Option Handelsstrategi Och Indien

. Hur man gör ett alternativ handel i Indien. : 29. 2013. Aktiehandeln landskapet är väldigt annorlunda idag än för några år sedan. I den här videon förklarar vår expert hur du kan använda ICICIdirect dot com portal för att utnyttja sina många funktioner och få en nybörjare på alternativhandel i Indien. Våra experter enkla förklaringar av de olika funktionerna svarar på dina frågor och tar itu med utmaningar om handel som: Hur man gör en optionshandel Vad är de bästa sätten att göra alternativhandel Länkar till andra videoklipp i denna handledningsserie: 1) Vad är eget kapital Den bästa Equity trading funktioner och tips. Bit. lyVpDZYT 2) Vad är terminer och alternativ Det väsentliga programmet för inträdesnivå investerare. bit. lyYheCZN 3) Lär futures trading det smarta sättet bit. ly14rgxy7 4) Gateway till lager som investerar i Indien. Bit. ly14rg5jv 5) Investeringar i ömsesidiga fonder förenklades. bit. lyXReJsW 6) Indian Share Market: Hur hittar du de bästa produkterna att investera. bit. lyXgNA3v 7) Terminologier för online-aktiehandel görs enkelt. Bit. lyYhfei7Options Trading Strategy Guide: Världen av Options Trading Options: Inte ett Noll Sum Spel Med det möjliga undantaget för terminskontrakt är handel inte ett nollsumman spel. Med andra ord, för varje vinnare behöver det inte vara en förlorare. Därför, eftersom det finns så många olika kombinationer och sätt som alternativ kan säkras mot varandra, är det inte meningsfullt att titta på övergripande siffror (t ex antalet alternativ som upphör att vara värdelösa) och nå slutsatser om hur många som har gjort eller förlorat pengar. För enkelhet, låt oss ta fallet med en spridning. Det faktum att en person tjänade pengar på att köpa en fjäril innebär inte automatiskt att någon annan förlorat. Istället kan den person som sålde fjärilen ha handlat ut ur positionen med hjälp av spridda eller genom att sälja individuella alternativ. För varje person som är lång en fjäril, samtal sprid, sätta spridning eller vad som helst, det finns inte nödvändigtvis människor som är korta motsvarande position. Som sådan kommer lönsamheten för sina positioner nödvändigtvis att skilja sig från varandra. Känn din tävling I många avseenden är alternativhandel ett strategispel som inte skiljer sig från konkurrenssport eller schackturneringar. Huvudskillnaden är att i handel finns det fler spelare och flera dagordningar. För att lyckas är det viktigt att ha kunskap och uppskattning av de andra spelarna. Generellt sett måste du uppskatta de olika aktörernas beteende och motivation. På optionsmarknaderna faller spelarna i fyra kategorier: Exchanges Financial Institution Market Makers Individuella (Retail) Investors Vad följer är en kort översikt över varje grupp tillsammans med insikter i deras handelsmål och strategier. Utbytet är en pblace där marknadsaktörer och handlare samlas för att köpa och sälja aktier, optioner, obligationer, terminer och andra finansiella instrument. Sedan 1973, då Chicago Board Options Exchange först började handelsalternativ, har ett antal andra aktörer uppstått. I början behöll utbytena separata listor och handlade därför inte om samma kontrakt. Under senare år har detta förändrats. Nu när BSE och NSE båda dessa börser listar och handlar samma kontrakt, konkurrerar de med varandra. Trots att ett lager kan listas på flera börser, hanterar en växel i allmänhet huvuddelen av volymen. Detta skulle anses vara den dominerande utbytet för det speciella alternativet. Tävlingen mellan utbyten har varit särskilt värdefull för professionella näringsidkare som har skapat komplexa datorprogram för att övervaka prisskillnader mellan utbyten. Dessa skillnader, men små, kan vara utomordentligt lönsamma för handlare med förmåga och snabbhet att utnyttja. Ofta använder inte professionella handlare helt enkelt flera utbyten för att få de bästa priserna på sina affärer. Att bestämma mellan de två skulle helt enkelt vara en fråga om att välja det utbyte som gör mest handel med detta kontrakt. Ju mer volymen utbytet gör desto mer flytande kontraktet. Större likviditet ökar sannolikheten att handeln kommer att fyllas till bästa pris. Finansinstitut är pffessional investment management företag som vanligtvis faller i flera huvudkategorier: fonder, hedgefonder, försäkringsbolag, aktiefonder. I varje fall kontrollerar dessa pengarchefer stora portföljer av aktier, optioner och andra finansiella instrument. Även om enskilda strategier skiljer sig, delar institutionerna samma mål - att överträffa marknaden. I själva verket beror deras försörjning på prestanda, eftersom de investerare som utgör en fond tenderar att vara en vass grupp. När fonden inte fungerar är investerare ofta snabba att flytta pengar på jakt efter högre avkastning. Om enskilda investerare kan vara mer benägna att handla aktieoptioner relaterade till specifika aktier använder fondförvaltare ofta indexoptioner för att bättre approximera sina övergripande portföljer. En fond som investerar kraftigt i ett brett spektrum av tekniska aktier kommer till exempel att använda alternativen NSE Nifty Index istället för att skilja alternativ för varje aktie i deras portfölj. Teoretiskt sett skulle resultatet för detta index vara relativt nära prestanda för en delmängd av jämförbara högteknologiska aktier som fondförvaltaren kan ha i sin portfölj. Marknadstillverkare är handlare på golvet i börserna som skapar likviditet genom att erbjuda dubbelsidiga marknader. I varje räknare håller konkurrensen mellan marknadsförare spridningen mellan budet och erbjudandet relativt smalt. Ändå är det spridningen som delvis kompenserar marknadsförare för risken att villigt ta någon sida av en handel. För marknadsförare skulle den idealiska situationen vara att skalpa varje handel. Ofta är det dock inte marknadsaktörer som dra nytta av ett oändligt flöde av perfekt förskjutande affärer till hårbotten. Som ett resultat måste de hitta andra sätt att vinst. I allmänhet finns det fyra handelsmetoder som karaktäriserar hur olika marknadsaktörer handlar om handel. Någon eller alla dessa tekniker kan vara anställda av samma marknadsmäklare beroende på handelsvillkor. Day Traders Premium Säljare Spread Traders Theoretical Traders Daghandlare, på eller utanför handelsskärmen, brukar använda små positioner för att kapitalisera på intradagens marknadsrörelse. Eftersom deras mål inte är att hålla ställning i längre perioder, säkrar daghandlare i allmänhet inte alternativ med det underliggande lagret. Samtidigt tenderar de att vara mindre oroade över delta, gamma och andra mycket analytiska aspekter av optionsprissättning. Precis som namnet antyder tenderar premiumsäljare att fokusera sina ansträngningar att sälja högprissatta alternativ och utnyttja tidsfördröjningsfaktorn genom att köpa dem senare till ett lägre pris. Denna strategi fungerar bra i avsaknad av stora, oväntade prissvingningar men kan vara extremt riskabelt när flyktiga skyrockets. Liksom andra marknadsaktörer hamnar spridhandlare ofta i stora positioner men de kommer dit genom att fokusera på spridningar. På detta sätt kommer även den största positionen att vara något naturligt säkrad. Spread handlare använder en rad strategier att köpa vissa alternativ och sälja andra för att kompensera risken. Några av dessa strategier som omkastningar, omvandlingar och lådor används främst av golvhandlare eftersom de utnyttjar mindre prisskillnader som ofta bara finns i sekunder. Spridningshandlare kommer emellertid att använda strategier som fjärilar, kondorer, samtalsspridningar och lägga spridningar som kan användas ganska effektivt av enskilda investerare. Genom att enkelt skapa dubbelsidiga marknader befinner sig marknadsförare ofta med stora optionspositioner över en rad månader och prissättning. Samma sak händer med teoretiska handlare som använder komplexa matematiska modeller för att sälja alternativ som är övervärderade och köpa alternativ som är relativt undervärda. Av de fyra grupperna är teoretiska handlare ofta det mest analytiska genom att de ständigt utvärderar sin position för att bestämma effekterna av förändringar i pris, volatilitet och tid. När alternativvolymen ökar blir enskilda investerares roll viktigare eftersom de står för över 90 volymer. Det är särskilt imponerande när du anser att optionsvolymen i februari 2000 var 56,2 miljoner kontrakt - en förbluffande 85-ökning jämfört med februari 1999 Psykologin hos den enskilda investeraren Från en psykologisk synpunkt är enskilda investerare intressanta för att det finns så många strategier och mål Som det finns individer. För vissa är alternativ ett sätt att generera extra inkomster genom relativt konservativa strategier som talsamtal. För andra ger alternativ i form av skyddssatser en utmärkt form av försäkring för att låsa vinst eller förhindra förluster från nya positioner. Fler risk toleranta individer använder alternativ för hävstångseffekten de tillhandahåller. Dessa människor är villiga att handla alternativ för stora procentuella vinster, även om hela investeringen kan vara på linjen. På ett visst sätt innebär en position på marknaden automatiskt att du konkurrerar med otaliga investerare från de kategorier som beskrivs ovan. Medan det kan vara sant, undvik att göra direkta jämförelser när det gäller dina handelsresultat. Den enda personen du ska konkurrera med är dig själv. Så länge du lär dig, förbättrar och har kul spelar det ingen roll hur resten av världen gör. HUR RISKER OCH SKYDDS RESULTAT MED OPTIONER Professionella handlare (kända inom branschen som marknadsmäklare eller marknadsaktörer) tror ofta att för inledningsinvesteraren måste optionshandel tyckas likna att man sätter ihop ett pussel utan hjälp av en bild. Du kan hitta bilden om du vet var du ska titta på. Att titta igenom en professionell marknadsmästares ögon är ett av de bästa sätten att lära sig om handelsalternativ under reala marknadsförhållanden. Denna erfarenhet kommer att hjälpa dig att förstå hur förändringar i verkliga variabler i alternativprissättningsvariabler påverkar ett alternativvärde och riskerna i samband med det alternativet. Dessutom, eftersom marknadsaktörer är väsentligen ansvariga för vad optionsmarknaden ser ut, måste du känna till deras roll och strategier som de använder för att reglera en likvida marknad och säkerställa sin egen vinst. Vi kommer att ge en översikt över marknadsaktörernas praxis och utforska deras tankegång som arkitekterna av optionsföretaget. För det första kommer vi att överväga logistik för ett ansvar för marknadsaktörer. Hur svarar marknadsaktörer på utbud och efterfrågan för att säkerställa en likvida marknad Hur bedömer de värdet av ett alternativ baserat på marknadsförhållanden och krav I den andra delen av detta kapitel kommer vi att överväga en marknadsmakers vinstorienterade mål. Hur gör marknadsmakten som någon annan verksamhet Hur innebär det att en marknadsmäklare vinst Vad innebär det att säkra en position och hur använder en marknadsmäklare säkring för att minimera risken Vem är marknadsmäklare Bilden av en elektronisk handelsterminal är inte okänd för Indisk fantasi, men många kanske inte vet vem spelarna bakom skärmen är. Marknadsförare, mäklare, fondförvaltare, detaljhandeln och investerare upptar handelsterminaler i hela Indien. Tusentals handelsterminaler över 250 städer i Indien kombineras, de representerar marknaden för optionshandel. Utbytet i sig ger platsen, tillsynsorganet, datorteknik