Concepts

Strike prices and GPS
March 26, 2018
Concepts

Strike prices and GPS

Richard Ho

One day I was driving home after work and I received a call from an old friend, Alex. We started talking about the kids and the wife but, eventually, we ended up talking about the markets. Alex has some knowledge of options, but there was one thing that he didn’t understand. He asked me, “How do you know which strike price...

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4 weeks ago
Use Bid/Ask Spreads to Measure Liquidity, Not Open Interest
March 22, 2018
Concepts

Use Bid/Ask Spreads to Measure Liquidity, Not Open Interest

Tony Zhang

One question we’re often asked about our trades is why we would present ideas that have low volume and open interest. The answer might surprise you: It’s because open interest and volume are not reliable indicators of liquidity. Option liquidity is primarily a function of the underlying stock’s liquidity. Here’s why:...

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4 weeks ago
Evolution, Revolution or Convolution: The Changing Landscape of Exchange Market Structure in North America
March 22, 2018
Concepts

Evolution, Revolution or Convolution: The Changing Landscape of Exchange Market Structure in North America

Alan Grigoletto

Bill Gates once said, “The first rule of any technology used in a business is that automation applied to an efficient operation will magnify the efficiency. The second is that automation applied to an inefficient operation will magnify the inefficiency.” There is some argument as to which nation created the first exchange....

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4 weeks ago
Option Myths and Misconceptions
March 21, 2018
Concepts

Option Myths and Misconceptions

Jason Ayres

For those readers who are just beginning their options education journey, I am sure you have been presented with many opinions from other investors and investment professionals alike, regarding the value and risk that options bring to a portfolio. Unfortunately, many myths and misconceptions have arisen due to a lack of...

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4 weeks ago
Secret to Consistent Income with Options
March 19, 2018
Concepts

Secret to Consistent Income with Options

Tony Zhang

The success to trading any strategy on stocks or options is consistency. This is true for both researching the underlying stock or ETF, and choosing the right trading strategy. Having a consistent approach such as technical or fundamental analysis leads to reliable research that doesn’t conflict. The same applies to...

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1 month ago
Understanding Credit Spreads and How They Differ from Debit Spreads
March 16, 2018
Concepts

Understanding Credit Spreads and How They Differ from Debit Spreads

Alan Grigoletto

In a previous posting, “Bull Call and Bear Put Spreads, Pairing Option Strategies with Forecasts” we learned how to implement a debit spread for both calls and puts. This week we will examine another form of vertical spreads: credit spreads and how they can be used. Recall that debit spreads are a limited risk transaction,...

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1 month ago
5 Potential Canadian Market Surprises for 2018
January 04, 2018
Concepts

5 Potential Canadian Market Surprises for 2018

Patrick Ceresna

What better way to wrap up the 2017 year than with a market forecast.  As a trader, I always look at a forecast as establishing a baseline from which to build investment themes for the upcoming year.  The obstacle however, lies in that there is substantial herding in economic forecasting and rarely does an analyst stick their...

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4 months ago
Understanding Options Vega
October 19, 2017
Concepts

Understanding Options Vega

Alan Grigoletto

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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6 months ago
Unintended Consequences of Systematic Covered Call Writing
September 07, 2017
Concepts

Unintended Consequences of Systematic Covered Call Writing

Patrick Ceresna

Enhancing income and returns through covered call writing has become one of the most common strategies being adopted by investors.  Arguably selling calls against shares and ETFs is considered a conservative strategy that almost any Canadian retail investor can access, in and out of their registered accounts. While many...

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7 months 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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9 months ago