Learning Techniques for Stock and Commodity Options 6 pdf

Learning Techniques for Stock and Commodity Options_1 docx

... 0.080 −9.93 6. 56 2.7155 0.51 19.28 0. 060 6. 55 4.53 1.00 60 0.08 4.07 0.020 −2.05 1.44 0.21 65 0.01 0.54 0.003 −0. 36 0. 26 0.03c04 JWBK147-Smith May 8, 2008 9:48 Char Count=52 WHY AND HOW OPTION ... 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...

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 ... bullish or bearish on the implied volatility and thereforeon the options. Figure 6. 2 shows the current situation with implied and historical volatility for IBM. I think that this situation would ... 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...

Learning Techniques for Stock and Commodity Options_3 pptx

... VegaOct 120 C −1.20 26. 24 −30 −.0 56 .0 766 −.0821Oct 105 C 11.40 31 .67 .98 .0 06 −.0210 .0081Net Position −$70 .68 −.050 .0 566 −. 064 c 06 JWBK147-Smith May 8, 2008 9:52 Char Count=82 OPTION STRATEGIESreceive ... −.0919c 06 JWBK147-Smith May 8, 2008 9:52 Char Count=Selecting a Strategy 81FIGURE 6. 3 October CallsWe would pay $11,555 for the 100 shares and receive $2,500 for ourshort call for a net ... 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...

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 ... 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 ... you will select. The reasons for this are that the delta will be higher for a lower strike price than for ahigher strike and that the premium is higher, thus affording greater proﬁtpotential....

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 ... stock $1 96, 950+ Stock commissions +1,300− Options premium received −5 ,68 8+ Options commissions +390Net investment required $192,952Example 10.2 Return-if-exercised–CommonProceeds from stock ... GeneralWidget. The stock is currently trading at $62 , and the option is at $4. Thenet price you want is $62 −$4, or $58. Although unlikely, the net order couldbe ﬁlled at $63 and $5 or at $59 and $1. Your...

Learning Techniques for Stock and Commodity Options_6 pdf

... Thenet price you want is $62 + $4, or $66 . Although unlikely, the net ordercould be ﬁlled at $65 and $1 or at $59 and $7. Your analysis has been pred-icated on getting $62 and $4. In most cases, ... 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 ... May 8, 2008 10 :6 Char Count= 160 OPTION STRATEGIES3Price of Underlying InstrumentProfit 6 −4−3−5−2−112−70404142434445 46 474849505152535455 56 575859 60 FIGURE 13.1...

Learning Techniques for Stock and Commodity Options_7 doc

... maximum risk and the point whereit occurs, 64 77/8. Table 15.3 shows the same situation for a bull call spreadwith the 64 5 call purchased for 103/4 and the 65 0 call purchased for 77/8.The ... Call ResultsPrice Bull spread Long call 64 5 −27/8−177/8 65 0 +21/8−127/8 65 5 +21/8−77/8 66 0 +21/8−27/8 66 5 +21/8+21/8 67 0 +21/8+71/8between sticking with ... Call Spread Results and Rolling Up ResultsPrice Original bull spread New bull spread 64 5 −27/8−7/8 65 0 +21/8−7/8 65 5 +21/8+41/8 66 0 +21/8+41/8 66 5 +21/8+41/8c14...

Learning Techniques for Stock and Commodity Options_8 pptx

... enoughTABLE 16. 4 Bear Call Spread Results and Long Call ResultsPrice Bear call spread Long call 64 0 +27/8+17/8 64 5 +27/8+17/8 65 0 −21/8+17/8 65 5 −21/8 +6 7/8 66 0 −21/8+117/8c17 ... creditreceived.Table 16. 1 shows an example of the maximum risk and the point whereit occurs, 65 0. Table 16. 3 shows the same situation for a bear call spreadwith the 64 5 call sold for 103/4 and the 65 0 call ... Spread Results and Long Call ResultsPrice Bear call spread Long call 65 0 −21/8−191/8 65 5 −21/8−141/8 66 0 −21/8−91/8 66 5 −21/8−41/8 67 0 −21/8+7/8 67 5 −21/8+57/8Use...

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 ... the options on Treasury-bond futures using the September and December 96 0/32strikes when theprice of the underlying futures contract is 96 5/32. These options, being theat-the-money options, ... capture the time decay ofthe nearby option. For example, you could sell the United Airlines (UAL)November 60 calls for 2 and buy the February 60 calls for 37/8when theprice of UAL is 59.The...

Learning Techniques for Stock and Commodity Options_10 doc

... debit is $6. The strike price, $60 , plus the net debit, $6, gives an up-side break-even of $66 . The strikeprice, $60 , minus the net debit, $6, gives a down-side break-even of $54. For another ... 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. ... InstrumentProfit−2−3−11−4345 6 0404142434445 46 474849505152535455 56 575859 60 FIGURE 21.1 Long Straddle0Price of Underlying InstrumentProfit−2−3−1−4−5 6 1234404142434445 46 474849505152535455 56 575859 60 FIGURE...

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