och personal som är nödvändiga för att stödja och övervaka handelsaktivitet. Marknadstillverkare sägs faktiskt göra alternativmarknaden, medan mäklare representerar de offentliga orderen. I allmänhet kan marknadsaktörer göra marknader med upp till 30 eller fler problem och konkurrera med varandra för kundköp och säljorder i dessa frågor. Marknadsförare handlar med antingen eget kapital eller handel för ett företag som förser dem med kapital. Marknadsföringsaktiviteten, som sker alltmer genom datorkörning, representerar alternativindustrins centralbehandlingsenhet. Om vi ​​betraktar utbytet självt som branschens ryggrad, representerar åtgärden i Mumbais mäklarbyrå industrins hjärna och industri, hjärta. Som både en katalysator för handel och en vinstdrivande i egen regi är marknadsaktörernas roll i branschen väl värda närmare granskning. Individuell näringsidkare mot marknadsmäklare Utvärderingen av alternativ som värderas av enskilda näringsidkare respektive marknadsmäklare är grunden för optionshandel. Trader och marknadsförare köper och säljer de produkter som de förutser som lönsamma. Ur detta perspektiv föreligger ingen skillnad mellan en marknadsmäklare och den enskilda köpmannen. Mer formellt är skillnaden mellan dig och marknadsmäklaren dock ansvarig för att skapa alternativindustrin, som vi vet. Marknadsförare är i huvudsak professionella, volymmässiga alternativhandlare vars egen handel tjänar allmänheten genom att skapa likviditet och djup på marknaden. Dagligen står marknadsaktörer för upp till hälften av all optionsvolym och mycket av denna verksamhet är ansvarig för att skapa och säkerställa en tvåsidig marknad som består av de bästa buden och erbjudandenna för offentliga kunder. En marknadsaktörs handelsverksamhet sker under villkoren för ett avtalsförhållande med en utbyte. Som medlemmar av börsen måste marknadsförare betala avgifter och hyra eller äga en plats på golvet för att kunna handla. Ännu viktigare, en marknadsförare relation med utbytet kräver att han eller hon handlar alla frågor som tilldelas hans eller hennes primära gropen på alternativet våningen. I gengäld kan marknadsmäklaren ha ett privilegierat läge på optionsmarknaden - marknadsmäklare är köpmännen i optionsbranschen, de är i stånd att skapa marknaden (bud och fråga) och sedan köpa på sina bud och sälja på deras erbjudande. Huvudskillnaden mellan en marknadsmäklare och detaljhandeln är att marknadsaktörernas position primärt dikteras av kundorderflödet. Marknadsföraren har inte lyxen att välja och välja sin position. Precis som bokmakare i Las Vegas-kasinon som ställer oddsen och sedan rymmer enskilda spelare som väljer vilken sida av spelet som de vill ha, är ett marknadsförare jobb att tillhandahålla en marknad i alternativen, ett bud och ett erbjudande, och sedan Låt allmänheten bestämma om man ska köpa eller sälja till dessa priser och därigenom ta andra sidan av insatsen. Som de officiella köpmännen är marknadsaktörer i stånd att köpa alternativt grossist och sälja dem i detaljhandeln. Med detta sagt är de två största skillnaderna mellan marknadsmäklare och andra handlare som marknadsförare säljer vanligt innan de köper, och värdet av deras lager fluktuerar när aktiekursen fluktuerar. Liksom med alla handlare betalar sig en förtrogenhet med produkten. Marknadsförare års erfarenhet av marknadsvillkor och handelspraxis i allmänhet - inklusive en rad handelsstrategier - gör det möjligt för honom eller henne att skapa en kant (dock liten) över marknaden. Denna kant är grunden för marknadstillverkarnas potentiella rikedom. Smarta handelssteg för marknadsoperatörer Under hela handelsdagen använder marknadsaktörer i allmänhet en av två handelsformer: scalping eller position trading. Scalping är en enklare handelsstil som ett allt mindre antal handelsmän använder. Positionshandel, som är indelad i ett antal underkategorier, används av den största andelen av alla marknadsaktörer. Som vi har diskuterat ställs de flesta marknadsaktörernas position dikterade av dem genom det offentliga orderflödet. Varje enskild marknadsmäklare kommer att ackumulera och säkra detta orderflöde på olika sätt, allmänt föredrar en handelsform över en annan. En marknadsaktörs handelsstil kan ha att göra med en tro på att en stil är mer lönsam än en annan eller kan vara på grund av en handlares allmänna personlighet och uppfattning om risk. Scalper försöker generellt köpa ett alternativ på anbudet och sälja det på erbjudandet (eller sälja på erbjudandet och köpa på budet) för att fånga skillnaden utan att skapa en alternativposition. Scalpers vinst från handel som kallas bud ask spread, skillnaden mellan budpriset och askpriset. Till exempel, om marknaden på Nifty juli 1130 sätter är 15 (bud) - 15,98 (fråga), kommer denna näringsidkare att köpa en optionsorder som kommer in i handelsplatsen på budet tillsammans med resten av publiken. Denna näringsidkare är nu inriktad på att sälja dessa satser för vinst, snarare än att säkra alternativen och skapa en position. På grund av bristen på provision betalad av marknadsaktörer kan denna näringsidkare sälja det första 15.20 budet som går in i handelsmängden och gör fortfarande vinst, som är känd inom finansbranschen som hårbotten. Tradern har just gjort en vinst utan att skapa en position. Ibland är det dock oundvikligt att hålla och säkra en position. Ändå är denna typ av handel generellt mindre riskabel, eftersom näringsidkaren endast behåller små positioner med liten risk. Skalperen är mindre vanligt idag eftersom noteringen av alternativ på mer än en utbyte (dubbelnotering) har ökat konkurrensen och minskade bidragen. Scalper kan bara tjäna pengar när kunder köper och säljer alternativ i lika stora mängder. Eftersom kundorderflödet är generellt ensidigt (antingen kunder köper eller säljer bara) möjligheten att hårbotten är sällsynt. Scalpers finns därför i allmänhet i trading pits trading aktier som har stora alternativ orderflöde. Scalperen är en sällsynt ras på handelsgolvet, och tillkomsten av dubbla noteringar och konkurrerande börser har gjort scalpers en hotad art. Ställhandlaren har i allmänhet en optionsposition som skapas samtidigt som det tillgodoser det offentliga orderflödet och säkrar den resulterande risken. Denna typ av handel är mer riskabel eftersom marknadsmäklare kan antas riktningsrisk, volatilitetsrisk eller ränterisk för att nämna några. På motsvarande sätt kan marknadsförare anta ett antal positioner i förhållande till dessa variabler. Vanligtvis är de två vanliga typerna av positionshandlare antingen backspreaders eller frontspredare. I huvudsak är backspreaders handlare som ackumulerar (köp) fler alternativ än de säljer och har därför teoretiskt stor eller obegränsad vinstpotential. Till exempel skulle en långsträcka anses vara en backspread. I det här fallet köper vi 50-nivået samtal och lägger (en ATM-strejk skulle vara delta-neutral). Eftersom den underliggande tillgången minskar i värde, kommer samtalet att öka i värde. För att vinstpositionen ska kunna göras måste värdet av det stigande alternativet öka mer än värdet av det fallande alternativet, eller näringsidkaren måste aktivt byta lager mot positionen, skalande lager när delarna ändras. Positionen kan också dra nytta av en ökning av volatiliteten, vilket skulle öka värdet av både samtalet och uppsättningen. När volatiliteten ökar kan den näringsidkare sälja ut positionen för vinst eller försäljningsalternativ (vid högre volatilitet) mot de som hon äger. Positionen har stor eller obegränsad vinstpotential och begränsad risk. Som vi vet från tidigare kapitel finns det en mängd risker som är förknippade med att ha en inventering av alternativ. I allmänhet är den största risken i samband med en backspread tidfallet. Vega är också en viktig faktor. Om volatiliteten minskar dramatiskt kan en backspreader tvingas stänga sin position till mindre än gynnsamma priser och kan uppstå en stor förlust. Backspreaderna är beroende av rörelse i den underliggande tillgången eller en ökning av volatiliteten. Det motsatta av en backspreader säljer frontspreader i allmänhet fler alternativ då han eller hon äger och därför har begränsad vinstpotential och obegränsad risk. Med det föregående exemplet skulle frontspreader vara säljaren av 150-nivåsamtalet och sätta, korta 150-nivåsträckan. I denna situation skulle marknadsmakten dra nytta av positionen om den underliggande tillgången inte gick utöver premien mottagen för försäljningen före utgången. Frontspreader letar i allmänhet efter en minskning av volatiliteten och med liten eller ingen rörelse i den underliggande tillgången. Positionen kan också dra nytta av en minskning av volatiliteten, vilket skulle minska värdet för både samtalet och satsen. När volatiliteten minskar kan näringsidkaren köpa i en position för vinst eller köpoptioner (vid lägre volatilitet) mot de som han eller hon är kort. Positionen har begränsad vinstpotential och obegränsad risk. När man överväger dessa typer av handel är det viktigt att erkänna att en näringsidkare kan handla underliggande lager för att antingen skapa vinst eller hantera risker. Backspreader kommer att köpa aktier när beståndet minskar i värde och säljer aktien som aktieökningen och därigenom scalping aktien för vinst. Skalpning av det underliggande lagret, även när börsen handlar inom ett område som är mindre än det premie som betalats för positionen, kan inte bara betala för positionen utan kan skapa vinst över den ursprungliga investeringen. Backspreaders kan göra detta med minimal risk eftersom deras position har positiv gamma (krökning). Det betyder att när den underliggande tillgången sjunker i pris kommer positionerna att ackumulera negativa delta, och näringsidkaren kan köpa aktier mot dessa delta. Då den underliggande tillgången ökar i pris, kommer positionen att ackumulera positiva deltar och näringsidkaren kanske säljer aktier. Generellt kommer en backspreader att köpa och sälja lager mot hans eller hennes deltaposition för att skapa en positiv hårbotten. På samma sätt kan en frontspreader använda samma teknik för att hantera risken och upprätthålla positionens vinstpotential. En utspridd position kommer att ha negativ gamma (negativ krökning). Att hålla delta neutralt kan hjälpa en frontspreader att undvika förluster. En flitig frontspreader kan descalp (scalping for a loss) den underliggande tillgången och minska hennes vinst med endast en liten marginal. Att undvika eventuella skillnader i den underliggande tillgången, disciplinerad köp och försäljning av den underliggande tillgången kan hålla några förluster till ett minimum. För att komplicera saker ytterligare kan en backspreader eller frontspreader initiera en position som har spekulativa egenskaper. Två exempel följer. Dessa handlare ställde sig till en position som gynnar en riktning i den underliggande tillgången över en annan. Denna näringsidkare spekulerar på att beståndet kommer att flytta antingen upp eller ner. Denna typ av handel kan vara extremt riskabel eftersom näringsidkaren föredrar en riktning för att utesluta att skydda den risk som är förknippad med rörelse till andra sidan. Till exempel kan en näringsidkare som tror att den underliggande tillgången har sålt betydligt kan köpa samtal och sälja satser. Båda dessa transaktioner kommer emellertid att gynnas av en ökning av den underliggande tillgången, om den underliggande tillgången skulle fortsätta nedåt kan positionen förlora mycket