Yearly Archives: 2017

Buyers of Options Can Face an Uphill Climb
August 16, 2017
Volatility

Buyers of Options Can Face an Uphill Climb

Hans Albrecht

S&P/TSX 60 (“the Index”) options are generally priced a little too high versus actual market movement. In other words, many buyers of insurance will pay more than ‘fair value’ for options in order to protect against drawdowns and volatile market environments. Based on an ongoing measure of realized volatility, or...

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4 days ago
Writing Calls Covered by Long-Term Call Options on CM Shares
August 11, 2017
Technical analysis

Writing Calls Covered by Long-Term Call Options on CM Shares

Martin Noël

As the following graph shows, share prices for Canadian Imperial Bank of Commerce (CM) peaked in February 2017, after which they fell by almost 15% to settle at around $104. Since then, CM is up slightly and trying to break through $110, but this resistance level may be difficult to breach, since it was a support level in...

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1 week ago
Options Brief – Week of August 7th
August 08, 2017
Stock Options

Options Brief – Week of August 7th

Montréal Exchange

The Canadian marijuana market is preparing for a major development: the legalization of recreational use of cannabis. While some may think that legalization will boost the Canadian economy, others believe that marijuana stocks are simply overhyped.   One of the largest Canadian marijuana stocks company, Canopy Growth...

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2 weeks ago
Hedging Canadian Bank Risk with Debit Spreads
August 01, 2017
Protection

Hedging Canadian Bank Risk with Debit Spreads

Patrick Ceresna

The recent hawkish shift and rate hike by the Bank of Canada has ushered in a resounding 10% rise in the Canadian dollar in a few short months.  This has not only put stress broadly on Canadian equities, but it has instilled concerns about the tightening of credit conditions on an already over indebted Canadian consumer....

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3 weeks ago
Options Brief- Week of July 31st
August 01, 2017
Index Options

Options Brief- Week of July 31st

Montréal Exchange

The rallying markets have led to a large pool of investors accumulating unrealized gains on their portfolio. One may believe that now is a good time to cash in a profit, but investors may wish to hold on to their stocks just a little longer if they are receiving a healthy dividend payment from these holdings or wish to avoid...

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3 weeks ago
Making a Bull Spread on CNR Metamorphose Into a Reverse Butterfly Spread
July 26, 2017
Bullish Outlook

Making a Bull Spread on CNR Metamorphose Into a Reverse Butterfly Spread

Martin Noël

As shown in the following graph, shares in the Canadian National Railway Company (CNR) have begun a slight correction since peaking at $108.64 at the end of June. When the markets closed on July 24, CNR was trading at $101.63 and was near its 34-week moving average (34-WMA), which has served as a support point several times in...

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4 weeks ago
Options Brief- Week of July 24
July 26, 2017
Concepts

Options Brief- Week of July 24

Montréal Exchange

Behind every transaction, there is intention, a belief. Investors typically select options strategies with a clear objective in mind based on a predetermined outlook. One of the most popular strategies is the covered call strategy. We have discussed the covered call in depth in previous posts, but here is a quick summary. The...

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4 weeks ago
A not so TD-ous trade
July 24, 2017
Stock Options

A not so TD-ous trade

Christopher Thom

TD is an extremely well-run bank with diversification across many business lines and geographies. The share price has pulled back from its 52-week high of $71.31 set back in late February by around 8.5%. With shares hovering around the $65 mark, I want to pick up some yield or look to get long the stock at even lower prices. At...

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4 weeks ago
Three ways to build a butterfly spread
July 18, 2017
Neutral Outlook

Three ways to build a butterfly spread

Martin Noël

A butterfly spread is appropriate when you expect that the price of the underlying asset will remain relatively unchanged and reach a specific target price upon expiration of the options used in the strategy. The following graph illustrates such a situation with shares in BCE Inc., when their price fluctuated within a range of...

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1 month ago
Options Brief- Week of July 17
July 18, 2017
Currency Options

Options Brief- Week of July 17

Montréal Exchange

Unless you’ve been living under a rock, you heard that the Bank of Canada (BoC) raised interest rates for the first time in 7 years last week. The overnight rate target was adjusted to 0.75 percent, an increase of 0.25 percent (from 0.5 percent). Citing the statement release from the BoC, «recent data have bolstered the...

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1 month ago