A Fundamental Introduction to Japanese Candlestick Charting
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Tracking and Trading Volatility 155
ffirs.qxd 9/12/06 2:37 PM Page i The Index Trading Course Workbook www.rasabourse.com ffirs.qxd 9/12/06 2:37 PM Page ii Founded in 1807, John Wiley & Sons is the oldest independent publishing company in the United States. With offices in North America, Europe, Aus- tralia, and Asia, Wiley is globally committed to developing and marketing print and electronic products and services for our customers’ professional and personal knowledge and understanding. The Wiley Trading series features books by traders who have survived the market’s ever changing temperament and have prospered—some by reinventing systems, others by getting back to basics. Whether a novice trader, professional, or somewhere in-between, these books will provide the advice and strategies needed to prosper today and well into the future. For a list of available titles, visit our web site at www.WileyFinance.com. www.rasabourse.com ffirs.qxd 9/12/06 2:37 PM Page iii The Index Trading Course Workbook Step-by-Step Exercises and Tests to Help You Master The Index Trading Course GEORGE A. FONTANILLS TOM GENTILE John Wiley & Sons, Inc. www.rasabourse.com ffirs.qxd 9/12/06 2:37 PM Page iv Copyright © 2006 by George A. Fontanills, Tom Gentile, and Richard Cawood. All rights reserved. Published by John Wiley & Sons, Inc., Hoboken, New Jersey. Published simultaneously in Canada. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, (978) 750-8400, fax (978) 646-8600, or on the web at www.copyright.com. -
VERTICAL SPREADS: Taking Advantage of Intrinsic Option Value
Advanced Option Trading Strategies: Lecture 1 Vertical Spreads – The simplest spread consists of buying one option and selling another to reduce the cost of the trade and participate in the directional movement of an underlying security. These trades are considered to be the easiest to implement and monitor. A vertical spread is intended to offer an improved opportunity to profit with reduced risk to the options trader. A vertical spread may be one of two basic types: (1) a debit vertical spread or (2) a credit vertical spread. Each of these two basic types can be written as either bullish or bearish positions. A debit spread is written when you expect the stock movement to occur over an intermediate or long- term period [60 to 120 days], whereas a credit spread is typically used when you want to take advantage of a short term stock price movement [60 days or less]. VERTICAL SPREADS: Taking Advantage of Intrinsic Option Value Debit Vertical Spreads Bull Call Spread During March, you decide that PFE is going to make a large up move over the next four months going into the Summer. This position is due to your research on the portfolio of drugs now in the pipeline and recent phase 3 trials that are going through FDA approval. PFE is currently trading at $27.92 [on March 12, 2013] per share, and you believe it will be at least $30 by June 21st, 2013. The following is the option chain listing on March 12th for PFE. View By Expiration: Mar 13 | Apr 13 | May 13 | Jun 13 | Sep 13 | Dec 13 | Jan 14 | Jan 15 Call Options Expire at close Friday, -
YOUR QUICK START GUIDE to OPTIONS SUCCESS.Pages
YOUR QUICK START GUIDE TO OPTIONS SUCCESS Don Fishback IMPORTANT DISCLOSURE INFORMATION Fishback Management and Research, Inc. (FMR), its principles and employees reserve the right to, and indeed do, trade stocks, mutual funds, op?ons and futures for their own accounts. FMR, its principals and employees will not knowingly trade in advance of the general dissemina?on of trading ideas and recommenda?ons. There is, however, a possibility that when trading for these proprietary accounts, orders may be entered, which are opposite or otherwise different from the trades and posi?ons described herein. This may occur as a result of the use of different trading systems, trading with a different degree of leverage, or tes?ng of new trading systems, among other reasons. The results of any such trading are confiden?al and are not available for inspec?on. This publica?on, in whole or in part, may not be reproduced, retransmiDed, disseminated, sold, distributed, published, broadcast or circulated to anyone without the express prior wriDen permission of FMR except by bona fide news organiza?ons quo?ng brief passages for purposes of review. Due to the number of sources from which the informa?on contained in this newsleDer is obtained, and the inherent risks of distribu?on, there may be omissions or inaccuracies in such informa?on and services. FMR, its employees and contributors take every reasonable step to insure the integrity of the data. However, FMR, its owners and employees and contributors cannot and do not warrant the accuracy, completeness, currentness or fitness for a par?cular purpose of the informa?on contained in this newsleDer. -
The Impact of Implied Volatility Fluctuations on Vertical Spread Option Strategies: the Case of WTI Crude Oil Market
