option market details with option greeks
reference from zerodha varsity
details about option market and basic knowledge of option market
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option market trading strategy
share market trading with options
buying and selling of options based upon strategy
derivative market trading strategy
how to trade in option market with different strategy
learn option market trading strategy with reference from NSE
making profit by trading in share market with different method and strategy
The document discusses bull put spread and bear call spread strategies. A bull put spread involves selling a put option and buying a further out-of-the-money put. This strategy profits if the underlying asset stays above the higher strike price or rises. A bear call spread involves selling an in-the-money call and buying a further out-of-the-money call. This strategy profits if the underlying stays below the higher strike price or falls. The document also provides an example of each strategy, including the net premium, break-even price, and potential payoffs.
The document discusses various option strategies including long call, long put, short call, synthetic long call, and short put.
A long call strategy involves buying call options and profits if the underlying stock or index price rises above the strike price plus premium paid. A long put strategy involves buying put options and profits if the price falls below the strike price minus premium paid.
A short call strategy involves selling call options and profits if the price remains below or at the strike price, collecting premium as maximum profit. A synthetic long call strategy involves buying stock and buying protective put options to limit downside risk while retaining upside potential.
A short put strategy involves selling put options and profits as long as the underlying price remains above
The document provides information on various market neutral investment strategies:
- Market neutral refers to strategies that aim to profit from both increases and decreases in stock prices through long and short positions.
- Common market neutral strategies include straddles, strangles, ratio spreads, and butterfly spreads. Straddles involve long calls and puts at the same strike price. Strangles use different strike prices.
- Ratio spreads and butterfly spreads use a combination of buying and selling options at different strike prices to limit risk and maximize potential profit within a price range. The maximum profit is generally the difference between strike prices plus any premiums received.
The document discusses various options trading strategies including bull call spread, bear put spread, straddle, strangle, covered call, protective put, and calendar spread. For each strategy, it provides details on when to use it, the associated risks and rewards, and break-even points. Worked examples with numerical values are given to illustrate how to implement the strategies and analyze their potential payoffs.
The document describes two option strategies: a long combo and a protective call/synthetic long put.
A long combo is a bullish strategy that involves selling an out-of-the-money put and buying an out-of-the-money call on the same stock. This provides upside exposure similar to owning the stock but at a lower cost. Profits are made if the stock rises above the break-even point.
A protective call/synthetic long put involves shorting a stock and buying a call option to hedge against downside risk. If the stock falls, profits are made on the short position. The long call limits losses if the stock rises unexpectedly. This strategy hedges upside movement in the
The document discusses various options trading strategies, including:
1) Buying call options to profit from an expected rise in the market. This strategy has unlimited upside potential but limited downside risk of the premium paid.
2) Buying put options to profit from an expected fall in the market. This also has unlimited upside potential and limited downside risk of the premium.
3) Holding stock and selling covered calls to generate income from the stock holding when a neutral market is expected. This caps upside potential in exchange for the option premium received.
The document explains the mechanics and risk-reward profiles of these and other options strategies through the use of diagrams and payoff tables.
The document discusses various types of options strategies that can be used in the stock market. It defines call and put options and provides examples. It also explains covered calls, bull spreads, bear spreads, butterfly spreads, and calendar spreads as options strategies. Bull spreads profit if the underlying stock rises, while bear spreads profit if the stock falls. Butterfly spreads seek limited profit from little price movement. Calendar spreads involve options of the same stock but different expiration months, aiming to profit from time decay of nearer dated options.
option market trading strategy
share market trading with options
buying and selling of options based upon strategy
derivative market trading strategy
how to trade in option market with different strategy
learn option market trading strategy with reference from NSE
making profit by trading in share market with different method and strategy
The document discusses bull put spread and bear call spread strategies. A bull put spread involves selling a put option and buying a further out-of-the-money put. This strategy profits if the underlying asset stays above the higher strike price or rises. A bear call spread involves selling an in-the-money call and buying a further out-of-the-money call. This strategy profits if the underlying stays below the higher strike price or falls. The document also provides an example of each strategy, including the net premium, break-even price, and potential payoffs.
The document discusses various option strategies including long call, long put, short call, synthetic long call, and short put.
A long call strategy involves buying call options and profits if the underlying stock or index price rises above the strike price plus premium paid. A long put strategy involves buying put options and profits if the price falls below the strike price minus premium paid.
A short call strategy involves selling call options and profits if the price remains below or at the strike price, collecting premium as maximum profit. A synthetic long call strategy involves buying stock and buying protective put options to limit downside risk while retaining upside potential.
A short put strategy involves selling put options and profits as long as the underlying price remains above
The document provides information on various market neutral investment strategies:
- Market neutral refers to strategies that aim to profit from both increases and decreases in stock prices through long and short positions.
- Common market neutral strategies include straddles, strangles, ratio spreads, and butterfly spreads. Straddles involve long calls and puts at the same strike price. Strangles use different strike prices.
- Ratio spreads and butterfly spreads use a combination of buying and selling options at different strike prices to limit risk and maximize potential profit within a price range. The maximum profit is generally the difference between strike prices plus any premiums received.
