Bearish Outlook

Profiting from the second-wave downturn
April 30, 2020
Bearish Outlook

Profiting from the second-wave downturn

Martin Noël

In a bear market, the lows of the first market downturn are often retested following a rally like the one we have just seen. This article examines how put options can be used to maximize the return on a bearish projection. As can be seen in the following chart, the unit price of the iShares S&P/TSX Capped Financials Index...

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2 months ago
Making the most of volatility in these uncertain times
March 26, 2020
Bearish Outlook

Making the most of volatility in these uncertain times

Martin Noël

In our last article we discussed how to reduce the risk associated with the time-value decay of options in a directional position. Now we will take advantage of the market meltdown to discuss the implied volatility in the price of an option, how it reflects the degree of market uncertainty over future price movements in the...

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3 months ago
Reduce the Risk Associated with Time Value Decay
March 02, 2020
Bearish Outlook

Reduce the Risk Associated with Time Value Decay

Martin Noël

Reduce the risk associated with time value decay In this article, we will examine how to reduce the risk associated with the time value decay of options in a directional position, as well as how this affects the strategy’s payoff profile. As can be seen in the following chart, the price of shares in BCE Inc. (BCE) have...

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4 months ago
Hedging with Delta
January 14, 2020
Bearish Outlook

Hedging with Delta

Martin Noël

As can be seen in the following chart, the price of shares in National Bank of Canada (NA) recently peaked at $73.22, representing an increase of 21.85% in 110 days, for an annualized rate of return of 72.50%. It is unlikely that this pace of growth can be sustained over an extended period of time. In addition, there are signs...

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6 months ago
Writing covered call options to profit from a period of consolidation
December 03, 2019
Bearish Outlook

Writing covered call options to profit from a period of consolidation

Martin Noël

As can be seen in the following graph, the price trend for shares in the Canadian National Railway Company (CNR) appears to have faltered. The stochastic oscillator indicator has just fallen below 75, much like it did in June 2019. At that time, the price of CNR stayed in a channel for many weeks. As long as the oscillator...

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7 months ago
Covered Calls: Managing Risk Exposure and Generating Value During Volatile Times
September 06, 2019
Bearish Outlook

Covered Calls: Managing Risk Exposure and Generating Value During Volatile Times

Antonio Cabeda

Key facts on covered calls This strategy consists of writing a call that is covered by an equivalent long stock position. It represents a simple way for investors to manage their short-term risk exposure, allowing them to earn premium income (i.e. the money received from writing the calls) in return for part of the stock’s...

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10 months ago
Generating Income with Credit Vertical Spreads
August 29, 2019
Bearish Outlook

Generating Income with Credit Vertical Spreads

Tony Zhang

Credit spreads are a popular strategy that is used to generate income with limited risk from a modest bullish, bearish or even neutral view on a stock or ETF. Many investors are attracted to writing higher delta options because of the higher premiums, but it is important to understand the tradeoff, which is that this will risk...

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10 months ago
Minimizing Your Risk with Vertical Debit Spreads
August 14, 2019
Bearish Outlook

Minimizing Your Risk with Vertical Debit Spreads

Tony Zhang

What are debit spreads? Placing a trade on the direction of a stock using options typically requires purchasing a call or put option. When purchasing options, the largest headwind is erosion of the extrinsic value of an option over time. This is measured by the option’s theta. For a strategy to be profitable, one must predict...

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11 months ago
Maximize Returns and Minimize Losses in a Recession

May 28, 2019
Bearish Outlook

Maximize Returns and Minimize Losses in a Recession


Jason Ayres

Canadian investors continue to watch both domestic and global economic data closely as fears of a recession loom. According to Statistics Canada in their March 1st , 2019 release “Growth in real gross domestic product (GDP) slowed to 0.1% in the fourth quarter, the slowest pace since the second quarter of 2016”   See...

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1 year ago
Strategy to profit from the tensions with China
December 18, 2018
Bearish Outlook

Strategy to profit from the tensions with China

Martin Noël

Recent events in the news have led us to analyze a stock discussed in our last article. As the following chart shows, the price of shares in Canada Goose Holdings (GOOS) has plummeted by over 20% in the turmoil surrounding the Huawei affair in which, following the arrest of Huawei’s Chief Financial Officer, China called for a...

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2 years ago
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