Effects of stock price on the time spread

462 views

Published on

Options and Binary Options Knowledge & Tips by Pierre A Pienaar Effects of Stock Price on the Time Spread
Binary Options - How can anyone predict market movements over short or long time frames?

Published in: Economy & Finance
  • Be the first to comment

  • Be the first to like this

Effects of stock price on the time spread

  1. 1. Options and Binary Options Knowledge & Tips by Pierre A PienaarOptionsDoc, Todd, and Daves BIG Video:Profiting in Todays MarketTodds Free Video:New Trade This AM, and Update---------------------Effects of Stock Price on the Time SpreadThe price of a time spread fluctuates with movements in stock price. A time spread is atits widest when the stock price and the strike price of the spread are identical or at-the-money.As the stock moves away from the strike in either direction, the value of the time spreaddecreases. As the stock moves in either direction from the spread’s strike, the closermonth will experience a quicker price change due to the front month’s higher gamma.Gamma shows the rate of change of an option’s Delta in relation to movements in theprice of the stock. It is the Delta of the Delta! Gamma is highest in at-the-money options
  2. 2. and in the front month. It decreases as you move away from the at-the-money strikeand as you move out over time.In the same way that a time spread loses value as the stock price moves away from thestrike price, the opposite holds true. As the stock price moves closer to the strike price,the value of the time spread increases.Examine the June / July 65 call time spread. With the stock priced at $65, directly at thestrike, the spread is at its widest point or highest value. As the stock climbs from $65and pushes toward $70, the June / July 65 spread loses value.At the same time the June / July 65 loses value, the June / July 70 spread gains in valueas the stock approaches the 70 strike. When the stock reaches $67.50 the pointequidistant (mid-point) between the two strikes, both spreads will trade atapproximately the same value.Look at Chart 2. Notice that as the stock increases from $57.50, both the June / July 65and June / July 70 spreads increase in value. Their increases continue until they reachtheir strike price at which time they both begin to lose value.This demonstrates that the spread with the strike price that the stock is moving towardwill increase in value. Meanwhile, the spread with the strike price that the stock ismoving away from will simultaneously lose value.Chart 2 follows the effect of the movement of the stock price across the two timespreads.Source: Options University
  3. 3. Binary OptionsHow can anyone predict market movements over short or longtime frames?Analysis of the financial markets can assist traders as make that important decisionbetween up and down. By conducting their own analysis, or using reliable trading signalsfrom professional analysts, the beginner trader should be aiming to trade in-the-moneyaround 70% to 80% of the time. Technical analysis is one of the two key methods usedby financial analysts to evaluate the markets and predict price action in the future. Thismethod of analysis involves the use of graphs, charts and statistics, all of which enableanalysts to spot patterns. It is these mathematical and statistical patterns which canindicate future activity.This brings the expert traders to the primary principle on which technical analysis stands:history tends to repeat itself. The sentiment is as true in market activity as in general life.The repetitive nature of price movements is generally attributed to the fact that marketparticipants react consistently to similar market stimuli over time. Furthermore the veryprice of any underlying asset follows trends. Once a trend has been established, futuremovement is more likely to move in the same direction than against it.Binary Options trading is a great way to trade on a wide variety of financial assets. Oncea new trader has learnt the basics and formed a basic strategy he will soon be able tomake high profits from trading the financial markets using binary contracts, even if hehas never traded before.Basically newcomers need two things when they’re beginners and want to be successfulin trading Binary Options:They definitely need a good strategy and they need to find the right Binary Optionsbroker which is always the hardest part of the challenging quest to high profits.Source: Banc De BinaryNewsBanc De Binary gets CySEC license
  4. 4. * Aims to reach 500,000 accounts by end-2013 *Banc De Binary, the first binary options firm to secure a trading license by the CyprusSecurities and Exchange Commission, has set an ambitious target to double its currentclient base to 500,000 accounts by the end of 2013.Oren Laurent, chairman of the online investment house that has operations in fourcountries, said Banc De Binary currently employs 230 people and plans to open an office in Nicosia to complement its Limassol operations. Trading on Banc De Binary includes 90 assets in commodities, currencies, indices and stocks, which Laurent believes will very soon outpace the online forex trading companies. “Half of the Fortune 500 companies were established in times of crisis,” he said, addingthat plans for Banc De Binary include expansion to Asia and the Australian markets.Laurent explained that in the case of binary options, the profit and loss markers areensured in advance, but that regulation was still slow kin some countries, which is whyhe is pulling out of the U.S. and will use his CySEC license to secure a pan-Europeanpassport.
  5. 5. Taxation, too, is still a bit fuzzy, but Banc De Binary plans to stay here until new ruleskick in.Meanwhile, the five different types of accounts, starting from the basic 500-dollaraccount and going up to the 50,000+ VIP account, are generating a revenue stream ofabout 100 mln euros, which is also contributing to the Cyprus economy, Laurent said.Source: Banc De Binary Trade smart, not with Greed Pierre A PienaarPierre A Pienaar retired in 2011 from business.I would like to share my passion, my interests, knowledge & experiencesin Forex, Options, Gold Investments, Futures, Stocks, Binary Options, Economics,Stamp Collection, Sports, Gardening, Reading, Photography, and PoliticsOptions and Binary Options Trading Resources Index Options System Index Time Trading Machine Options Trading Education - Options University Options University offers options trading education and live options classes online ...“Industry Leading Education and Training Focused on the Needs of Todays Trading Profitable Options Strategies Report Your Global Leader in Binary Option Trading
  6. 6. iOption Group and Faunus Analytics LLC announce a joint project to develop unique trading signals system for binary option trading. Faunus Covered Calls Extreme Trading System Naked Puts Extreme Options Trading System Your Binary Income Engine Sales VideoOptions Daily Paychecks Options Day Trading SystemVortex Stock Options Trading System V2.0 - Parabolic Trend and Pattern Collapse System The Biotech Trader Handbook (2nd Edition): A Fast, ... by T. Ayers Pelz Learn to Trade Options Well: Subscribe - OptionsTradingAuthority.com Newsletter Your Gateway to Global Options on Futures Markets Long Leaf Xpress is well suited for the trader who wants quick execution on the electronic markets. Traders have the ability to trade futures and options from a price chart or an order ticket. Long Leaf Xpress also offers option chains, Depth of Market for futures and options plus streaming real-time quotes and charts. Supported Instruments: Futures, Options on Futures. If you wish to have preferential treatment with your Futures Trading Account, please contact Tony Klancic and refer to this report: Resources For The Independent Trader____________________Resources for the Trader:TradersVideoPlaybook Signup SpecialUltimate Forex Trading Business & Investing Book Market Timing Indicators +Platform Store Predictions for FreeAutomated Trading Systems Today’s Top 50 Stocks list Today’s Top Preforming- A Turn-key, All-inclusive ETFsSolution for DevelopersTop 10 Penny Stocks Today’s Top Preforming Free Stock Trend Analysis Forex Pairs
  7. 7. "Its Hands-Down The Think Global, Grow Rich: 7 6 Successful Trader ThingsEasiest Money You Can Principles for Building a In CommonMake From Wall Street" Global Portfolio Carl DelfeldFollow meXING Pinterest FacebookViadeo Naymz TumblerWeibo LinkedinSubstantial risk of lossThere is a substantial risk of loss in futures and forex trading. You shouldtherefore carefully consider whether such trading is suitable for you in light ofyour financial condition. You should read, understand, and consider the RiskDisclosure Statement that is provided by your broker before you considertrading.Online trading is risky. The risk of loss in online trading of stocks, options, andforeign equities is substantial.

×