The document discusses various options trading strategies including bull call spread, bear put spread, straddle, strangle, covered call, protective put, and calendar spread. For each strategy, it provides details on when to use it, the associated risks and rewards, and break-even points. Worked examples with numerical values are given to illustrate how to implement the strategies and analyze their potential payoffs.
The document describes two option strategies: a long combo and a protective call/synthetic long put.
A long combo is a bullish strategy that involves selling an out-of-the-money put and buying an out-of-the-money call on the same stock. This provides upside exposure similar to owning the stock but at a lower cost. Profits are made if the stock rises above the break-even point.
A protective call/synthetic long put involves shorting a stock and buying a call option to hedge against downside risk. If the stock falls, profits are made on the short position. The long call limits losses if the stock rises unexpectedly. This strategy hedges upside movement in the
The document discusses various options trading strategies, including:
1) Buying call options to profit from an expected rise in the market. This strategy has unlimited upside potential but limited downside risk of the premium paid.
2) Buying put options to profit from an expected fall in the market. This also has unlimited upside potential and limited downside risk of the premium.
3) Holding stock and selling covered calls to generate income from the stock holding when a neutral market is expected. This caps upside potential in exchange for the option premium received.
The document explains the mechanics and risk-reward profiles of these and other options strategies through the use of diagrams and payoff tables.
The document discusses various types of options strategies that can be used in the stock market. It defines call and put options and provides examples. It also explains covered calls, bull spreads, bear spreads, butterfly spreads, and calendar spreads as options strategies. Bull spreads profit if the underlying stock rises, while bear spreads profit if the stock falls. Butterfly spreads seek limited profit from little price movement. Calendar spreads involve options of the same stock but different expiration months, aiming to profit from time decay of nearer dated options.
This document discusses various options trading strategies, including:
1. Long call - buyer is bullish on the underlying asset and pays a premium for the right to buy it at a set price.
2. Short call - writer is bearish and collects premium but has obligation to sell the asset if exercised.
3. Covered call - involves buying the asset and writing a call to generate income but limits upside.
4. Long put - buyer is bearish and pays premium for right to sell the asset at a set price.
5. Short put - writer is bullish and collects premium but has obligation to buy the asset if exercised.
It provides details on the risk and reward
This document provides an overview of various bullish, neutral, and bearish options trading strategies. It begins with a table of contents listing 27 bullish strategies, 25 neutral strategies, and 9 bearish strategies. It then provides a brief introduction to options, defining call options, put options, and describing option duration and moneyness. The document proceeds to explain 15 specific strategies in more detail, including long call, synthetic long call, short put, covered call, long combo, and others. Each strategy section defines the strategy, risks, rewards, construction, and provides an example to illustrate how it works.
http://www.options-trading-education.com/24043/straddle-options/
Straddle Options
When an options trader is not sure which way prices will go in a volatile market he or she often uses straddle options. Straddle options both long and short let a trader stake out potentially profitable positions for both rising and falling markets. Which route a trader takes in using straddle options will depend on whether he wants to buy or sell options contracts.
Going Long
A long straddle is buying both a call and a put on the same stock with the same expiration date. In a long straddle options strategy the worst a trader can do is lose the cost of the premiums paid for the call and the put if the stock does not change price. These straddle options have potentially unlimited potential if the stock price changes significantly, up or down.
Long Straddle Calls
If the stock price goes up the trader exercises the call option, sells the stock at the spot price and buys at the strike price. The profit is the price of 100 shares per contract at the spot price minus the strike price, minus the cost of premiums on both put and call options.
Long Straddle Puts
If the stock goes down in price the trader exercises the put option and sells the stock at the strike price and buys at the new, lower market price, the spot price. The profit will be the price of 100 shares per contract at the strike price minus the spot price minus the premium cost of both put and call options.
This strategy is useful in a volatile and unpredictable market. It carries twice the overhead of a call or put trade. But, the trader cuts down on the risk of missing out on an unexpected market move by covering both up and down eventualities. The only time when a trader loses with a long straddle is when the stock price does not change and then he is only out the cost of two options contracts.
Going Short
A short straddle strategy is selling both a put and a call on the same stock with the same options expiration dates. If the stock does not go up or down the options trader gains two premiums, one for the call and one for the put. Straddle options like these can be cash cows for a trader who has done his homework and only sells contracts on stocks that have very little likelihood of going up or down.
Volatile Markets and Big Losses
Whereas a long straddle is ideal for a volatile market a short straddle should only be used in a quiet market. As with all selling of options contracts the losses can be enormous if a stock price changes greatly. Which is why selling options contracts is so commonly limited to traders with very deep pockets.
Volatile Markets and Big Gains
Volatile markets bring us back to the long straddle. This is the ideal strategy for a market that is crazy in its volatility.
The document discusses various derivative strategies and their risk-reward profiles. It defines derivatives and options, and identifies the main types of option contracts. The rest of the document outlines bullish, bearish, and neutral option strategies, detailing the maximum risk and reward for each. These include strategies like bull call spreads, covered calls, collars, bear put spreads, and more complex strategies involving butterflies and condors. Overall, the document provides an overview of multiple derivative trading strategies and how their risk and profit potentials are determined.