pengar. Volatilitetshandlare kommer i allmänhet att ta ett antagande om alternativ volatilitetens riktning. För dessa handlare är det oavsett om man köper eller säljer ett samtal eller en uppsättning baserat på en bedömning av alternativ volatilitet. Att förutse förändringar i volatiliteten är typiskt en största utmaning för affärsmän. Som diskuterats tidigare är volatiliteten viktig eftersom den är en av de viktigaste faktorerna som används för att uppskatta ett optionspris. En volatilitetshandlare kommer att köpa alternativ som prissätts under hans eller hennes volatilitetsantagande och sälja alternativ som handlar över antagandet. Om portföljen är balanserad med avseende på antal köpta och sålda optioner (alternativ med liknande egenskaper som utgångsdatum och strejk) kommer positionen att ha liten vega risk. Om emellertid näringsidkaren säljer mer volatilitet än han eller hon köper, eller vice versa, kan positionen förlora mycket pengar på en volatilitetsrörelse. HUR MARKEDSVERKSÄTTARE KOMMER ÅTGÄRDEN I allmänhet börjar marknadsföraren sin bedömning genom att använda en prissättningsformel för att skapa ett teoretiskt värde för ett alternativ och sedan skapa en marknad kring det värdet. Denna process innebär att man skapar ett bud under marknadsmakers verkliga värde och ett erbjudande över marknadsmakers verkliga värde på optionen. Kom ihåg att marknadsmäklaren har ett juridiskt ansvar för att säkerställa en likvid marknadsplats genom att leverera en bidrisk spridning. Handelsmännen kan då antingen köpa eller sälja alternativen baserat på marknadsföringsförteckningar, eller det kan förhandla med marknadsmäklaren till ett pris som ligger mellan de angivna bidriskpriserna (baserat på hans eller hennes respektive beräkningar av teoretiskt värde) . I de flesta fall är skillnaden mellan marknadsmäklare och enskilda investerarbud och erbjudanden en fråga om pennies (vad vi kanske anser brutto vinst). För marknadsmakaren är dock nyckeln volym. Som ett kasino kommer marknadsföraren att hantera risken så att hon kan stanna i matchen gång efter gång och göra en Rs.1 här och en Rs.5 där. Dessa vinster lägger till. Liksom kasinot kommer en marknadsförare att uppleva förlust ibland, men genom riskhantering försöker han eller hon att vara kvar i branschen tillräckligt länge för att vinna mer än han eller hon förlorar. En annan analogi finns i förhållandet mellan en köpare och en begagnad bilhandlare. En bilhandlare kan göra ett bud på en begagnad bil för ett belopp som är mindre än vad han kan sälja bilen till på marknaden. Han eller hon kan göra en vinst genom att köpa bilen till ett pris och sälja det till ett högre pris. När du bestämmer det belopp som han eller hon är villig att betala, måste återförsäljaren ta antagandet om bilens framtida värde. Om han är felaktig om hur mycket någon ska köpa bilen för, kommer återförsäljaren att förlora transaktionen. Om det är korrekt står dock återförsäljaren för att göra vinst. Å andra sidan kan ägaren av bilen avvisa återförsäljarens ursprungliga bud för bilen och begära mer pengar och därigenom komma in mellan återförsäljarens bidrisk-marknad. Om återförsäljaren bedömer att priset som ägaren begär för bilen fortfarande möjliggör en vinst, kan han eller hon köpa bilen oberoende av det högre priset. På samma sätt, när en marknadsförare bestämmer om han eller hon ska betala (eller sälja) ett pris över en annan, bestämmer han eller hon inte bara det teoretiska värdet av alternativet, även om alternativet är en viss gran för riskhantering . Det kan finnas tillfällen då en marknadsförare kommer att försvaga den teoretiska kanten eller handla för en negativ teoretisk kant för det enda syftet med riskhantering. Innan vi fortsätter med vår diskussion om marknadsaktörernas handelsaktivitet i detalj, låt oss återigen hänvisa till casinoanalogin. Huset på ett kasino gynnar i stor utsträckning sin kännedom om spelets verksamhet och betters beteende. Som en institution drar det också fördel av att hålla ett jämnt huvud och säkerligen att det är bra (om inte bättre) informerat än sina kunder om logistiken i sina spel och strategier för att vinna. På samma sätt måste en marknadsförare kunna bedöma hur man svarar på olika marknadsvillkor som kan vara lika konkreta som en ränteförändring eller som immateriell som en känslomässig handelsfrenes baserat på en nyhetsrapport. Disciplin, utbildning och erfarenhet är en marknadstillverkare bästa försäkring. Vi nämner detta här, eftersom du som enskild investerare kan använda dessa riktlinjer för att hjälpa dig att konkurrera klokt med en marknadsförare och att bli en framgångsrik alternativhandlare. Marknadsföring som ett företag I det föregående avsnittet diskuterade vi ganska begreppsmässigt hur en marknadsmäklare arbetar i förhållande till marknaden (och i synnerhet i förhållande till dig, den enskilda näringsidkaren). En marknadsmakers verkliga praxis dikteras av ett antal affärsrelaterade affärsrelaterade frågor, vilket kräver konstant uppmärksamhet under handelsdagen. Liksom alla företagare måste en marknadsförare följa affärslogiken, och han eller hon måste överväga de klokaste användningarna av hans eller hennes kapital. Det finns många faktorer som du bör överväga när du bedömer om en optionshandel är ett bra eller dåligt affärsbeslut. Vid basen är de steg som en marknadsmäklare tar följande: 1. Bestämning av det aktuella teoretiska verkliga värdet av en option. (Som vi har diskuterat kan marknadsföraren utföra denna uppgift med hjälp av en matematisk prissättningsmodell.) 2. Försöker bestämma det framtida värdet av ett alternativ. Köp alternativet om du tror att det kommer att öka i värde eller sälja alternativet om du tror att det kommer att minska i värde. Detta görs genom bedömning av marknadsfaktorer som kan påverka värdet av ett alternativ. Dessa faktorer inkluderar. Räntor Volatilitet Utdelning Pris på underliggande lager 3. Fastställande av huruvida kapitalet kan spenderas bättre någon annanstans. Om räntan som sparas genom inköp av ett samtal (i stället för det direkta köpet av beståndet) överstiger den utdelning som skulle ha tagits emot genom att äga aktierna, är det bättre att köpa samtalet. 4. Beräkning av den långa aktieräntan som betalas för lånefonder för att köpa aktierna och överväga huruvida pengarna som används för att köpa det underliggande lagret skulle investeras bättre i ett räntebärande konto. Om så är fallet skulle köpoptioner istället för aktien vara en bättre handel. 5. Beräkning av huruvida räntan från försäljningen av kortstock är mer gynnsam än att köpa på den underliggande aktien. Är kombinationen av att äga samtal och sälja den underliggande aktien en bättre handel än det direkta köpet av satser 6. Kontrollera om arbitrage möjligheter. Precis som föregående steg innebär denna uppgift att avgöra om en handel är bättre än en annan. I avsnittet om syntetik undersökte vi möjligheten att skapa en position med samma resultatförlust egenskaper som en annan genom att använda olika komponenter. Ibland blir det mer kostnadseffektivt att sätta sig på en position syntetiskt. Arbitragehandlare utnyttjar prisskillnaderna mellan samma produkt på olika marknader eller motsvarande produkter på samma marknad. Till exempel kan en skillnad mellan ett alternativ och det faktiska underliggande lagret utnyttjas för vinst. De tre faktorer som ligger till grund för detta beslut är följande: Nivån på den underliggande tillgången. Räntan. Om du till exempel köper ett köpalternativ sparar du räntan på de pengar du skulle ha betalat för det underliggande lagret. Omvänt, om du köper en uppsättning, förlorar du den korta ränteintäkten som du kan få från försäljningen av det underliggande lagret. Utdelningsgraden. Om du köper ett köpalternativ, förlorar du de utdelningar som du skulle ha tjänat genom att faktiskt hålla aktierna. 7. Slutligen, bestämma risken i samband med optionshandeln. Som tidigare diskuterats är alla faktorer som bidrar till priset på alternativet potentiella riskfaktorer till en befintlig position. Som vi vet, om de faktorer som bestämmer priset för ett alternativ ändras, kommer värdet av ett alternativ att ändras. Denna risk som är förknippad med dessa förändringar kan lindras genom direkt inköp eller försäljning av ett ersättningsalternativ eller underliggande lager. Denna process kallas säkring. A market makers complex positioning As we mentioned earlier, the bulk of a market makers trading is not based on market speculation but on the small edge that can be captured within each trade. Because the market maker must trade in such large volumes in order to capitalize on fractional profits, it is imperative that he or she manage the existing risks of a position. For example, in order to retain the edge associated with the trade, he or she might need to add to the position when necessary by buying or selling shares of an underlying asset or by trading additional options. In fact, it is not uncommon that once the trade has been executed, the trader an opposite market position in the underlying security or in any other available options. Over time, a large position consisting of a multitude of option contracts and a position in the underlying stock is established. The market makers job at this point is to continue to trade for theoretical edge while maintaining a hedged position to alleviate risk. In the following section, we will review the basics of risk management in the form of hedging. Although market makers are the masters of hedging, hedged positions are essential for the risk management for all option traders. It will be equally important for you to understand how to use these strategies. THE TRUMP CARD OF MARKET OPERATORS: HEDGING Thus far, we have overviewed the logistics of the market makers business model and have seen how it functions to both serve the trading public and the market maker simultaneously. Now we will consider how market makers work to secure their edge against the ongoing risks presented to their many positions. An investor who chooses to invest in a particular market is exposed to the risks that are inherent in that market. The specific risk is high if the investor concentrates on one security only. The more a portfolio is diversified, the lesser the specific risk. Hedging is the most basic strategy that an investor can use in order to guard against loss. A hedge position is taken with the specific intent of lowering risk. As we have learned, option positions are susceptible to more than just simple directional price risks, and therefore, a trader must be concerned with more than simple delta neutral trading. There is risk associated with each of the variables that determine an options value (from interest rates to time until expiration). In order to minimize the effect of these risks to an options value, a trader will establish a position with offsetting characteristics. Just as you hedge a bet by betting against your original bet too a lesser degree, market makers try to take on complementary positions (in stock or options) with characteristics that can potentially buffer against exposure to loss. A hedge, then, is a position that is established for the sole purpose of protecting an existing position. Determining what risks an option position might be exposed to is one of the first steps towards determining how best to hedge risk. We have learned that six risks are associated with an option position: Directional risk (delta risk) is