Yearly Archives: 2017

Early Exercise of Options
May 30, 2017
Concepts

Early Exercise of Options

Martin Noël

Holding shares in a company gives the shareholder the following rights:*The right to transfer ownership, *The right to dividends, *Voting rights, and *The right to residual income and assets. What this means is that shareholders are free to sell their shares, take dividends when they are paid, vote at shareholder meetings and...

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4 weeks ago
Call Put Parity: How to Transform Your Positions
May 17, 2017
Concepts

Call Put Parity: How to Transform Your Positions

Martin Noël

I have been told frequently – and surely so have you – that selling cash-secured puts is a very risky strategy. Haven’t you? The main reason put forward for not using this strategy is that you could be forced to buy the security, even if the company had just gone bankrupt. In this light, the strategy rightly raises fears....

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1 month ago
Bottom Fishing Cenovus? Hedging may be Appropriate
May 10, 2017
Bullish Outlook

Bottom Fishing Cenovus? Hedging may be Appropriate

Patrick Ceresna

Cenovus stirred up the Canadian oil industry back on March 29th with an announcement on the $17.7 billion-dollar purchase of ConocoPhillips’ Canadian oil sand assets. To say the deal was not well received is an understatement as the stock dropped over 10% on the announcement and continued to actively distribute lower. From...

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2 months ago
Delta: Assessing Probabilities Based on the Break-even price
May 07, 2017
Concepts

Delta: Assessing Probabilities Based on the Break-even price

Martin Noël

As we saw in an earlier article, delta measures how much an option’s price moves in relation to a change in the price of the underlying asset. Delta is a variable from the Black-Scholes option pricing model, and it is also used in the industry as an approximation of the probability that the option will be in-the-money at...

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2 months ago
It’s Good to be the Insurer
May 04, 2017
Risk Management

It’s Good to be the Insurer

Hans Albrecht

  Option pricing, or insurance, is a relative value product. For instance, a $300 annual premium for $1 million of life insurance coverage for a young, healthy individual is reasonable. However, that same $300 price tag to insure a 65 year-old smoker with high blood pressure is way too cheap. When it comes to life...

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2 months ago
Purchasing Put Options or Selling Call Options to Protect Oneself? (Third and Last Part)
May 02, 2017
Concepts

Purchasing Put Options or Selling Call Options to Protect Oneself? (Third and Last Part)

Martin Noël

In the two previous articles, we compared purchasing put options as a protective strategy with selling covered call options. The first article used options with monthly expirations, and the second article used options expiring after our period of analysis, from April 17, 2015 to January 22, 2016. In both cases, the analysis led...

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2 months ago
Purchasing put options or selling call options to protect oneself? (Part 2)
April 20, 2017
Protection

Purchasing put options or selling call options to protect oneself? (Part 2)

Martin Noël

In the last article, we compared purchasing put options with selling call options. We reached the conclusion that, in the absence of a known target price and timeframe, it is better to use strategies that take advantage of the decaying time value of options, such as selling call options, as protection against a decline in the...

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2 months ago
Purchasing put options or selling call options to protect oneself?
April 11, 2017
Bearish Outlook

Purchasing put options or selling call options to protect oneself?

Martin Noël

Is it better to purchase put options or to sell call options for protection against loss? Many investors ask this question but, in this as in many areas, there is no single right answer. As we have seen in earlier articles, purchasing options has one major disadvantage: the erosion of the time value that must be counterbalanced...

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3 months ago
Peak Optimism Weighing on Canadian Banks
April 05, 2017
Risk Management

Peak Optimism Weighing on Canadian Banks

Patrick Ceresna

Reflecting on the last 9 months, we can decisively identify the global reflation trade as the primary driver of the equity rally. This was considerably accelerated by the Republican sweep in the U.S. elections driven by expectations of new growth driven by tax cuts and fiscal spending. During that roaring bull advance, it was...

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3 months ago
Add (ONEX)tra upside without putting on extra downside
April 05, 2017
Bullish Outlook

Add (ONEX)tra upside without putting on extra downside

Christopher Thom

Onex is a stock that has done very well over the long term. Since going public in 1996, the stock has had an annualized total return over 16%. The company places emphasis on managers owning stock and investing alongside shareholders – this is something I like to look for when investing in a company. For an investor who...

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3 months ago