The STRADDLE is a trading strategy that involves the use of options. This strategy calls for taking a neutral stand on the market. And thus, suggests buying or selling, call and put options of the exact same strike price, with the same expiry date for the same underlying security.
https://efinancemanagement.com/derivatives/straddle-2
The document provides an overview of the history and basics of options trading. Some key points:
- Options have been traded since ancient Greece but modern options markets developed in the 19th century in the US. Major developments include the creation of the CBOE in 1973 and the modeling of option pricing using the Black-Scholes model.
- The basics covered include defining call and put options, long vs. short positions, premiums, payoffs, assignment, and the factors that determine an option's price such as the underlying asset's price, strike price, time to expiration, volatility, and interest rates.
- Key concepts explained include intrinsic vs. time value, moneyness, breakeven
The document discusses options contracts, including the key parties (buyer and seller), types of options (calls and puts), how option value is determined, and examples of calculating profit and loss for option buyers and sellers. It also defines important option terms and describes the main types of options - stock options, index options, currency options, and futures options.
The document discusses various option strategies including long calls, puts, straddles, strangles and spreads. It provides details on the construction and profit/loss potential of each strategy. In a bull call spread, the trader buys an ITM call and sells an OTM call. Maximum profit is limited while loss is limited to the net premium paid. A bear put spread involves buying an OTM put and selling an ITM put, with maximum loss limited to the difference in strike prices less net premium received.
This document discusses options and their key concepts. It defines options as contracts that give the buyer the right, but not the obligation, to buy or sell an asset at a predetermined price. The main types are calls, which are options to buy, and puts, which are options to sell. Key terms discussed include premiums, strike prices, expiration dates, and intrinsic and time value. The uses of options for hedging and speculation are also summarized. Overall, the document provides a high-level overview of options, their characteristics and applications.
1. An option is a contract that gives the buyer the right, but not the obligation, to buy or sell an underlying asset at a predetermined price on or before a specified date.
2. Options have both buyers and writers, with buyers paying premiums for the rights conveyed and writers receiving premiums in exchange for taking on obligations.
3. The key factors that determine an option's premium are the underlying asset's price, the strike price, time to expiration, and expected volatility.
1) Options have intrinsic value, which is the difference between the stock price and exercise price if in the money, and time value, which is any additional premium above intrinsic value.
2) Key variables that affect option pricing are the stock price, exercise price, time to expiration, volatility, interest rates, and dividends. Higher stock prices and volatility increase call values while lowering put values.
3) Put-call parity states that the call price plus the present value of the strike price must equal the put price plus the stock price.
This document provides an overview of options, including definitions, concepts, pricing models, risks, and strategies. It defines options, outlines key terms like premium, strike price, and expiration. It explains pricing models including intrinsic value and factors that affect option prices like underlying price, volatility, and time to expiration. Put-call parity and how options can be used to synthesize other positions are also summarized.
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The document provides an overview of various option trading strategies categorized by their risk-reward profile as low, neutral, or high risk. For each strategy, it outlines the maximum potential loss and gain. Some key strategies discussed include long calls, protective puts, covered calls, bull spreads, bear spreads, straddles, strangles, butterflies, condors, and more. It also includes an option pricing worksheet and inputs for creating option strategies.
Advance Option Trading Strategy Mentorship Program - For More Details Visit - https://www.ptaindia.com/advance-option-trading-strategies-mentorship-program/
Or Call +91 9261211003
Advance Option Trading Strategy Mentorship Program - For More Details Visit - https://www.ptaindia.com/advance-option-trading-strategies-mentorship-program/
Or Call +91 9261211003
Advance Option Trading Strategy Mentorship Program - For More Details Visit - https://www.ptaindia.com/advance-option-trading-strategies-mentorship-program/
Or Call +91 9261211003
The document provides an overview of futures and options trading in India. It defines key terms like futures contracts, options, calls, puts, strike price, expiration date, premium etc. It explains how futures and options work, including the roles of buyers and sellers. It also outlines some advantages of futures trading like high leverage, ability to profit in rising and falling markets, and lower transaction costs compared to other investments. Finally, it provides a table showing the growth of index futures, stock futures, index options and stock options trading in India from 2000-2004 in terms of number of contracts, turnover and average daily turnover.
This document provides an overview of options contracts, including calls and puts. It defines key terms like strike price, expiration date, premium price, and describes the rights of buyers and sellers. The document also explains the components of an option's price, including intrinsic value and time value. Overall, the document serves as an introduction to basic option concepts.