the risk that an options value will change as the underlying asset changes in value. All other factors aside, as the price of an underlying asset decreases, the value of a call will decrease while the price of the put will increase. Conversely, as the underlying asset increases in value, a call will increases in value as the put decreases in value. Delta risk can easily be offset through the purchase or sale of an option or stock with opposing directional characteristics. Directional hedges are illustrated in Tables 1 and 2. Table 1: Delta Effects When the Underlying Security . Increase in Value Interest rate risk (rho risk) is negligible to most traders. Its impact can be substantial if a position contains a large amount of long or short stock or long-term options. Decreasing the stock position, replacing stock with options is the most efficient way to reduce rho risk. Remember, longer-term options are more interest rate sensitive. Dividend risk can be offset through the purchase or sale of options or the underlying stock. An increase in the dividend will make the call decrease in value because the holder of the call does not receive the dividend. In this situation, it is more advantageous to own the underlying asset over owning the call. Conversely, the put will increase in value when the dividend is increased because the short stock seller must pay the dividend to the lender of the stock, which makes owning the put more desirable than shorting the underlying asset. Table 4 illustrates the effects of changing input variables on an options theoretical value. Varying market conditions As market conditions change the values of. Rise in price of the underlying. Knowing the risks involved with options trading is the first step to successful trading while hedging these risks to create a profitable position is the second step. We have learned that there are different ways to hedge each trade, providing a market maker with the important task of determining the best hedge possible for each trade he or she executes. Determining which hedge is the best is based on knowing not only the risks of the original trade but also the corresponding risk of the hedge. Observing actual positions under a multitude of conditions is by far the best way to learn the complex nuances of options. The next two chapters will guide the reader through the fundamentals of the marketplace and setting up a trading station, giving the investor the ability to begin trading on his or her own. HOW TO SELECT AN OPTIONS BROKER Once youve made the decision to trade online, its important to identify a brokerage firm that will meet, and preferably exceed, your expectations. This is especially true in the options trading arena because there are potentially many more factors involved than in a straightforward stock transaction. With stocks, once you have determined what stock to trade, it really becomes a question of how much to buy or sell and when. With options, the decision is much more complicated because the following factors must be considered: Will you buy (or sell) calls or puts What strike price(s) What month(s) What is your strategy Given this level of complexity, there are a few important issues to consider before you choose an on-line broker: Real Time Option Quotes Whether an online broker provides real time option quotes is, perhaps, the most important consideration for even semi-serious option traders. On-line brokerage firms, especially those that specialize in stocks, are sometimes lacking in this critical area. While they might be able to provide real time quotes on individual options, the option chains (the charts showing the bid-ask, volume, and other critical information for all strike prices and expirations) are often not accurate. With the efficiency of the exchanges and the standardization of the contracts, there is no longer a reason for option traders to pay higher commissions on option trades vs. stock trades its no more difficult to execute an options trade than it is to execute a stock trade. Access to Analytics Advanced analytical tools like implied volatilities and deltas are important to serious option traders. However, most traditional brokers do not provide customers access to this nformation. Instead, their customers are forced to trade in the dark. Choosing an exchange (i. e. BSE or NSE) When options are traded on multiple exchanges, its often possible to get a slightly better price on one of the exchanges. While these discrepancies dont last very long, 0.50 or 0.25 can make a significant difference on a large block of trade. However, brokerage firms that make it difficult to execute basic spread orders are even less likely to offer customers a choice as to where their trades are executed. In fact, many customers probably arent even aware of potential price discrepancies across exchanges. For investors who make larger trades, this can be a significant issue. Before establishing any position its important to establish a few guidelines for yourself: Are you trading with money you can afford to lose Is the position you intend to put on sufficiently small that it wont have a major impact on your portfolio What is your specific objective for this position What is your exit strategy What is your downside risk Are you trading with money you can afford to lose The importance of this cannot be overstressed. If you have already earmarked the money for another use, it is not advisable to invest it in a risky position--even for a short term trade. Every day the market extracts money from people who cant afford to lose it. Dont be one of them. Is the position you intend to put on sufficiently small that it wont have a major impact on your portfolio This is a guideline novice traders routinely violate. Experienced traders caution people against putting on positions that will have devastating results if the market moves the wrong way. Some traders go so far as to say that positions should be so small that putting them on seems almost meaningless. Typically, the percentage of your portfolio associated with this would be 12 to 1. Keep in mind though that this applies to traders more than long-term investors. This is not to say that investors wouldnt benefit from the same advice. They probably would. Its just that a disciplined approach is particularly beneficial to option traders who could easily lose their entire investment. What is your specific objective for this position What is your exit strategy These issues are inter-related so we will examine them together. First, whenever you put on a position, its important to set a price target along with a strategy for what happens when you get there. For example, if you are convinced a particular Internet stock is hugely overvalued (imagine that) and due for a correction, you might decide to buy a long put either at-the-money or slightly out-of-the-money. If the market behaves as you predict and the price drops, you have to decide how far to let your profits run and at what point to take profits. If the stock drops 50 and your put is now deep in-the-money, this might be a good time to take profits. On the other hand, if you think the stock is still overvalued, you could buy a slightly out of the money call and let the put ride. For example, if the stock dropped from 250 to 150 and you own the 240 put, you could lock in your profit by buying a 150 call. This way, if the stock goes back up, what you lose in the put will be made up by the call. If the stock continues to drop as you hope, the put will increase in value and the call will expire worthless. Whatever you decide, its good to have your strategy thought out in advance. This helps to take the emotion out of it. What is your downside risk With option spreads and other advanced strategies, your maximum loss may be more than your initial investment. Before entering into any trade, its important to know your maximum profit, maximum loss, and break-even. Trading surprises are seldom pleasant. Modifying and Managing a Position Depending on market conditions, option investors may need to modify their positions either to lock in profits or protect themselves from adverse moves. Protecting your profits and limiting your losses Taking the easiest example, lets imagine you bought a long call and watched with interest as the stock rallied. How can you protect what is now a paper profit Considering the additional stock commissions involved in exercising the option, well disregard this as a strategy and focus on other alternatives. The dilemma whenever a position makes money is when to take profits and when to let profits ride. By selling the call, you lock in profits, but you may miss additional upside. On the other hand, if you sit tight, the stock could pull back below the strike price. In this case, you would lose your additional investment as well as your paper profit. Fortunately, there are other alternatives. The important point to note is that the riskiest course of action is to do nothing because your initial investment remains at risk along with any paper profits you have generated. SEVEN MYTHS ABOUT STOCK OPTIONS For years, the options market was shrouded in mystery as transactions took place with obscure options dealers who set the prices and terms of options contracts known as Jhota Phatak. The BSE and NSE created listed options that became the standard, and option prices were set in an auction market nearly identical to the stock exchanges. For the first time, this allowed the option holder to choose to sell his contract on the open market before it expired. Trading volume in listed options has exploded in the United States and option trading on more than 1,900 different equities and indices now accounts for the equivalent of 70 million shares of stock trading each day. But many of the myths associated with options have lingered. Unfortunately, these myths have caused many investors to remain on the sidelines while they could be utilizing options profitably or for reducing risk. Myth 1: 90 of Options Expire Worthless This statistic is often bandied about by those who have no experience trading options. According to the CBOE, about 30 of all options expired worthless -- a far cry from 90. Myth 2: Options are Much Riskier Than Stocks or Mutual Funds This assumes that the investor is trading options with the same amount of capital that he would devote to stocks or mutual funds. On a rupee for rupee basis, options are riskier. Here at STOCKWHIZO Research, we never recommend trading options in this manner. Instead we show our subscribers that options are a cheap way to reduce their overall risk. How First, by limiting their total rupee exposure to a fraction of what they would invest in stocks or mutual funds. Second, by diversifying their options portfolio among different underlying equities. And third, by purchasing both call and put options, since put options are profitable when the underlying stock declines in prices. Myth 3: Option Sellers Make Profits at the Expense of Option Buyers Unlike the gambling casino (or the lottery or the race track) which has built-in percentage advantages for the house, option trading is a zero sum game in which option sellers and buyers are always at a standoff in total. Option buying and selling differ only in the distribution of their outcomes, not in their relative profitability. Although option buyers can have more losing than