Protective call
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This strategy involves being short on a stock future to take advantage of downward price movements, while purchasing a call option to limit losses from an unexpected price rise. The investor shorts a stock future and buys an at-the-money or slightly out-of-the-money call option. If the stock price falls, the investor profits from the short future position. However, if the price rises unexpectedly, the call option limits losses. The maximum risk is limited to the call strike price minus the stock price plus the premium paid. The maximum reward occurs if the stock price falls to the call strike price minus the premium.
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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
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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.
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7) Long combo by selling put and buying call
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Options presentaion
The document discusses 12 investment strategies using derivatives:
1) Long call
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4) Protective call/synthetic long put by shorting stock future and buying call
5) Long put
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7) Long combo by selling put and buying call
8) Long strangle
9) Short strangle
10) Covered call
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http://www.options-trading-education.com/24043/straddle-options/
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An option is a derivative financial instrument that specifies a contract between two parties for a future transaction on an asset at a reference price.
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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
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An investor sells both put and call options on the same stock with identical strike prices and expiration months, collecting premiums from buyers. This "writing a straddle" strategy profits if the stock price remains stable. The investor holds the underlying stock to cover calls sold and cash to buy stock if assigned puts. The strategy has break-even price ranges of $27.50-$32.50, above or below which the investor loses money. If the stock price is within this range at expiration, the investor keeps premiums; if below, assigned puts are covered; if above, assigned calls are covered for a profit.
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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.
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- The main types of options - calls and puts.
- Common valuation methods and strategies for options positions, including bullish, bearish, and neutral strategies.
Straddles and strangles
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.
14. option trading workbook (deb sahoo)
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.
Options Presentation Introduction to Corporate Finance
This document provides an introduction to corporate finance options, including:
1. A brief history of options and their evolution over time from ancient Greece to modern markets.
2. An overview of the key characteristics of options contracts, including the types of options (calls, puts), how they are valued, and common strategies (bullish, bearish, neutral).
3. Examples of how options work from the perspective of buyers and sellers, including payoffs and breakeven points. Valuation methods like the binomial tree approach are also introduced.
Derivatives - Option strategies.
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
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This presentation summarizes the results of backtesting various options trading strategies on the CNX NIFTY index. It finds that a short strangle strategy outperforms a long strangle strategy, with higher probability of profits and lower maximum drawdowns. A 2% range strategy, where options are purchased at strikes 2% from the current price 5 days before expiry, has around an 83% probability of profit over 5 years based on backtesting, but carries risk of large losses if the price moves outside the range. Overall, the presentation recommends short-term options strategies for risk-averse investors and considering foreign investment patterns to predict market trends.
Lecture no 45 modified call butterfly
Advance Option Trading Strategy Mentorship Program - For More Details Visit - https://www.ptaindia.com/advance-option-trading-strategies-mentorship-program/
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Option strategies
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.
Synthetic Position 2018
This document discusses synthetic put options, which are created by combining a short stock position with a long call option on the same stock. This combination mimics the payoff of a long put option. The document defines synthetic puts and outlines their characteristics, including their profit/loss potential and breakeven points. It also provides historical price data for a synthetic put on ADA/USD from December 2017 to February 2018, showing the monthly opening, high, and low prices.
Option trading strategies
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.
Lecture no 46 modified put butterfly
Advance Option Trading Strategy Mentorship Program - For More Details Visit - https://www.ptaindia.com/advance-option-trading-strategies-mentorship-program/
Or Call +91 9261211003
Lecture no 42 long put butterfly
Advance Option Trading Strategy Mentorship Program - For More Details Visit - https://www.ptaindia.com/advance-option-trading-strategies-mentorship-program/
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910717 2
The document summarizes an options trading seminar given by Steve Chang of Morgan Stanley. [1] It provides an overview of basic option concepts like calls, puts, premiums, strikes, expiration dates and Greeks. [2] It discusses how volatility impacts option pricing and gives examples. [3] It also outlines various trading strategies like buying calls/puts, spreads, and straddles/strangles and how they are impacted by Greeks.
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Protective call
- 1. STRATEGY:PROTECTIVE CALL / SYNTHETIC LONG PUT R.NAGA SRINIVASARAO NAGA 1
- 2. STRATEGY: PROTECTIVE CALL / SYNTHETIC LONG PUT This is a strategy wherein an investor has gone short on a stock future and buys a call to hedge. An investor shorts a stock future and buys an ATM or slightly OTM Call. In case the stock future price falls the investor gains in the downward fall in the price. However, incase there is an unexpected rise in the price of the stock the loss is limited. The pay-off from the Long Call will increase thereby compensating for the loss in value of the short stock future position. When to Use: If the investor is of the view that the markets will go down (bearish) but wants to protect against any unexpected rise in the price of the stock. Risk: Limited. Maximum Risk is Call Strike Price – Stock Price + Premium Reward: Maximum is Stock Price – Call Premium Breakeven: Stock Price – Call Premium Example : Suppose Apple stock. is trading at 184$ in June. An investor Mr. A buys a $185 call for 2$ while shorting the stock at $184. Strategy : Short Stock Future+ Buy Call Option Sells Stock future Current Market Price ($) 184 Buys Call Strike Price ($) 185 Mr. A pays Premium ($) 2 Break Even Point ($) (Stock Price – Call Premium) 182 NAGA 2
- 3. Apple. closes at ($)(Expiry) Payoff from the stock ($.) Net Payoff from the Call Option ($) Net Payoff ($) 165 19 -2 17 175 9 -2 7 180 4 -2 2 181 3 -2 1 182 2 -2 0 183 1 -2 -1 184 0 -2 -2 185 -1 -2 -3 186 -2 -1 -3 187 -3 0 -3 188 -4 1 -3 189 -5 2 -3 190 -11 8 -3 The payoff schedule The payoff chart (Synthetic Long Put) If you need more clarification kindly contact me. Mail id: naga@marketinvestment.com, rao9948281822@gmail.com. NAGA 3