energies Article The Impact of Implied Volatility Fluctuations on Vertical Spread Option Strategies: The Case of WTI Crude Oil Market Bartosz Łamasz * and Natalia Iwaszczuk Faculty of Management, AGH University of Science and Technology, 30-059 Cracow, Poland; [email protected] * Correspondence: [email protected]; Tel.: +48-696-668-417 Received: 31 July 2020; Accepted: 7 October 2020; Published: 13 October 2020 Abstract: This paper aims to analyze the impact of implied volatility on the costs, break-even points (BEPs), and the final results of the vertical spread option strategies (vertical spreads). We considered two main groups of vertical spreads: with limited and unlimited profits. The strategy with limited profits was divided into net credit spread and net debit spread. The analysis takes into account West Texas Intermediate (WTI) crude oil options listed on New York Mercantile Exchange (NYMEX) from 17 November 2008 to 15 April 2020. Our findings suggest that the unlimited vertical spreads were executed with profits less frequently than the limited vertical spreads in each of the considered categories of implied volatility. Nonetheless, the advantage of unlimited strategies was observed for substantial oil price movements (above 10%) when the rates of return on these strategies were higher than for limited strategies. With small price movements (lower than 5%), the net credit spread strategies were by far the best choice and generated profits in the widest price ranges in each category of implied volatility. This study bridges the gap between option strategies trading, implied volatility and WTI crude oil market. The obtained results may be a source of information in hedging against oil price fluctuations. -
Options Strategies for Big Stock Moves
1 Joe Burgoyne Director, OptionsOptions Industry Council Strategies for Big Stock Moves www.OptionsEducation.org 2 Disclaimer Options involve risks and are not suitable for everyone. Individuals should not enter into options transactions until they have read and understood the risk disclosure document, Characteristics and Risks of Standardized Options, available by visiting OptionsEducation.org. To obtain a copy, contact your broker or The Options Industry Council at 125 S. Franklin St., Suite 1200, Chicago, IL 60606. In order to simplify the computations used in the examples in these materials, commissions, fees, margin, interest and taxes have not been included. These costs will impact the outcome of any stock and options transactions and must be considered prior to entering into any transactions. Investors should consult their tax advisor about any potential tax consequences. Any strategies discussed, including examples using actual securities and price data, are strictly for illustrative and educational purposes and should not be construed as an endorsement, recommendation, or solicitation to buy or sell securities. Past performance is not a guarantee of future results. Copyright © 2018. The Options Industry Council. All rights reserved. 3 About OIC: • FREE unbiased and professional options education • OptionsEducation.org • Online courses, podcasts, videos, & webinars • Investor Services desk at [email protected] 4 U.S. Listed Options Exchanges Annual Options Volume 5 1973-2017 OCC Annual Contract Volume by Contract Type 5.0 4.5 -
Traders Guide to Credit Spreads
Trader’s Guide to Credit Spreads Options Money Maker, LLC Mark Dannenberg [email protected] www.OptionsMoneyMaker.com Trader’s Guide to Spreads About the Author Mark Dannenberg is an options industry veteran with over 25 years of experience trading the markets. Trading is a passion for Mark and in 2006 he began helping other traders learn how to profitably apply the disciplines he has created as a pattern for successful trading. His one-on-one coaching, seminars and webinars have helped hundreds of traders become successful and consistently profitable. Mark’s knowledge and years of experience as well as his passion for teaching make him a sought after speaker and presenter. Mark coaches traders using his personally designed intensive curriculum that, in real-time market conditions, teaches each client how to be an intelligent trader. His seminars have attracted as many as 500 people for a single day. Mark continues to develop new strategies that satisfy his objectives of simplicity and consistent profits. His attention to the success of his students, knowledge of management techniques and ability to turn most any trade into a profitable one has made him an investment education leader. This multi-faceted approach custom fits the learning needs and investment objectives of anyone looking to prosper in the volatile and unpredictable economic marketplace. Mark has a BA in Communications from Michigan State University. His mix of executive persona, outstanding teaching skills, and real-world investment experience offers a formula for success to those who engage his services. This document is the property of Options Money Maker, LLC and is furnished with the understanding that the information herein will not be reprinted, copied, photographed or otherwise duplicated either in whole or in part without written permission from Mark Dannenberg, Founder of Options Money Maker, LLC. -
Evidence on the Performance of Condor Option Spreads in Australia