winning trades, they never lose more than their original investment and their profit potential is unlimited. Option sellers profit most of the time but their potential losses are unlimited. STOCKWHIZO has always been dedicated to maximizing profit potential through option buying -- by taking full advantage of the unlimited profit potential and limited risk of this strategy. Myth 4: Options are Too Complicated Nonsense Anyone who is familiar with stocks can easily learn how to trade options. The approach to option trading that we use at STOCKWHIZO is very simple. If we are bullish on a stock, we advise you to buy a call option on that stock. For a fraction of the underlying stock price, you rent any appreciation in the stock above a particular price for a specified time. If we are bearish on a stock, we advise you to buy a put option. Here you rent any decline in the underlying stock below a particular price for a specified time. Its that simple Myth 5: Stockbrokers Dont Understand Options and are not interested in Options Business. While this may have been a problem in the beginning, the brokerage landscape will significantly changed for the better. A number of brokerage firms now specialize exclusively in options. Many large brokers will become option trader friendly. As time passes by with experience. Some traditional full-service firms will developed expertise in options and the desire for options business. While we do not recommend any specific firm, STOCKWHIZO subscribers receive a list of firms that are interested in options business and have the expertise to meet the needs of option traders. Myth 6: You cant Beat the Option Pricing Model. Since options are a zero-sum game, and option prices are based upon a mathematical option pricing model, some say it is impossible to profit from buying options in the long run. WE STRONGLY DISAGREE. First, prices for exchange-listed options are set in the marketplace by buyers and sellers, although the computerized pricing models do exert a strong influence. But more importantly, these models are based upon the mistaken assumption that all stock price movement is random. Clearly, there are always certain stocks that are moving in well-defined price trends, as opposed to moving randomly. If you can identify those stocks whose price trends are likely to continue, you can beat the option pricing model Much of our research has been devoted to developing indicators to determine stocks that will continue moving in such price trends, so our subscribers can profit from buying undervalued options on these stocks. Myth 7: Options Trading Requires Too Much Time Amateurs are rarely successful trading options because they dont have the time, information, expertise or the discipline to compete in this fast-moving market. But STOCKWHIZO subscribers have a big edge over these amateurs. First, our staff of professionals here at STOCKWHIZO Research have the information and expertise to make you a successful options trader. And second, we give you the disciplined trading rules that help you make big money and also minimize your time commitment to your options trading We tell you how much to pay, when, and at what price to sell. And you can often leave these instructions with your broker, so your options portfolio can appreciate on automatic pilot Anyone seriously interested in trading would do well to buy a copy of Jack Schwagers books Market Wizards The New Market Wizards. Through interviews and conversations with Americas top traders, Jack extracts the wisdom that separates successful traders from those who, through their trading, simply add to the wealth of successful traders. Keeping Your Trades Small One of the key factors mentioned by almost every good trader is discipline. Discipline, as you might imagine, takes a variety of forms. For beginning traders, one of the toughest challenges is to keep trades small. Believe it or not, more than a few top traders dont allow any one position to account for more than 1 of their total portfolio. Professionals attribute much of their success to managing risk in this way. Limiting Your Losses Another aspect of trading that involves discipline is limiting your losses. Here, there isnt a magic formula that works for everyone. Instead, you have to determine your own threshold for pain. Whatever you decide, stick to it. One of the biggest mistakes people make is to take a position with the intention that it be a short-term trade. Then, when the position goes against them, they make a seamless and unprofitable transition from trader to long-term investor. More than a few people have gone broke waiting for the trend to reverse so they could get out at break-even. If you are going to trade, you have to be willing to accept losses--and keep them limited Letting Your Profits Run Another mistake novice traders make is getting out of profitable positions too quickly. If the position is going well, it isnt healthy to worry about giving it all back. If thats a concern, you might want to liquidate part of the position or use options to lock in your profit. Then, let the rest of it ride. It isnt uncommon for people to view trading as a fast-paced, exciting endeavor. Fast-paced Absolutely. Exciting Now thats a matter of opinion. The Importance of Remaining Cool-Tempered More than a few traders interviewed in The New Market Wizards emphasize the importance of remaining unemotional and cool-tempered. To these people, trading is a game of strategy that has nothing to do with emotion. Emotion, for these traders, would only cloud their judgment. In the book Jack talks about one trader who was extremely emotional. Although Jack was able to show him how to be less emotional and more detached, it became quickly apparent didnt enjoy being emotionally unattached. He found it boring. Unfortunately, emotion involvement in trading comes at a high price. Before too long, that trader went broke. The morale of the story is simple: If you insist on being emotionally attached to your trading, be prepared to be physically detached from your money. Acceptance and Responsibility One of the biggest mistakes traders can make is to agonize over mistakes. To beat yourself up for something you wish you hadnt done is truly counterproductive in the long run. Accept what happens, learn from it and move on. For the same reason, its absolutely crucial to take responsibility for your trades and your mistakes. If you listen to someone elses advice, remember that you, and you alone, are responsible if you act on the advice. Another Way to View Losses Perhaps the most striking example of emotional distance in trading is a reaction to positions that go against thinking to yourself, Hmmm, look at that. If only we could all be that calm Of all the emotions we could possibly experience, fear and greed are possibly the two most damaging. Of all the emotions that can negatively impact your trading, fear may be the worst. According to many of the traders interviewed in The New Market Wizards, trading with scared money is an absolute recipe for disaster. If you live with the constant fear that the position will go against you, you are committing a cardinal sin of trading. Before long, fear will paralyze your every move. Trading opportunities will be lost and losses will mount. To help deal with your fear, keep in mind what fear is False Evidence Appearing Real The flip side of fear is confidence. This is a quality that all great traders have in abundance. Great traders dont worry about their positions or dwell on short-term losses because they know they will win over the long term. They dont just think theyll win. And they dont just believe theyll win. They KNOW theyll win. It should never bother to lose, because one should always believe that one would make it right back. Thats what it takes. To Talk or Not to Talk For many traders, sharing opinions and taking a particular stance only magnifies the stress. As a result, they begin to fear being wrong as much as they fear losing money. Although it may be one of the hardest lessons to learn, the ability to change your opinion without changing your opinion of yourself is an especially valuable skill to acquire. If thats too hard to do, the alternative may prove much easier: Dont talk about your trades. Greed is a particularly ugly word in trading because it is the root cause of more than a few problems. Its greed that often leads traders to take on positions that are too large or too risky. Its greed that causes people to watch once profitable positions get wiped out because they never locked in profits and instead watched the market take it all back. Part of the remedy for greed is to have, and stick to, a trading plan. If you faithfully set and adjust stop points, you can automate your trading to take the emotion out of the game. For example, lets say you are long the 150 calls in a stock that rises more rapidly than you ever expected. With the stock at 240, the dilemma is fairly obvious. If you sell the calls, you lock in the profit but you eliminate any additional upside potential. Rather than sell the calls, you might buy an equal number of 230 puts. The Rs.90 profit per call that you just locked in will more than offset the cost of the puts. At the same time, youve left yourself open to additional upside profit. Gradual Entry and Exit Another strategy successful traders use is to gradually get in and out of positions. In other words, rather than putting on a large trade all at once, buy a few contracts and see how the position behaves. When its time to get out, you can use the same strategy. Psychologically, the problem people have implementing this strategy is that it takes away the right and wrong of the decision making process. Its impossible to be completely right or completely wrong using this strategy because, by definition, some of the trades will be put on at a better price than others. Awareness and Instincts For professional traders especially, instincts often play a crucial role in trading. To truly appreciate this, just close your eyes and imagine making trades in a fast market with dozens if not hundreds of people screaming around you. In this environment, it becomes absolutely essential to maintain a high level of awareness about everything going on around you. Then, to have the confidence to pull the trigger when necessary, you have to trust your instincts. Its absolutely amazing to see how some professional traders, even in a busy market, know exactly who is making what trades. For these traders, expanded awareness is often a necessary prerequisite to fully developing and trusting their instincts. The same is true for professional traders as well. Watching how markets behave and developing a feel for the price fluctuations is truly time well spent. Unfortunately, in this era of technology, people have become so removed from their natural instincts that many are no longer in touch with their intuition. This is unfortunate because intuition functions as a wonderful inner guidance system for those who know how to use it. One trader interviewed by Jack Schwager in The New Market Wizards relies so heavily on his intuition that he didnt want his name in the book for fear his clients would be uncomfortable with his strategy and move their money elsewhere. Speaking anonymously, he described in detail how he establishes a rhythm and gets in sync with the markets. In this