The document provides an introduction to option Greeks, which are sensitivities of an option's price to different variables. It defines several Greeks including:
- Delta - Sensitivity to changes in the underlying asset price
- Gamma - Sensitivity of delta to changes in the underlying price
- Theta - Sensitivity to the passage of time until expiration
- Vega - Sensitivity to changes in volatility
- Rho - Sensitivity to changes in interest rates
It provides examples of how to calculate these Greeks and explains their characteristics, such as gamma being highest for at-the-money options and theta increasing as expiration approaches. The document is an educational guide for traders to understand the risks associated with different option positions based on movements in the variables that
This document discusses various options trading strategies, including:
1. Long call - buyer is bullish on the underlying asset and pays a premium for the right to buy it at a set price.
2. Short call - writer is bearish and collects premium but has obligation to sell the asset if exercised.
3. Covered call - involves buying the asset and writing a call to generate income but limits upside.
4. Long put - buyer is bearish and pays premium for right to sell the asset at a set price.
5. Short put - writer is bullish and collects premium but has obligation to buy the asset if exercised.
It provides details on the risk and reward
This document provides an overview of various bullish, neutral, and bearish options trading strategies. It begins with a table of contents listing 27 bullish strategies, 25 neutral strategies, and 9 bearish strategies. It then provides a brief introduction to options, defining call options, put options, and describing option duration and moneyness. The document proceeds to explain 15 specific strategies in more detail, including long call, synthetic long call, short put, covered call, long combo, and others. Each strategy section defines the strategy, risks, rewards, construction, and provides an example to illustrate how it works.
http://www.options-trading-education.com/24043/straddle-options/
Straddle Options
When an options trader is not sure which way prices will go in a volatile market he or she often uses straddle options. Straddle options both long and short let a trader stake out potentially profitable positions for both rising and falling markets. Which route a trader takes in using straddle options will depend on whether he wants to buy or sell options contracts.
Going Long
A long straddle is buying both a call and a put on the same stock with the same expiration date. In a long straddle options strategy the worst a trader can do is lose the cost of the premiums paid for the call and the put if the stock does not change price. These straddle options have potentially unlimited potential if the stock price changes significantly, up or down.
Long Straddle Calls
If the stock price goes up the trader exercises the call option, sells the stock at the spot price and buys at the strike price. The profit is the price of 100 shares per contract at the spot price minus the strike price, minus the cost of premiums on both put and call options.
Long Straddle Puts
If the stock goes down in price the trader exercises the put option and sells the stock at the strike price and buys at the new, lower market price, the spot price. The profit will be the price of 100 shares per contract at the strike price minus the spot price minus the premium cost of both put and call options.
This strategy is useful in a volatile and unpredictable market. It carries twice the overhead of a call or put trade. But, the trader cuts down on the risk of missing out on an unexpected market move by covering both up and down eventualities. The only time when a trader loses with a long straddle is when the stock price does not change and then he is only out the cost of two options contracts.
Going Short
A short straddle strategy is selling both a put and a call on the same stock with the same options expiration dates. If the stock does not go up or down the options trader gains two premiums, one for the call and one for the put. Straddle options like these can be cash cows for a trader who has done his homework and only sells contracts on stocks that have very little likelihood of going up or down.
Volatile Markets and Big Losses
Whereas a long straddle is ideal for a volatile market a short straddle should only be used in a quiet market. As with all selling of options contracts the losses can be enormous if a stock price changes greatly. Which is why selling options contracts is so commonly limited to traders with very deep pockets.
Volatile Markets and Big Gains
Volatile markets bring us back to the long straddle. This is the ideal strategy for a market that is crazy in its volatility.
The document discusses various derivative strategies and their risk-reward profiles. It defines derivatives and options, and identifies the main types of option contracts. The rest of the document outlines bullish, bearish, and neutral option strategies, detailing the maximum risk and reward for each. These include strategies like bull call spreads, covered calls, collars, bear put spreads, and more complex strategies involving butterflies and condors. Overall, the document provides an overview of multiple derivative trading strategies and how their risk and profit potentials are determined.
The STRADDLE is a trading strategy that involves the use of options. This strategy calls for taking a neutral stand on the market. And thus, suggests buying or selling, call and put options of the exact same strike price, with the same expiry date for the same underlying security.
https://efinancemanagement.com/derivatives/straddle-2
The document provides an overview of the history and basics of options trading. Some key points:
- Options have been traded since ancient Greece but modern options markets developed in the 19th century in the US. Major developments include the creation of the CBOE in 1973 and the modeling of option pricing using the Black-Scholes model.
- The basics covered include defining call and put options, long vs. short positions, premiums, payoffs, assignment, and the factors that determine an option's price such as the underlying asset's price, strike price, time to expiration, volatility, and interest rates.
- Key concepts explained include intrinsic vs. time value, moneyness, breakeven
The document discusses options contracts, including the key parties (buyer and seller), types of options (calls and puts), how option value is determined, and examples of calculating profit and loss for option buyers and sellers. It also defines important option terms and describes the main types of options - stock options, index options, currency options, and futures options.
The document discusses various option strategies including long calls, puts, straddles, strangles and spreads. It provides details on the construction and profit/loss potential of each strategy. In a bull call spread, the trader buys an ITM call and sells an OTM call. Maximum profit is limited while loss is limited to the net premium paid. A bear put spread involves buying an OTM put and selling an ITM put, with maximum loss limited to the difference in strike prices less net premium received.
This document discusses options and their key concepts. It defines options as contracts that give the buyer the right, but not the obligation, to buy or sell an asset at a predetermined price. The main types are calls, which are options to buy, and puts, which are options to sell. Key terms discussed include premiums, strike prices, expiration dates, and intrinsic and time value. The uses of options for hedging and speculation are also summarized. Overall, the document provides a high-level overview of options, their characteristics and applications.
1. An option is a contract that gives the buyer the right, but not the obligation, to buy or sell an underlying asset at a predetermined price on or before a specified date.
