time to expiration and underlying volatility.
Moneyness
Out-of-the-money
options are cheaper to buy than in-the-money options but they
are also more likely to expire worthless.
For call
options, this means that the higher the strike price, the cheaper the option.
Similarly, put options with lower strike prices are therefore less expensive to
purchase.
However,
the size of the premium alone does not tell us the whole story. In
fact, at-the-money options can be considered the most expensive even
though their premiums are lower than in-the-money options. This is because
their time value is highest and time value is the part of the premium
that will waste away as the expiration date approaches.
Time to Expiration
Obviously,
the longer the time to expiration, the more chance the option buyer have for
the underlying price to move in the right direction and therefore the more
expensive the option.
Selecting the Right Option to
Buy
Which
strike price and expiration you choose all depends on your outlook of the
underlying. For instance, if you believe that the underlying will make an
explosive move upwards very soon, then it makes sense to buy an at-the-money
call option expiring in the nearest expiration month.
Buying Options for the
Purpose of Hedging
Other
than speculation, options can also be bought as a means to insure potential
losses for an existing position in the underlying. To hedge a long underlying
position, a protective put can be purchased. Similarly, to protect a
short underlying position, a protective call strategy can be used.
Wednesday 8 April 2015
How to Trade Options – Options Trading Basics
All investors should
have a portion of their portfolio set aside for option trades. Not only do
options provide great opportunities for leveraged plays; they can also help you
earn larger profits with a smaller amount of cash outlay.
What’s more, option
strategies can help you hedge your portfolio and limit potential downside risk.
No investors should be sitting on the sidelines simply because they don’t
understand options.
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