# Can you suggest a simple strategy that combines an option position and a position in the underlying asset…?

September 10, 2010 by admin

Filed under Option Trading

It has been following the options of purchase of three months in bank XYZ. You are not safe if 9 dollars it is the right price for the population, but consider that real volatileness is of 30%, inferior to implicit 36% in the price of options of purchase of three months with $ 9 idles. We suppose that the free rate of risk is of 3%. It can suggest a simple strategy that combines a position in options and a position in the underlying assets to operate this knowledge? A strategy of delta-neutral negotiation has sense?

# Trading Option Greeks Ebook – What 3 Important Clues the Options Trading Greeks “Delta” Tell You

September 3, 2010 by admin

Filed under Option Trading

Trading Option Greeks Ebook

The options “delta” is one of the important component of the options greeks. As you might have already known, the options greeks offer you clues to the likely behavior of an option’s price movement in relation to the corresponding price movement of the underlying share.

Besides the delta, the options greeks also include other components such as the theta, gamma, vega & rho etc. In a nutshell, an options delta is basically a measure of the change in the option price resulting from a change in the price of the underlying stock. The delta is usually expressed as a decimal value in the range of between 0. 00 to 1. 00. The other components of the options greeks are also represented in decimal value. In this article, we would explore the 3 critical information that the options delta could reveal to an options trader so that it would give him or her a clearer picture of the potential price movement of the options so as to help him or her make a better options trading decision.

The first information that an options delta could reveal is that it could tell the options trader the percentage chance of an option trade. This percentage chance refers to the percentage chance in which a particular option would end up in-the-money. By the way, when an option goes in-the-money, it would be said to have attained “intrinsic value” and thus would be worth some value to the options trader when he or she either sells the options position or exercise the option. Thus, an option with a delta value of 0. 80 would mean that it has a 80% chance of finishing in-the-money. Trading Option Greeks Ebook

The second information that the options delta provides is the percentage change that an option trader would expect of an option position. This means that the delta would determine the percentage change in the options price movement in relation to the corresponding change in the price of the underlying stock. For example, an option with a delta value of 0. 60 will move 60% of every one-point movement of the underlying stock. If the underlying stock moves $1. 00, then the option would move $0. 60. So if an option has a delta value of 0. 90, the option would move $0. 90 on every $1. 00 movement in the underlying stock; I guess you get the point.

The last important information that the options delta can provide is the hedge ratio, which is the amount of deltas needed to properly hedge a particular trading position. For example, an investor who wants to implement a delta-neutral strategy may buy up 100 shares of the underlying stock and hedge the position with 2 nos. of at-the-money put option which have a delta value of around 0. 50 each. Since the underlying stock has a delta of 1. 00 and the delta value of the 2 put options would add up to the delta value 1. 00 too, this would thus establish a delta-neutral trading position.

As mentioned earlier, the options delta is an important component of the the options greeks which could tell an options investor how to determine the likely price movement behavior of the options in relation to the corresponding price action of the underlying stock. The delta basically determines the percentage chance, the percentage change and the hedge ratio requirement of an option trading position. Thus, the options trader is advised to take a look at this important component of the options greeks the next time he or she make a options trading decision. Trading Option Greeks Ebook

# Tips for Better Options Trading

July 25, 2010 by admin

Filed under Option Trading

There are two types of options: call options and put options. Call options give the recipient the right but not the obligation to buy the shares at a specific price on or before a specific date. The put options give the recipient the right but not the obligation to sell the shares at a specific price on or before a specific date. The holder of a put is only required to deliver the underlying shares if they exercise the option. There are some advantages in the negotiation of options: put options allows you to protect against a possible fall in the price of the shares held. You can take out as insurance against a loss in share price. In making a purchase, the purchase price of the shares are locked in. This gives the option holder call up to the expiry date to decide whether or not he or she will buy the shares. This also applies to the beneficiary, he or she has to decide whether or not to sell the shares before the deadline. The ease of trade within and outside of an option position can trade options with the intent to ever exercise. If you expect the market to rise, you may want to buy call options, and if you are expecting a slump, you may decide to buy put options. This means you can sell the option before the expiry date in order to earn profits or limit losses. The options also allow you to build a diversified portfolio of a lower initial outlay than purchasing shares directly. The generation of income for the choices you can make profits over the dividends by writing call options against their shares. When writing an option, you will receive the option premium up front. While you must keep the option premium, it is possible that you can exercise against and have to deliver their shares to the beneficiary in the exercise price. This strategy uses material purchased on margin. By combining different options, or stocks with options, you can create a wide range of strategies. You can earn additional income by writing options against shares you already own or are purchasing. This is one of the simplest strategies and more rewarding. Using options gives you time to decide. Taking a call option can give you time to decide whether to buy stocks. You pay the premium, which is only a fraction of the price of the underlying shares. The option then locks in a purchase price of the shares if you decide to exercise. You then have until the date of expiry of the option to decide whether to buy the stock. This is the same as the option. Note that, like any other non-commercial routes that can not afford to lose.