2. Options have both buyers and writers, with buyers paying premiums for the rights conveyed and writers receiving premiums in exchange for taking on obligations.
3. The key factors that determine an option's premium are the underlying asset's price, the strike price, time to expiration, and expected volatility.
1) Options have intrinsic value, which is the difference between the stock price and exercise price if in the money, and time value, which is any additional premium above intrinsic value.
2) Key variables that affect option pricing are the stock price, exercise price, time to expiration, volatility, interest rates, and dividends. Higher stock prices and volatility increase call values while lowering put values.
3) Put-call parity states that the call price plus the present value of the strike price must equal the put price plus the stock price.
This document provides an overview of options, including definitions, concepts, pricing models, risks, and strategies. It defines options, outlines key terms like premium, strike price, and expiration. It explains pricing models including intrinsic value and factors that affect option prices like underlying price, volatility, and time to expiration. Put-call parity and how options can be used to synthesize other positions are also summarized.
Advance Option Trading Strategy Mentorship Program - For More Details Visit - https://www.ptaindia.com/advance-option-trading-strategies-mentorship-program/
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The document provides an overview of various option trading strategies categorized by their risk-reward profile as low, neutral, or high risk. For each strategy, it outlines the maximum potential loss and gain. Some key strategies discussed include long calls, protective puts, covered calls, bull spreads, bear spreads, straddles, strangles, butterflies, condors, and more. It also includes an option pricing worksheet and inputs for creating option strategies.
Advance Option Trading Strategy Mentorship Program - For More Details Visit - https://www.ptaindia.com/advance-option-trading-strategies-mentorship-program/
Or Call +91 9261211003
Advance Option Trading Strategy Mentorship Program - For More Details Visit - https://www.ptaindia.com/advance-option-trading-strategies-mentorship-program/
Or Call +91 9261211003
Advance Option Trading Strategy Mentorship Program - For More Details Visit - https://www.ptaindia.com/advance-option-trading-strategies-mentorship-program/
Or Call +91 9261211003
The document provides an overview of futures and options trading in India. It defines key terms like futures contracts, options, calls, puts, strike price, expiration date, premium etc. It explains how futures and options work, including the roles of buyers and sellers. It also outlines some advantages of futures trading like high leverage, ability to profit in rising and falling markets, and lower transaction costs compared to other investments. Finally, it provides a table showing the growth of index futures, stock futures, index options and stock options trading in India from 2000-2004 in terms of number of contracts, turnover and average daily turnover.
This document provides an overview of options contracts, including calls and puts. It defines key terms like strike price, expiration date, premium price, and describes the rights of buyers and sellers. The document also explains the components of an option's price, including intrinsic value and time value. Overall, the document serves as an introduction to basic option concepts.
The document provides an introduction to option Greeks, which are sensitivities of an option's price to different variables. It defines several Greeks including:
- Delta - Sensitivity to changes in the underlying asset price
- Gamma - Sensitivity of delta to changes in the underlying price
- Theta - Sensitivity to the passage of time until expiration
- Vega - Sensitivity to changes in volatility
- Rho - Sensitivity to changes in interest rates
It provides examples of how to calculate these Greeks and explains their characteristics, such as gamma being highest for at-the-money options and theta increasing as expiration approaches. The document is an educational guide for traders to understand the risks associated with different option positions based on movements in the variables that
This strategy involves buying one in-the-money (ITM) call, selling one ITM call with a lower strike, selling one out-of-the-money (OTM) call with a higher middle strike, and buying one OTM call with an even higher strike. The maximum loss is limited to the net debit paid to open the position. The maximum gain occurs if the underlying asset closes between the two short call strikes. There are two break-even points: one where the asset closes above the lower long call strike plus premiums paid, and one where it closes below the higher long call strike minus premiums paid.
The document discusses strategic foreign exchange risk management. It defines strategic FX risk as transactional and profit/loss translation exposures with time horizons up to 10 years. Due to elasticities, options are best suited to hedge strategic risk. The behavior of strategic exposures can vary based on volumes and pricing. Hedging techniques should match the risk characteristics of the exposure using options' Greeks (delta, gamma, vega, theta) which measure sensitivity to spot rates, volatility, and time decay. Delta can hedge current exposure, gamma hedges elasticities, and vega hedges volatility risk.
Derivatives are financial instruments whose value is dependent on an underlying asset such as a commodity, currency, stock, bond, or market index. Common derivative products include forwards, futures, options, and swaps. Forwards involve a customized over-the-counter agreement to buy or sell an asset in the future at an agreed upon price, while futures trade on an exchange with standardized contracts. Options provide the right but not the obligation to buy or sell the underlying asset at a predetermined strike price by a specified date. The value of derivatives is influenced by factors like the price and volatility of the underlying asset.
The document discusses the determinants of option price and the Greeks - Delta, Gamma, Vega, Theta, and Rho. It explains that these Greeks measure how sensitive an option's price is to changes in the underlying asset's price, volatility, time to expiration, and interest rates. Specifically, Delta measures change in option price for a $1 change in the underlying, Gamma measures rate of change of Delta, Vega measures change for a 1% volatility change, Theta measures daily time decay, and Rho measures change for a 1% interest rate change. Understanding how the Greeks change is important for risk management and making informed options trading decisions.
