Understanding Options Vega
October 19, 2017
Concepts

Understanding Options Vega

Prior to understanding Vega, we need to quickly review option-pricing models. The options pricing models are mathematical formulas that help investors and traders remove the guesswork from determining an options price. The models make some assumptions, primarily that stock prices are random and that only one of the option...

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5 days ago
Going Long Volatility
December 09, 2016
Volatility

Going Long Volatility

No on can accurately predict whether the worst is over or just pausing before stocks make another dramatic move lower. The Long Straddle can be used to take advantage in either outcome. The Long Straddle is composed of a long call option and a long put option. Both options are at the closest At-The-Money-strike (ATM) of the...

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11 months ago
Of Mice and Men and Rolling Options
September 06, 2016
Concepts

Of Mice and Men and Rolling Options

As anyone who has every traded knows, the best laid plans often go awry. Before making any adjustments, the investor needs to dissect what went wrong. Does he or she still hold fast to their original forecast but has simply run out of time, or was the strategy selection itself incorrect? Remember that closing the position in...

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1 year ago
Understanding Put-Call Parity
August 29, 2016
Concepts

Understanding Put-Call Parity

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,...

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1 year ago
Pairing Option Strategies with Forecasts
August 25, 2016
Bearish Outlook

Pairing Option Strategies with Forecasts

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...

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1 year ago
When to Exercise Call Options to Collect the Dividend
August 10, 2016
Dividends

When to Exercise Call Options to Collect the Dividend

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...

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1 year ago
The Covered Strangle is both an Income and Investment Strategy
July 29, 2016
Revenue

The Covered Strangle is both an Income and Investment Strategy

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...

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1 year ago
Moving Beyond the Basics with the Covered Call Strategy
June 01, 2016
Neutral Outlook

Moving Beyond the Basics with the Covered Call Strategy

Once investors learn the basics of both buying and selling calls and puts, the next natural progression is learning how to use options in conjunction with long stock, ETF or Indices. The covered call is a widely used strategy that is appropriate for a neutral or slightly bullish forecast. It is simple in its essence, but like...

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1 year ago