way, he has learned to distinguish between what he wants to happen and what he knows will happen. In his opinion, the intuition knows what will happen. With this knowing, the ideal trade is effortless. If it doesnt feel right, he doesnt do it. When he doesnt feel in sync with the markets, this trader will paper trade until he feels back in rhythm. But even here, he keeps his ego and emotion out of it. His definition of out of sync is completely quantifiable. Being wrong three times in a row is out of sync. Three mistakes and its back to the paper trading. Now theres a strategy almost everyone can benefit from. Trading is a performance-oriented discipline and every great athlete, trader, or Performer will occasionally hit performance blocks. Every Olympic contender trained hard physically, but the difference between the ones who made the Olympic team and those who did not was the emphasis put on mental coaching by the winners. Much of a traders early education is concentrated on strategies and market analysis. But what are the necessary ingredients for peak performance What are the tools for both mastering the mental side of the game and busting out of the inevitable slumps that can occur along the way First - what is the mindset necessary for peak performance How does one ultimately get in the groove There is no better feeling than being in the flow - especially with trading. That is what many of us live for and what keeps us in the game, because trading can be a very tough business with long hours. There are several key common ingredients when you are performing your best, no matter what the field. EXPECT success. It begins initially with your self-talk. Do you get down on yourself when you make a mistake - or do you say to yourself - next time I will do better because I have great trade management and am a superior trader Be your own best motivator and believer in yourself. Positive Self Talk leads to positive BELIEFS. If you believe you can do something, you WILL eventually find a way. When you have a positive belief system that the eventual outcome will be OK, then you are more mentally and physically relaxed. You then have better concentration, which leads to smoother execution, which of course leads to peak performance. Now, on the flip side of the coin, negative self-talk sows seeds of doubt. This lowers self-confidence, which leads to a negative belief system. This then creates anxiety, which leads to disrupted concentration. Now the trader becomes tense and tentative which in turn leads to poor performance. Talk about a vicious cycle SECRETS OF TOP TRADING PERFORMANCE KEY INGREDIENTS TO PERFORMING YOUR BEST You must be passionate about what you are doing and having fun. Passion first, then performance. Top performance comes from having a high degree of confidence. You must have the confidence that you can take control and face adversity. You must also be confident that you will have a favorable outcome over time. Peak performance comes from exceptional CONCENTRATION. You must concentrate on the process, though, not the outcome. A sprinter who is in the lead is thinking about the wind on their face, how relaxed their arms are, feeling the perfect stridethey are totally in the moment. The person who does NOT have the edge is thinking, Oh, that runner is pulling ahead of meI dont know if I have enough wind to catch the leader They are tense and tight because they are thinking about the outcome, not the process. Great performances come from being able to rebound quickly and forget about mistakes. Great performance comes from pushing yourself and trying to overcome limitations. Staying in the safe zone becomes a monkey on your back. Challenge yourself to take that hard trade. Manage it. If it does not work out, so whatyour risk was limited and you can pat yourself on the back for taking the hard trade in the first place. SEE AND DO. DONT THINK Great performance comes from turning off the brain and becoming automatic. This is being in the Zone in the groove. You cant overanalyze the markets during the trading day. When you are relaxed, your reflexes and timing are superior because you are loose. POSITIVE SELF TALK There are some concrete tools to break the cycle and bust out of the slump The number one tool for starters is POSITIVE SELF TALK. We all talk to ourselves in our own head. Be aware of the things you are saying to yourself. The written word is also a powerful tool. Read affirmations and books on positive thinking. Norman Vincent Peale, Napoleon Hill. Arnold Schwarzenaggers autobiography are a few. Richard Marcinko wrote a book called the Rogue Warrior. He talked about the Will to WIN and the belief that ANY circumstances could be overcome. This is a great inspirational book for traders. Next - act like you are already where you want to be. Assume the mannerisms, posture and talk of a top trader. In addition to self-talk and reading written words, develop mental pictures. Visualize what you are going to do with your wealth or how it is that you want to live. Think of the power that money would give you to start any organization you want or to make other peoples lives better. Visualize your dream house. Program your subconscious as though you are already there. Dare to dream. OK - talk, words and pictureswhat is next Look at your environment that you have surrounded yourself with. Your success in trading will also be a product of your environment and I am not just talking about office space. Look at the people you surround yourself with. Do they support your activities Surround yourself with people who believe in you, who smile, and who are enthusiastic in anything they try or do. The top Olympic athletes had friends and family cheering them on every step of the way. BE PREPARED FOR A SURPRISE EVERYDAY All of the above factors deal with external factors and internal belief systems. Now lets get down to the DOING part Every trader should be prepared before the markets open because they already did their homework - right. One of the most impressive points in the Rogue Warrior book was this veteran navy seals obsession for being totally prepared for Mr. Murphy There was always a backup plan for everything and this is what kept him alive. Prepare your daily game plan by looking for both new setups and preparing strategies for managing existing positions. So, assuming that you have done your daily homework as a trader, the next step is to learn how to get into the groove. There is no better tool for this than having routines and rituals. Pre-market rituals help calm the nerves, get you into a rhythm, and also help to turn off the logical part of your brain - the part that wants to overanalyze everything. If you have a chattering monkey sitting behind your ear, routines and rituals are one of the best things to shut that monkey up. Maybe there is an opening sequence of tasks you do before the market opens. Perhaps in the middle of the day you draw swing charts or take periodic readings of the markets action. Maybe you keep a journal and make notes to yourself. At the end of the day, what type of record keeping do you do for your trading activity What do you do to unwind Salesmen are taught to do small rituals before cold calling clients. It controls the anxieties and fears of rejection. Cricket opening Batsmen have a pre-warm up ritual. It calms their minds and puts their body on the autopilot mode. It keeps them involved in the PROCESS and not thinking about the outcome. One of the more common rituals on the trading floors was to wear the same disgusting lucky tie every day. If the mind BELIEVED that the tie was lucky, this was all the traders needed to keep the long term odds in their favor. Here is another helpful factor: A healthy body keeps a healthy mind. EXERCISE This gets oxygen to the brain and keeps the blood flowing. How can you expect to be a peak performer when you are eating junk food and going through insulin swings Or perhaps you drank too much wine the night before or are jittery from drinking too much coffee. How can you concentrate well if you are not getting a full decent nights sleep Sure, most of these are minor factors but they can all add up to major bumps in your performance. One moment of sloppiness can lead to forgetting to place stops or letting a bad trade go too long. Then when damage is done, your confidence gets chipped away. You must treat your confidence level as something to be protected. Good habits will keep your confidence level high. Once you have good habits, it will allow you to increase your trading size. If you want to push yourself to the next level in your trading and are wondering how to increase your size, you MUST have a foundation of good habits. If you are running into a mental block in this area, it is your subconsciouss way of telling you that either you have not done adequate preparation or you are not satisfied with your money management habits. There is one more extremely important thing that contributes to your success and that is GOAL SETTING. When you set your goals, they must be concrete and measurable. You must also break them down into bite size pieces. Perhaps your larger goal is to make 8 digits over the next three years, but how do you get there Put together a more detailed business plan that is NOT Rupee oriented but will help you eventually reach your Rupee-oriented goal. Maybe it includes how many trades you should make per week, how much time you should devote each evening to preparation and studying charts, and plans for controlling risk. Both short term and long term goals help achieve peak performance. You must also have concrete ways to measure those goals. Top cricketers know the splits that they run. They know if they are ON or OFF according to how practice goes. They know their unforced error percentage, their personal best, and their competitions stats. The same should apply to you in your trading. Know your weekly winloss ratios, your trade frequency, and the average amount of profit or loss each month. Only by having something to measure can you tell if you are improving or not and moving closer to your goal The battleground isnt the markets but whats within you. The more you talk with other traders, the more you realize that everyone goes through various common experiences. Everyone makes many of the same classic mistakes. But what distinguishes the ones who can ultimately overcome them Remember that ATTITUDE is everything. How you frame out an individual experience or event will affect your success in the long run. Do you see a trading loss or bad drawdown period as a major setback, or do you see it as a learning experience from which you can figure out how to be on the RIGHT side of a trade instead of the wrong side the next time around. Many great traders use periods after drawdowns to go back to the drawing board. Some of the best systems and trading ideas have come after periods of adversity. What incentive is there to learn and improve ourselves when everything is smooth sailing and we are fat and happy But when times are tough, that is when we can rise to the occasion and prove that we can overcome any obstacle set down in our path. So many great athletes have been able to come from behind when they are down because they have learned how to seize that one opening or opportunity and CONVERT. They latch on to the tiniest shift in momentum and milk it for