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Advance Option Trading Strategy Mentorship Program - For More Details Visit - https://www.ptaindia.com/advance-option-trading-strategies-mentorship-program/
Or Call +91 9261211003
This document discusses the Black-Scholes formula and hedging strategies for options. It explains that dynamic hedging under the Black-Scholes model replicates the payoff of an option using a portfolio of the underlying stock and riskless bonds. The weights of this hedging portfolio determine the option's value. Rebalancing is required to maintain a perfect hedge as the Black-Scholes parameters change over time. Transaction costs are not considered in the basic Black-Scholes framework.
New Understanding Strategy options Greekspoojalate59
Strategy Greeks are the measures of the sensitivity of the option price to various factors, such as the price of the underlying asset, the time to expiration, the volatility of the underlying asset, the interest rate, etc. The most common strategy Greeks are delta, gamma, theta, vega and rho. Here is how they affect the short call strategy:
The document defines derivatives and describes the key characteristics of different types of derivatives like forwards, futures, options, and swaps. It also discusses derivatives markets, types of traders, option strategies like covered calls and bull put spreads, and volatility strategies like straddles and strangles. The key details covered include how derivatives derive their value from underlying assets, the difference between exchange-traded and over-the-counter derivatives, Greeks like delta and gamma, and using different option positions for income generation or playing volatility.
This document provides information about options trading strategies from the International School of Financial Markets. It begins with definitions of options terminology like calls, puts, premiums, strikes, expiration dates, and payoff profiles. It then describes 22 different options trading strategies like long calls, covered calls, protective puts, spreads, butterflies and condors. Each strategy is explained over 1-2 pages with diagrams illustrating how the strategy works and its potential payoffs.
The document discusses various options strategies and their payoffs:
- Covered calls involve buying a stock and writing a call on it. This limits upside gains in exchange for receiving the premium to reduce risk.
- Protective puts involve buying a stock and purchasing a put on it. This protects against stock price declines by ensuring a minimum sale price while allowing participation in upside gains.
- Straddles involve buying both a put and call with the same strike price. This bets that the stock will move substantially in either direction.
- Spreads, like vertical spreads, involve buying and selling options of the same type but different strike prices or expiration dates to limit risk and gain from smaller stock movements.
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The document provides an overview of options, including calls and puts, strike prices, volatility, and Greeks. It defines an option as a contract that gives the buyer the right to buy or sell an asset by a certain date. Calls provide the right to buy and benefit from rising prices, while puts provide the right to sell and benefit from falling prices. The strike price is the price at which the underlying can be bought or sold. Options are in-the-money, out-of-the-money, or at-the-money depending on the relationship between the strike price and current underlying price. Volatility and Greeks like delta, gamma, theta, and vega are important factors in option pricing and the document provides definitions
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Straddles and strangles are options strategies that allow investors to benefit from price movements in either direction of an underlying asset. A straddle uses the same strike price for a call and put option, while a strangle uses different strike prices. For a long straddle/strangle, maximum loss is limited to the premium paid, while reward is unlimited. For a short straddle/strangle, risk is unlimited as losses exceed the premium received, while reward is limited to the premium. Both strategies have two break-even price points.
This document provides guidance on leveraged trading on the BitMEX cryptocurrency exchange. It explains that fees on BitMEX are higher than other exchanges because they are calculated based on the entire leveraged position rather than just the margin. It recommends using limit orders rather than market orders to benefit from lower maker fees. The document also provides tips on risk management, such as starting with small position sizes and leverage between 2-5x. It introduces the @BitmexRekt Twitter account as a way to monitor large liquidations on the exchange. Overall, the document offers an introduction to leveraged trading basics and strategies for managing risk on the BitMEX exchange.
Optimizing Net Interest Margin (NIM) in the Financial Sector (With Examples).pdfshruti1menon2
NIM is calculated as the difference between interest income earned and interest expenses paid, divided by interest-earning assets.
Importance: NIM serves as a critical measure of a financial institution's profitability and operational efficiency. It reflects how effectively the institution is utilizing its interest-earning assets to generate income while managing interest costs.
Falcon stands out as a top-tier P2P Invoice Discounting platform in India, bridging esteemed blue-chip companies and eager investors. Our goal is to transform the investment landscape in India by establishing a comprehensive destination for borrowers and investors with diverse profiles and needs, all while minimizing risk. What sets Falcon apart is the elimination of intermediaries such as commercial banks and depository institutions, allowing investors to enjoy higher yields.
2. Elemental Economics - Mineral demand.pdfNeal Brewster
After this second you should be able to: Explain the main determinants of demand for any mineral product, and their relative importance; recognise and explain how demand for any product is likely to change with economic activity; recognise and explain the roles of technology and relative prices in influencing demand; be able to explain the differences between the rates of growth of demand for different products.
OJP data from firms like Vicinity Jobs have emerged as a complement to traditional sources of labour demand data, such as the Job Vacancy and Wages Survey (JVWS). Ibrahim Abuallail, PhD Candidate, University of Ottawa, presented research relating to bias in OJPs and a proposed approach to effectively adjust OJP data to complement existing official data (such as from the JVWS) and improve the measurement of labour demand.