APPLIED FINANCE LETTERS VOLUME 06, ISSUE 01, 2017 FLIGHT OF THE CONDORS: EVIDENCE ON THE PERFORMANCE OF CONDOR OPTION SPREADS IN AUSTRALIA SCOTT J. NIBLOCK1* 1. Lecturer, School of Business & Tourism, Southern Cross University, Australia * Corresponding Author: Dr Scott J. Niblock, Lecturer, School of Business & Tourism, Southern Cross University, Gold Coast, Australia +61 7 5589 3098 [email protected] Abstract: This paper examined whether superior nominal and risk-adjusted returns could be generated using condor option spread strategies on a large capitalized Australian stock. Monthly Commonwealth Bank of Australia Ltd (CBA) condor option spreads were constructed from 2012 to 2015 and their returns established. Standard and alternative measures were used to determine the nominal and risk-adjusted performance of the spreads. The results show that the short put condor spread produced superior nominal and risk-adjusted returns, but seemingly underperformed when the upside potential ratio was taken into consideration. The long iron condor spread also offered reasonable returns across both performance metrics. On the other hand, the short call condor, long call condor, short iron condor and long put condor spreads did not perform as well on a nominal and risk- adjusted return basis. The results suggest that constructing spreads on the foundation of volatility preferences could be a driver of performance for condor option spreads strategies. For instance, short volatility condor spreads with negatively skewed return distribution shapes appear to add value, while long volatility condor spreads with positively skewed return distribution shapes seem to be less attractive over the sample period. Overall, condor option spreads demonstrate high risk-return profiles, offer versatility in their construction and intended pay-off outcomes, create value in some instances and can be executed across varying market conditions. -
My Top 5 Rules for Successful Debit Spread Trading Trade with Lower Cost and Create More Consistency in Your Options Portfolio
My Top 5 Rules for Successful Debit Spread Trading Trade with Lower Cost and Create More Consistency in Your Options Portfolio Price Headley, CFA, CMT TABLE OF CONTENTS: How Debit Spreads Give You Growth AND Income Potential Rule #1: Buy In-The-Money, Sell Slightly Out-Of-The-Money Rule #2: Sell More Time Premium than You Buy Rule #3: Profit Taking Quickly Increases Win Percentage Rule #4: Don’t Be Greedy – Favor Early Profit Taking Rule #5: Trade Weekly Options for More Bang for Your Buck How Debit Spreads Give You Growth AND Income Potential If you’ve ever bought an option before, you know that one of the challenges of trading a time-limited asset is paying a “time premium” and overcoming the loss of time. And yet as a trader, I still see plenty of opportunities to take advantage of trends on various time frames, from quick moves over a few days to “swing trading” moves over several weeks. So how can you actually place time on your side in the options game? Many would say that options selling is the best way to do this but despite how profitable collecting premium can be, selling options can occasionally cause lots of trouble if a stock or market moves sharply against you. The answer that meets nicely in the middle – profiting from the growth potential of catching a piece of an existing trend, while lowering your total cost per contract and paying no net time in your options – is Debit Spreads. You may have heard them called Vertical Spreads, Bull Call Spreads or Bear Put Spreads. -
Fidelity 2017 Credit Spreads
Credit Spreads – And How to Use Them Marty Kearney 789768.1.0 1 Disclaimer Options involve risks and are not suitable for everyone. Individuals should not enter into options transactions until they have read and understood the risk disclosure document, Characteristics and Risks of Standardized Options, available by visiting OptionsEducation.org. To obtain a copy, contact your broker or The Options Industry Council at One North Wacker Drive, Chicago, IL 60606. Individuals should not enter into options transactions until they have read and understood this document. In order to simplify the computations used in the examples in these materials, commissions, fees, margin interest and taxes have not been included. These costs will impact the outcome of any stock and options transactions and must be considered prior to entering into any transactions. Investors should consult their tax advisor about any potential tax consequences. Any strategies discussed, including examples using actual securities and price data, are strictly for illustrative and educational purposes and should not be construed as an endorsement, recommendation, or solicitation to buy or sell securities. Past performance is not a guarantee of future results. 2 Spreads . What is an Option Spread? . An Example of a Vertical Debit Spread . Examples of Vertical Credit Spreads . How to choose strike prices when employing the Vertical Credit Spread strategy . Note: Any mention of Credit Spread today is using a Vertical Credit Spread. 3 A Spread A Spread is a combination trade, buying and/or selling two or more financial products. It could be stock and stock (long Coca Cola – short shares of Pepsi), Stock and Option (long Qualcomm, short a March QCOM call - many investors have used the “Covered Call”), maybe long an IBM call and Put. -
