Concepts

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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2 years 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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2 years 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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2 years 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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2 years 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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2 years ago
Generating Consistent Income with Covered Calls
July 14, 2017
Concepts

Generating Consistent Income with Covered Calls

Tony Zhang

Generating consistent income with covered calls can be achieved when using a disciplined and methodical approach. It’s important to understand your personal preferences before searching for income opportunities on your portfolio. Choosing expirations that suits your trading frequency and strike prices that fit your risk...

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

Demystifying the Black-Scholes formula

Martin Noël

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

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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2 years 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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3 years 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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