South Dakota State University degree offer diploma Transcriptynfqplhm
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Falcon stands out as a top-tier P2P Invoice Discounting platform in India, bridging esteemed blue-chip companies and eager investors. Our goal is to transform the investment landscape in India by establishing a comprehensive destination for borrowers and investors with diverse profiles and needs, all while minimizing risk. What sets Falcon apart is the elimination of intermediaries such as commercial banks and depository institutions, allowing investors to enjoy higher yields.
Fabular Frames and the Four Ratio ProblemMajid Iqbal
Digital, interactive art showing the struggle of a society in providing for its present population while also saving planetary resources for future generations. Spread across several frames, the art is actually the rendering of real and speculative data. The stereographic projections change shape in response to prompts and provocations. Visitors interact with the model through speculative statements about how to increase savings across communities, regions, ecosystems and environments. Their fabulations combined with random noise, i.e. factors beyond control, have a dramatic effect on the societal transition. Things get better. Things get worse. The aim is to give visitors a new grasp and feel of the ongoing struggles in democracies around the world.
Stunning art in the small multiples format brings out the spatiotemporal nature of societal transitions, against backdrop issues such as energy, housing, waste, farmland and forest. In each frame we see hopeful and frightful interplays between spending and saving. Problems emerge when one of the two parts of the existential anaglyph rapidly shrinks like Arctic ice, as factors cross thresholds. Ecological wealth and intergenerational equity areFour at stake. Not enough spending could mean economic stress, social unrest and political conflict. Not enough saving and there will be climate breakdown and ‘bankruptcy’. So where does speculative design start and the gambling and betting end? Behind each fabular frame is a four ratio problem. Each ratio reflects the level of sacrifice and self-restraint a society is willing to accept, against promises of prosperity and freedom. Some values seem to stabilise a frame while others cause collapse. Get the ratios right and we can have it all. Get them wrong and things get more desperate.
Economic Risk Factor Update: June 2024 [SlideShare]Commonwealth
May’s reports showed signs of continued economic growth, said Sam Millette, director, fixed income, in his latest Economic Risk Factor Update.
For more market updates, subscribe to The Independent Market Observer at https://blog.commonwealth.com/independent-market-observer.
2. Story of Ajay and Venu
Ajay is a buyer
Venu is a seller
Current market price of land is 5 lakh
Ajay agrees to pay 1 lakh
Agreement period is 6 months
Possibilities of three scenario
1. Price of land goes up to 10 lakh
2. Price of land remain constant
3. Price of land goes down
3.
4.
5.
6.
7.
8. Option Premium
Premium=Time value+ Intrinsic value
Option Premium is a mix of two values
Intrinsic Value
Time value
Intrinsic value of a call option
IV = Spot Price – Strike Price
Time value=Premium-intrinsic value
9. Example for calculation
Bajaj Auto CE 2050 bought at premium of 6.35
Assumption is the date of expiry spot price rate
10. 1. Even if the price of Bajaj Auto goes down (below the strike price of 2050),
the maximum loss seems to be just Rs.6.35/-
Generalization 1 – For a call option buyer a loss occurs when the spot price
moves below the strike price. However the loss to the call option buyer
is restricted to the extent of the premium he has paid
2. The profit from this call option seems to increase exponentially as and
when Bajaj Auto starts to move above the strike price of 2050
Generalization 2 – The call option becomes profitable as and when the spot
price moves over and above the strike price. The higher the spot price goes
from the strike price, the higher the profit.
3. From the above 2 generalizations it is fair for us to say that the buyer of
the call option has a limited risk and a potential to make an unlimited
profit.
P&L = Max [0, (Spot Price – Strike Price)] – Premium Paid
11. BEP(Break Even Point)
Till the spot price is equal to the strike price. However, when the spot price starts
to move above the strike price, the loss starts to minimize. The losses keep
getting minimized till a point where the trade neither results in a profit or a loss.
This is called the breakeven point. B.E = Strike Price + Premium Paid
12.
13. ITM, OTM, ATM
If intrinsic value is non-zero number then
option strike is called ITM
If intrinsic value is zero the option strike is
called OTM
The strike which is closest to the Spot price is
called ATM
14. The option Greeks
1. Delta – Measures the rate of change of options
premium based on the directional movement of the
underlying
2. Gamma – Rate of change of delta itself
3. Vega – Rate of change of premium based on change
in volatility
4. Theta – Measures the impact on premium based on
time left for expiry
15. Delta
As and when the value of the spot changes, so does the option premium.
More precisely as we already know – the call option premium increases
with the increase in the spot value and vice versa.
The Delta of an option helps us answer questions of this sort – “By how
many points will the option premium change for every 1 point change in
the underlying?”
The delta is a number which varies –
a) Between 0 and 1 for a call option, some traders prefer to use the 0 to 100 scale. So
the delta value of 0.55 on 0 to 1 scale is equivalent to 55 on the 0 to 100 scale.
b) Between -1 and 0 (-100 to 0) for a put option. So the delta value of -0.4 on the -1 to
0 scale is equivalent to -40 on the -100 to 0 scale
16. Let’s take an Example:-
Nifty @ 10:55 AM is at 8288
Option Strike = 8250 Call Option
Premium = 133
Delta of the option = + 0.55
Nifty @ 3:15 PM is expected to reach 8310
What is the likely option premium value at 3:15 PM?