Why and How to Trade Butterflies to Beat Any Market by Larry Gaines
Why and How to Trade Butterflies to Beat Any Market By Larry Gaines, Founder PowerCycleTrading.com, 30 Year Trading Professional Butterflies provide a low-risk high reward trading opportunity more than any other option strategy. As most traders know, markets direction can go through months and even years of higher than usual uncertainty. While there’s always some degree of uncertainty that traders and investors must accept, there can be long frustrating periods of higher than usual conflicting signals. Or often, technical analysis paints one picture, while the economic or political environment paints another picture. This can be said for both broad market direction and individual securities. Higher levels of uncertainty can be both stressful and costly for traders waiting on the sidelines. Plus, for traders who have come to rely on regular income from trading, loss of that income can cause serious lifestyle problems. These situations call for a strategy that will work no matter which direction the market heads. That’s exactly what the highly versatile Butterfly strategy does. It gives you a trading advantage in any type of market environment. This makes it a powerful strategy that every serious trader will want to add to their arsenal of skills. Power Cycle Trading© – Click Here for Weekly Unique Trade Ideas, Live Q&A with Larry, Trading Room+ Many traders have heard about the advantages of Butterfly strategies, yet they may have avoided it because of its complexity. Initially, the setup can seem overly complicated. This is because most traders try to master the Butterfly without truly understanding a few basic option trading principles first. -
My Top 5 Rules for Successful Debit Spread Trading Trade with Lower Cost and Create More Consistency in Your Options Portfolio
My Top 5 Rules for Successful Debit Spread Trading Trade with Lower Cost and Create More Consistency in Your Options Portfolio Price Headley, CFA, CMT TABLE OF CONTENTS: How Debit Spreads Give You Growth AND Income Potential Rule #1. Buy In-The-Money and Sell At or Out-Of-The-Money Rule #2. Sell More Time Premium Than You Buy Rule #3. Profit Taking in Pieces Increases Win Percentage Rule #4. Don’t Be Greedy – Favor Early Profit Taking Rule #5. Trade in Pairs How Debit Spreads Give You Growth AND Income Potential If you’ve ever bought an option before, you know that one of the challenges of trading a time-limited asset is paying a “time premium” and overcoming the loss of time. And yet as a trader, I still see plenty of opportunities to take advantage of trends on various time frames, from quick moves over a few days to “swing trading” moves over several weeks. So how can you actually place time on your side in the options game? It’s not by just selling options, as that can be profitable, but many traders have seen how a small number of trades can cause you lots of trouble in option selling if a stock or market moves sharply against you. The answer that meets nicely in the middle – profiting from the growth potential of catching a piece of an existing trend, while lowering your total cost per contract and paying no net time in your options – is Debit Spreads. You may have heard them called Vertical Spreads, or Bull Call Spreads or Bear Put Spreads. -
Options Trading
OPTIONS TRADING: THE HIDDEN REALITY RI$K DOCTOR GUIDE TO POSITION ADJUSTMENT AND HEDGING Charles M. Cottle ● OPTIONS: PERCEPTION AND DECEPTION and ● COULDA WOULDA SHOULDA revised and expanded www.RiskDoctor.com www.RiskIllustrated.com Chicago © Charles M. Cottle, 1996-2006 All rights reserved. No part of this publication may be printed, reproduced, stored in a retrieval system, or transmitted, emailed, uploaded in any form or by any means, electronic, mechanical photocopying, recording, or otherwise, without the prior written permission of the publisher. This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is sold with the understanding that neither the author or the publisher is engaged in rendering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a competent professional person should be sought. From a Declaration of Principles jointly adopted by a Committee of the American Bar Association and a Committee of Publishers. Published by RiskDoctor, Inc. Library of Congress Cataloging-in-Publication Data Cottle, Charles M. Adapted from: Options: Perception and Deception Position Dissection, Risk Analysis and Defensive Trading Strategies / Charles M. Cottle p. cm. ISBN 1-55738-907-1 ©1996 1. Options (Finance) 2. Risk Management 1. Title HG6024.A3C68 1996 332.63’228__dc20 96-11870 and Coulda Woulda Shoulda ©2001 Printed in the United States of America ISBN 0-9778691-72 First Edition: January 2006 To Sarah, JoJo, Austin and Mom Thanks again to Scott Snyder, Shelly Brown, Brian Schaer for the OptionVantage Software Graphics, Allan Wolff, Adam Frank, Tharma Rajenthiran, Ravindra Ramlakhan, Victor Brancale, Rudi Prenzlin, Roger Kilgore, PJ Scardino, Morgan Parker, Carl Knox and Sarah Williams the angel who revived the Appendix and Chapter 10.