Making the most of a potential rebound in shares of Intact Financial Corporation
September 18, 2017
Bullish Outlook

Making the most of a potential rebound in shares of Intact Financial Corporation

Daily graph of IFC ($100.37 on Wednesday, September 13, 2017)   As you can see in the above graph, the price of shares in Intact Financial Corporation (IFC) fell $3.96 from a peak of $103.03 on September 1, 2017 and then bottomed out at $99.07 on September 12, 2017. We can also see that the RSI indicator (5)  (the...

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1 year ago
Mixed Long Condor Spread on Shares in Dollarama Inc.
August 28, 2017
Technical analysis

Mixed Long Condor Spread on Shares in Dollarama Inc.

As the following graph shows, the price of shares in Dollarama Inc. have just created a brief trough at $118.81 after having peaked at $132.34 in June 2017. Recently the stock has stayed within this range, closing at $123.80 on August 22, 2017. Over the next few weeks, $125 may act as a resistance level and $120 may be a...

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1 year 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

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 year 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

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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1 year ago
Three ways to build a butterfly spread
July 18, 2017
Neutral Outlook

Three ways to build a butterfly spread

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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2 years ago
Profiting from a Stock’s Relative Stability over a Given Period of Time
July 04, 2017
Neutral Outlook

Profiting from a Stock’s Relative Stability over a Given Period of Time

There are three situations in which options can be used to take advantage of changes in the price of an underlying stock: when prices rise, when they fall, and when they enter a relatively stable period. In this article, I will examine how to benefit from a relatively stable stock price. More specifically, we will look at an...

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2 years ago
Demystifying the Black-Scholes formula
June 27, 2017
Concepts

Demystifying the Black-Scholes formula

The Black-Scholes formula is an option valuation model developed by two academics, Fischer Black and Myron Scholes, who first described it in a 1973 article. The article appeared in the same year that the Chicago Board Options Exchange (CBOE) was founded, and the model effectively democratized the use of options. Previously,...

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2 years ago
Early Exercise of Options
May 30, 2017
Concepts

Early Exercise of Options

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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2 years ago
Call Put Parity: How to Transform Your Positions
May 17, 2017
Concepts

Call Put Parity: How to Transform Your Positions

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

Delta: Assessing Probabilities Based on the Break-even price

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 years ago