We are expecting the underlying to change by 22 points
(8310 – 8288), hence the premium is supposed to increase
by
= 22*0.55
= 12.1
Therefore the new option premium is expected to trade
around 145.1 (133+12.1)
17. Another Example:-
Nifty @ 10:55 AM is at 8288
Option Strike = 8250 Call Option
Premium = 133
Delta of the option = 0.55
Nifty @ 3:15 PM is expected to reach 8200
What is the likely premium value at 3:15 PM?
We are expecting Nifty to decline by – 88 points (8200 – 8288), hence the
change in premium will be –
= – 88 * 0.55
= – 48.4
Therefore the premium is expected to trade around
= 133 – 48.4
= 84.6 (new premium value)
18. Scenario 1: Delta greater than 1 for a call option
Nifty @ 10:55 AM at 8268
Option Strike = 8250 Call Option
Premium = 133
Delta of the option = 1.5 (purposely keeping it above 1)
Nifty @ 3:15 PM is expected to reach 8310
What is the likely premium value at 3:15 PM?
Change in Nifty = 42 points
Therefore the change in premium (considering the delta is 1.5)
= 1.5*42
= 63
So the option is gaining more value than the underlying itself. Remember the option is a
derivative contract, it derives its value from its respective underlying, hence it can never
move faster than the underlying.
. If the delta is 1 (which is the maximum delta value) it signifies that the option is moving in
line with the underlying which is acceptable, but a value higher than 1 does not make
sense. For this reason the delta of an option is fixed to a maximum value of 1 or 100.
19. Scenario 2: Delta lesser than 0 for a call option
Nifty @ 10:55 AM at 8288
Option Strike = 8300 Call Option
Premium = 9
Delta of the option = – 0.2 (have purposely changed the value to below 0, hence negative
delta)
Nifty @ 3:15 PM is expected to reach 8200
What is the likely premium value at 3:15 PM?
Change in Nifty = 88 points (8288 -8200)
Therefore the change in premium (considering the delta is -0.2)
= -0.2*88
= -17.6
For a moment we will assume this is true, therefore new premium will be
= -17.6 + 9
= – 8.6
when the delta of a call option goes below 0, there is a possibility for the premium to go
below 0, which is impossible. At this point do recollect the premium irrespective of a call or
put can never be negative. Hence for this reason, the delta of a call option is lower bound to
zero.
20. The value of the delta is one of the many outputs from the
Black & Scholes option pricing formula
21.
22.
23. I’ve considered Bajaj Auto as the underlying. The price is 2210 and the expectation
is a 30 point change in the underlying (which means we are expecting Bajaj Auto
to hit 2240). We will also assume there is plenty of time to expiry; hence time is
not really a concern.
24. Key Points
The Delta changes as and when the spot value changes
As the option transitions from OTM to ATM to ITM, so does the delta
Delta hits a value of 0.5 for ATM options
Delta predevelopment is when the option transitions from Deep OTM to OTM
Delta Take off and acceleration is when the option transitions from OTM to ATM
Delta stabilization is when the option transitions from ATM to ITM to Deep ITM
Buying options in the take off stage tends to give high % return
Buying Deep ITM option is as good as buying the underlying.
The delta is additive in nature
The delta of a futures contract is always 1
Two ATM option is equivalent to owning 1 futures contract
The options contract is not really a surrogate for the futures contract
The delta of an option is also the probability for the option to expire ITM
25. Gamma
Delta of an option is a variable and changes for every change in the underlying and
premium
Gamma captures the rate of change of delta, it helps us get an answer for a question
such as “What is the expected value of delta for a given change in underlying”
Delta is the 1st order derivative of premium
Gamma is the 2nd order derivative of premium Between 0 and 1 for a call option, some
traders prefer to use the 0 to 100 scale.
Gamma measures the rate of change of delta
Gamma is always a positive number for both Calls and Puts
Large Gamma can translate to large gamma risk (directional risk)
When you buy options (Calls or Puts) you are long Gamma
When you short options (Calls or Puts) you are short Gamma
Avoid shorting options which have large gamma
Delta changes rapidly for ATM option
Delta changes slowly for OTM and ITM options
26.
27. Theta
Option sellers are always compensated for the time risk
Premium = Intrinsic Value + Time Value
All else equal, options lose money on a daily basis owing to Theta
Time moves in a single direction hence Theta is a positive number
Theta is a friendly Greek to option sellers
When you short naked options at the start of the series you can pocket a
large time value but the fall in premium owing to time is low
When you short option close to expiry the premium is low (thanks to time
value) but the fall in premium is rapid
28.
29. Vega
Historical Volatility is measured by the closing prices of the stock/index
Forecasted Volatility is forecasted by volatility forecasting models
Implied Volatility represents the market participants expectation of
volatility
India VIX represents the implied volatility over the next 30 days period
Vega measures the rate of change of premium with respect to change in
volatility
All options increase in premium when volatility increases
The effect of volatility is highest when there are more days left for expiry