all it is worth. Latch on to that next winning trade and convert. The first small moral victory is the first step towards reaching the top of Mt. Everest. And if you keep making small steady steps, you will eventually reach the top. Sometimes for a trader, the greatest feeling in the world can be making back those losses, no matter how long it takes, because once you have done that, you realize you can do anything. The most successful players are the ones who have a burning desire to win Dont check out of the game. Never give up Improve your consistency. Stay active, stay involved, and keep your feet moving. Ha tålamod. Do not force a trade that isnt there. Wait for the play to set up. When you get a good trade, go for it. Manage it. Trail a stop. Dont be too eager to get out. Be flexible - if what you are doing isnt working, change what you are doing When down, get a little rhythm and confidence going. Dont worry about being too ambitious. Stay with your game. Dont let outside distractions bother you. They take energy and break your concentration. Match your particular strengths to the type of market conditions. Hate making stupid mistakes and unforced errors. This includes not getting out of a bad trade when you know you are wrong. Many players will play their best game when they are coming from behind. Copyright 2001 by Hiten Jhaveri, StockWhizo Investments. All rights reserved worldwide. Option Strategies Generally, an Option Strategy involves the simultaneous purchase andor sale of different option contracts, also known as an Option Combination. I say generally because there are such a wide variety of option strategies that use multiple legs as their structure, however, even a one legged Long Call Option can be viewed as an option strategy. Under the Options101 link, you may have noticed that the option examples provided have only looked at taking one option trade at a time. That is, if a trader thought that Coca Colas share price was going to increase over the next month a simple way to profit from this move while limiting hisher risk is to buy a call option. Of course, she could also sell a put option. But what if she bought a call and a put option at the same strike price in the same expiry month How could a trader profit from such a scenario Lets take a look at this option combination In this example, imagine you bought (long) 1 65 July call option and also bought 1 65 July put option. With the underlying trading at 65, the call costs you 2.88 and the put costs 2.88 also. Now, when youre the option buyer (or going long) you cant lose more than your initial investment. So, youve outlaid a total of 5.76, which is youre maximum loss if all else goes wrong. But what happens if the market rallies The put option becomes less valuable as the market trades higher because you bought an option that gives you the right to sell the asset - meaning for a long put you want the market to go down. You can look at a long put diagram here. However, the call option becomes infinitely valuable as the market trades higher. So, after you break away from your break even point your position has unlimited profit potential. The same situation occurs if the market sells off. The call becomes worthless as trades below 67.88 (strike of 65 minus what you paid for it - 2.88), however, the put option becomes increasingly profitable. If the market trades down 10, and at expiry, closes at 58.50, then your option position is worth 0.74. You lose the total value of the call, which cost 2.88, however, the put option has expired in the money and is worth 6.5. Subtract from this to total amount paid for the position, 5.76 and now the position is worth 0.74. This means that you will exercise your right and take possession of the underlying asset at the strike price. This means that you will effectively be short the underlying shares at 65. With the current price in the market trading at 58.50, you can buy back the shares and make an instant 6.50 per share for a total net profit of 0.74 per share. That might not sound like much, but consider what your return on investment is. You outlaid a total 5.76 and made 0.74 in a two month period. Thats a 12.85 return in a two month period with a known maximum risk and unlimited profit potential. This is just one example of an option combination. There are many different ways that you can combine option contracts together, and also with the underlying asset, to customize your riskreward profile. Youve probably realized by now that buying and selling options requires more than just a view on the market direction of the underlying asset. You also need to understand and make a decision on what you think will happen to the underlying assets volatility. Or more importantly, what will happen to the implied volatility of the options themselves. If the market price of an option contract implies that it is 50 more expensive than the historical prices for the same characteristics, then you may decide against buying into this option and hence make a move to sell it instead. But how can you tell if an options implied volatility is historically high Well, the only tool that I know of that does this well is the Volcone Analyzer. It analyzes any option contract and compares it against the historical averages, while providing a graphical representation of the price movements through time - know as the Volatility Cone. A great tool to use for price comparisons. Anyway, for further ideas on option combinations, take a look at the list to the left and see what strategy is right for you. Comments (103) Peter December 6th, 2016 at 7:19pm Yes, it represents your PampL movements today when the stock price changes by the amount on the x-axis. Luciano December 6th, 2016 at 7:22am Thanks for your help. So does the pink line represent the PL of my position today I mean the PL that I should have if I close the strategy today Thank you and regards. Peter December 1st, 2016 at 5:15pm The pink line represents the change in the value of the position relative to the current theoretical price. At the center of the graph the pink line will always be zero because if you boughtsold the spread now at the current market price you will not have made or lost anything. But if the market price moves, which is represented by the x-axis your estimated (theoretical) PampL will change by the amount illustrated by the pink line - all other things being equal. As the expiration date approaches, the pink line moves closer to the bluepayoff line. This line, at the expiration date, will be the most you can gain or lose for each corresponding x-axis (stock price) point. Hope this is clear, please let me know if not. Luciano December 1st, 2016 at 8:48am could you please explain me what is the pink line in your graph (PampL60 days) and in the Option Trading Workbook spreadsheet (which is called: Current Theoretical PampL Relative to Underlying Price Changes) You did a great job for newbies like me Thank you. Peter November 18th, 2015 at 3:59pm Hi Renee, yes they are already added as either long or short i. e. Long Straddle and Long Strangle . Renee November 17th, 2015 at 8:55pm Could add Strangle or Straddle Igwe Zachary Githaiga March 30th, 2014 at 3:35am so, what are the strategies in option trading bee February 25th, 2014 at 4:05pm If I039ve actually short a stock and it now is trading higher, is there any option repair strategy I can use to limit my loss Most option repair strategy only gives example starting out with a long position on a stock. Peter December 3rd, 2013 at 2:52am Aplogogies for the delayed response The ATM point will be at the quotforwardquot price, which will be slightly higher than the stock price depending on the interest rate. If interest rates are zero then the ATM price will be the stock price. I039m not really sure what the best volatility to use actually is. Some prefer to stick to a one year rate while others will use an historical level appropriate for the expiration of the options. What is the website you039re looking at for the vols Terry B November 25th, 2013 at 5:21pm Hello, just downloaded your spreadhseet. Awesome stuff. I039m, mainly interested in the deltas for my particular use. a) For the default model stock price of 25. I noticed that the at the money calls were at .52 and the at the money puts were at -.48 Shouldn039t the. calls be at .50 and the puts at -.50 Also, I came across a site that post039s historical volatilities for a stock. 1mo, 2 mo, 3mo, 6mo, 1yr, 2 yr, and 3yr. Which would be the best to plug in to your spreadsheet to calculate most accurate delta039s. The shortest term 1mo thanks. great spreadsheet Jayant October 15th, 2013 at 12:23am Dear admin can u suggest me any new strategy except these strategies..i want some new strategy, m well known all this strategies because m the trainer of options market in kolkata and m also certified with NSE. Peter August 26th, 2013 at 6:18pm It is the theoretical PampL calculated with 60 days left to maturity. Steve August 26th, 2013 at 7:33am What exactly is the pink line in the diagrams It appears to be some average over time but I can039t find a definition anywhere. alvaro frances April 15th, 2012 at 5:03pm Amit Bhutani hello, please can you explain the strategies that spelling on March 17, 2012 the day that I describe below, thanks 1)Long Combo Nifty Short 2) Combo corto largo Nifty 2)Short Combo Nifty Long 3) Put Call Ratio spreed 3)Put Call Ratio spreed 4) Coloque el oso spreed Spreed Bull de llamadas. 4)Put bear spreed Call Bull Spreed. Peter March 27th, 2012 at 5:05pm Right - the OptionTradingWork book is currently onlt Black and Scholes. For American options you can use the Binomial Model - there is a spreadsheet on the Binomial page. James March 27th, 2012 at 7:02am Hi I039ve used the Option Trading Workbook. xls and compared it to bloomberg valuations and it is slightly out. Specifically I039m talking about american options on the ES mini contract, eg ESU2C 1350 Index Does this pricer work for american options, or is it just for european Any chance we get an american options enabled one :-))))) Peter March 26th, 2012 at 7:47pm You can write a callput on the basis of a) creating a naked position because you are bullishbearish on the underlying b) as part of a combination such as a covered call, which is used primarily to gain additional income on an existing stock position. Amit S Bhuptani March 17th, 2012 at 1:12pm Best strategy which I have come across. 