Risk Management
Understand the “Rule of 16”
Steve Sosnick
Professional options traders are really good at dividing and multiplying by 16. That seems like a weird skill, but it is a crucially important one for anyone who wants to fully understand the terminology used in options markets. No matter how you utilize options, the “Rule of 16” is critical for analyzing volatility,...
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...
Trading Weekly Options on Canada Goose Holdings Inc (GOOS.TO)
Mehra Wealth Management Group
Just as a follow up to our block trade on Canada Goose Holdings Inc (GOOS) from November 14, 2019, the January 17, 2020 $46 strike call options have expired worthless, since the stock traded out-of-the money at market close. Effectively, we have captured the full option premium of $4.31/share and our cost is now reduced to...
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...
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...
Impact of the Exchange Rate on Our Investments in the United States
Martin Noël
Given our proximity to the United States and/or for purposes of geographic diversification, many investors have investments in their portfolios that are priced in U.S. dollars. As with all investments, U.S. equities carry market risk, and it is important to carefully analyze securities so as to minimize, as much as possible,...
Writing Call Options to Protect a Position
Martin Noël
As the following graph shows, shares in the Bank of Montreal (BMO) has been in correction territory since falling below the 13 and 34-day moving averages. The stock’s last rally toward $101 is similar to one near the end of November 2018, just before the stock plummeted by almost 14% in the space of a few weeks. Furthermore,...
What do Cannabis, Nelson Peltz and Hedging Have in Common?
Jason Ayres
On March 13th, Aurora Cannabis Inc. (TSX: ACB) announced that they had appointed Nelson Peltz as a Strategic Advisor to help explore potential partnerships and advise on the company’s global expansion strategy. This is a big deal given Mr. Peltz’s business history and reputation for delivering results. For more details...
Options in a Recessionary Market
Jason Ayres
Many investors are becoming increasingly concerned that a recession may be on the horizon as North American markets continue to climb higher despite global trade concerns. A recession is defined as a temporary economic decline during which trade and industrial activity is reduced. It is typically identified by a fall in Gross...
Using call options as a hedge
Martin Noël
As can be seen in the following chart, the share price of ONEX Corporation (ONEX) has been weak enough to suggest that some caution may be necessary. The Relative Strength Index (RSI), which was recently in oversold territory, is trending downward. The same is true of the stochastic oscillator (%K). Although the scope of the...
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