As we mentioned in earlier articles, an option’s intrinsic value is the premium value related to the difference between the stock’s price and the strike on the option. VIoa = max(S – X; 0) VIov = max(X – S; 0) In the previous article, we saw that the evolution of interest rates had an impact on the actual value...
As the name suggests, a synthetic stock position is equivalent to a long stock position. Similar risk reward parameters but with some structural advantages for investors who want to utilize the strategy within registered accounts. In this column, we will focus on Canadian bank stocks. What else is new! Like it or not...
The OPEC agreement to cut production back in late 2016 ushered in a further wave of enthusiasm that pushed oil and the energy sector higher, with the belief that the oil bear market was over and long gone. Coupled with the Trump reflation trade enthusiasm, we have witnessed a very strong finish in 2016. The price of WTI oil...
The intrinsic value of an option is the value of its premium related to changes in the underlying stock’s price compared to the option’s strike price. So the intrinsic value of a call option (IVco) is the difference between the market price of the underlying (U) and the strike (X) of the call option, while the intrinsic...
You have done your homework on a stock, analyzing its fundamental and technical data, and you are bullish about its potential over the next few months. You decide to buy call options to make the most of your forecast. Over the next few weeks, the stock climbs slightly, and you see the value of your call options declining...
Before selecting an expiration date on an option contract, it is important to review some basic concepts of option trading. Options are perishable Absolutely! Remember that the premium of an option is defined as a tangible value, determined by the relationship between the strike price and the price of the underlying stock (also...
As you can see in the following graph, shares in BCE Inc. (BCE) have been trading in a range of $57 to $59 since mid-November, with points of momentum suggesting a slightly bullish trend. Daily Graph of BCE ($58.19 on Friday, January 13, 2017) We can also see that the stochastic oscillator (the lower indicator) has begun...
Writing covered calls as a hedge against a slight drop in the shares of Sun Life Financial Inc. As can be seen in the following weekly chart, shares in Sun Life Financial Inc. (SLF) have broken out of a range of $35 to $45 that has characterized trading since the beginning of 2014. In principle, $45 should now be a support...
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