Investors will often hear the term put-call parity without fully comprehending its meaning or how it keeps options prices in line. Put-Call Parity states that for a given underlying price with the same strike prices and the same expiry for both puts and calls, the value of a call at a given price implies a value for the put,...
At the present time, the S&P/TSX Composite is sitting roughly halfway between its 52-week high and low points. Whether your current forecast is glass half empty or glass half full, there are two simple option strategies that Canadian investors can employ for either forecast. The bull call spread, also called a long-call...
Covered call writing is a low risk option strategy. If the underlying rises above the strike price the calls are assigned, you deliver the shares and exit with the best case scenario. Covered calls make money in a rising or flat market and because the premium received reduces the cost of the underlying shares, is less risky...
Before examining the considerations, we first need to understand the mechanics of call options and the dividend process. Dividends are payments by a company to shareholders of record. These payments may be regular, predictable, variable or even one-time events. Some industries, like tanker or mining companies, pay highly...
Something weird is happening in the energy markets… Oil and gas stocks seemed to stop caring what oil is doing. The divergences are staggering. What do I mean? Back in May, when crude oil was at its $50+ peak level, there was jubilee amongst investors. It has become consensus that oil has not only bottomed but is discovering...
When most investors think about selling covered calls, they think in terms of writing calls against individual stocks. Less often we think about writing covered calls against exchange traded funds (ETFs). Too bad really, because there are some interesting opportunities in that market space. Trading ETFs reduces the impact of...
Canadian investors seeking an index or single stock option strategy may want to consider the covered strangle. It can be employed to enhance yield and provide a strategic means to both add to and exit existing positions. Like any options strategy there are trade-offs, and the covered strangle does pose some risk. The...
Probably the most noteworthy event in the first half of 2015 was the surprise rate cut issued by the Bank of Canada (BoC) in the first quarter. It was designed to provide “insurance against a downturn” in light of the sharp decline in oil prices. The BoC was right to be concerned. Unfortunately policymakers underestimated...
I apologize for the title but I couldn’t resist. Valeant Pharmaceuticals International (TSE:VRX) continues to defy broader market complacency. The diversified pharmaceutical company has barely wavered in its price advance since August of 2014. While this trend may be getting a little long in the tooth, the question is whether...
For the first half of 2015 global financial markets have been obsessed with short term noise. We have witnessed a succession of exacerbated reactions to on again off again negotiations with Greece, waste of time debates on the timing of a Fed rate hike or endless dissections of monthly jobs data where 20% revisions are more the...