1)Long Combo Nifty Short 2)Short Combo Nifty Long 3)Put Call Ratio spreed 4)Put bear spreed Call Bull Spreed. Regards Amit S Bhuptani. PMS ICICI Sec Ltd. Rakesh March 17th, 2012 at 10:38am I wanted to know the basics which I need to keep in mind before trading in quotEXPIRYquot When we need to write a CALLPUT Peter February 26th, 2012 at 4:44pm Mmm, that039s a tough question to answer here Rakesh -) I039d say your best bet would be to invest in a program like MultiCharts . MultiCharts can chart, scan and auto-trade stocks through many different brokers. Plus, it provides an easy to use scripting language that allows you to design and backtest trading ideas before risking real money. I have it and love it Rakesh February 26th, 2012 at 11:36am What things I need to keep in mind before getting into intraday trading in STOCKS I also wanted to know the procedure of picking the right stock in intraday trading Peter February 23rd, 2012 at 5:17pm It depends on what you define as the ATM strike. If you simply say that ATM strike is the strike closest to the stock price, then yes the call will normally have a higher premium than the put. However, the ATM strike should really be driven by the quotforward pricequot of the stock. As option contracts carry the right to exercise at a point in the future, their value is first based on the future price of the stock, which is the stock price plus the cost to hold the stock (cost of carry or interest rates) less any dividends received during that period. As you apply the interest rates and dividends to the current stock price you will calculate a price different to the stock and this is the true ATM price. For retail traders who are simply eye balling the option screen to see where the ATM is, just using the stock price is good enough, which is why they039ve noticed that the call premiums are higher than the puts as the true forward price is actually higher than the stock price. Call, put and stock prices for the same strike are all related and cannot violate put call parity. Take a look at that link to read more and let me know if I039ve missed anything or if you have any questions. Joel H. February 23rd, 2012 at 8:58am I just finished reading a book on options and one of the discussion points was that an ATM call will always have a higher premium than a put at the same strike. If I find a put which has a higher premium then a call at the same strike price, is this unusual Is there a way to take advantage of such a situation Is it fair to assume that this is a temporary situation Thanks in advance. Peter February 23rd, 2012 at 2:28am If the option is out-of-the-money then, yes, it will begin to lose value very quickly as expiration approaches. If you are happy with any profit you039ve made already then you should exit while you can. Ash February 23rd, 2012 at 1:39am Hi Peter, I have a question on when to close out my position on a call option. I currently have a April call option and i wanted to know if there are any best practices around when to closeout your position if you are not planning on purchasing the stock at expiry. I am asking this because as time goes by the price of options go down. It is end of feb now and my options expire in Apr. Your input is appreciated. Peter February 19th, 2012 at 5:04pm If you want limited risk and unlimited profit potential then you are best looking at positions like long call. long put. long straddle. long strangle etc - these are strategies where you are net long options. Rakesh February 19th, 2012 at 8:59am Can anybody tell me the statergies that I need to keep in mind before trading in quotOptionsquot So that the risk percentage is nominal and the probality of profit is high. Peter February 12th, 2012 at 5:09pm This strategy is called a short guts and is similar to a short strangle except you are shorting a put with a higher strike price, where a strangle sells the put with a lower strike price. The payoff calculation is a little different also: with a short strangle the max profit achievable is the premium received. But with a short guts the max profit is the net premium received minus the difference between the two strikes, so in this case 5 (multiplied by whatever multiplier the index carries). Can I ask why would choose this approach instead of selling the 1100 call and the 1050 put Peter February 12th, 2012 at 3:48pm Do you mean selling a call and a put together at the same 130 strike price i. e. a short straddle If so, and the combined premium for this trade was 10, with the underlying now at 150, then Net premium received: 10 Short Put: worthless Short Call: -2,000 Total: -1,990 With the stock at 150 you039ll be assigned the stock at a price of 130 meaning an immediate loss of 20, which multiplied by the multiplier of 100 leaves you with a 2,000 loss for that leg of the position. Take away the premium already received and you039re left with -1,990. eh February 11th, 2012 at 3:48am Short 1 lot, Strike Price 1050, Index CALL at 25 and Short 1 lot, Strike Price 1100, Index PUT at 30 What is the risk in this strategy Position held till expiry amp automatically settled by exchange at iNDEX spot price on expiry day. Varun February 10th, 2012 at 1:22am I am new to this and this site has been a big help , I wanted to clarify one thing . Considering that i am bullish on the market and would like to take a profit from it I sell a put call of a stock X with a strike price of 100 the stock is trading at 130 and i assume it will end close to 150 I will sell this Put call Strike price Premium Expected Price at expiry so the person to whom i am selling would not be excecising his option and i would be able to make money. Please do clarify whether this is possible or not danielyee December 22nd, 2011 at 7:08am If I buy a call e. g price 50 if the market start at 9.30 then suddenly drop is this mean all my money gone Peter December 21st, 2011 at 3:52pm You should be able to see the last price - even if the market is closed. danielyee December 21st, 2011 at 4:38am Thanks and when I click e. g AAPL per contract value NA Does this mean I need to wait until market open to see the price Peter December 20th, 2011 at 5:05pm You can take a look at the option prices on Yahoo . danielyee December 20th, 2011 at 5:15am Im a new guy here. can you teach me where I can see if I want to buy e. g AAPL option trading per contract how much Thanks. Peter December 18th, 2011 at 3:52pm Jorge December 16th, 2011 at 4:35pm What if I sell 5000K put on the day of expiration of the contract and the stock does not move significantly in value to exercise the contract for who ever bought it. Do I get to keep the commission Peter September 29th, 2011 at 12:15am You won039t be able to roll over at the same price - if you want to keep a position in the same strike price, you will have to sell (buy) out of the front month contract and buy (sell) into the back month at the current market prices. Ankur September 29th, 2011 at 12:00am Thanks Peter. Further, if I need to rollover my position to next month, then do I need to pay some extra premium or can I rollover at the same price Thanks Peter September 28th, 2011 at 6:04pm Yes, exactly. You would close your position for a profit without having to wait until expiration to exercise the option. Ankur September 28th, 2011 at 8:00am Really good information on Options. I had one question - Suppose I buy a an option Call 5000 for Rs 30 whereas the index is at 4950. Within 2 hours, index moves to 4990 and option premium is Rs 35. Can I sell the contract now and earn Rs 5 per lot as profit though the index did not reach 5000 Thanks Peter September 18th, 2011 at 11:37pm Risk-free Me too, please let me know when you find such strategies -) aparna September 18th, 2011 at 11:34pm I want to learn risk-free option trading in Indian market. Suggest me some website for it. NAGESH September 4th, 2011 at 11:30am First time I found more information about options. Tack så mycket. Peter August 3rd, 2011 at 5:55pm Both futures and stocks have a delta of 1 so hedging with a future is much the same as hedging with a stock. Raj baghel August 3rd, 2011 at 1:08am is there any help for hedging in future with respect to callput. Peter August 1st, 2011 at 5:48pm Please see the in-the-money page. Arul August 1st, 2011 at 7:02am what is in the money call amp put Peter May 12th, 2011 at 11:05pm Hi spinnerrobert, yes, you can exit an option position at any time prior to the expiraton date. Peter May 12th, 2011 at 11:04pm Hi Azaragoza, you can check out my option pricing spreadsheet for the formula. spinnerrobert May 12th, 2011 at 8:29pm My qestion is let say i own akam and buy option for either put or call. I want to sell it right after i purchase the contract let say within one hour. Is that allow azaragoza May 5th, 2011 at 3:15pm what is the formula you use to optain the PnL charts, do you have an example Peter February 28th, 2011 at 3:05am Hi Jai, it really depends on what market you039re looking at and what your view is of this market i. e is it trending upwards, is there a lot of volatility etc That039s what039s great about options - the strategies vary according to lots of factors. Jai February 24th, 2011 at 11:14pm Would you tell which are the best available statergies in the option market now S. Vivek February 7th, 2011 at 4:48am can you tell me short on options and how its works UOG December 13th, 2010 at 1:26pm Hello, I think your blog is epic. Congrats. Peter December 7th, 2010 at 1:25am You039d need to check with your if they can provide this service. I know that Interactive Brokers provide an API to plug external systems into that operates over the Internet. DAJB December 6th, 2010 at 3:38pm If one is using computational systems as an aid to decision making, then is there a source to receive streaming real time prices over the internet in a way which could be easily integrated into a system Thanks, Peter October 31st, 2010 at 3:53am Premium is the price of the option as it is traded in the market. Commissions (aka brokerage) are what you pay to your broker for executing your trade. 1. You would lose the premium plus any commissions paid to the broker, so 32.95 2. Depends on where the stock is in relation to the strike price. If you were very confident that the stock will not be above the strike price by the expiration date, then you would sell the option back at whatever price you could get and the loss would be 32.95 less (price sold for 2.95). 3. You will only lose the premium paid (plus commissions) i. e. 32.95. Hoppas det här hjälper. Let me know if anything is unclear. Anonymous October 29th, 2010 at 10:16pm I am using Thinkorswim. I haven039t seen about premium. So, I am wondering that what the differences between quotpremiumquot and quotcommissionquot are I bought long call GLD at 128 and expire Oct 2010, I got info from Thinkorswim max profit infinite, max loss 30(not including possible dividend risk), cost of trade including commissions 302.95 32.95. My question are 1. If the strike price expired Oct 31, 2010 is 125, how much would I loss (30 or 2.95 or 32.95) 2. Before the end of expiration, I thought that the market would go down. Which one should I pick between quotsell it before expirationquot or quotdo nothing in order to let it expired. quot How much does it cost of both of them 3. If the strike price expired Oct 31,2010 is 130, what will happen if I do nothing and let it expired Peter October 21st, 2010 at 4:21am Depends on the country and what your main form of income is I039d say, whether the trade is treated as capital gains or income. syrus October 21st, 2010 at 2:08am What is the tax liablity of a option trading when option is exercised. whether it will be profitable after payment of commission to broker and tax. is there any safe net to safeguard profit Peter October 18th, 2010 at 5:15pm Yes, you can surely exit an option position by trading out of it prior to the expiration date. Kartik October 18th, 2010 at 8:03am This explaination talks about option in case of expiry but what in case of trade which takes place in between the expiry date. Peter September 17th, 2010 at 2:26am Hi Meghna, just because there are no bids out there doesn039t mean there aren039t any buyers. You can just enter a sell order into the market and if the price is right a market maker will take it. Meghna September 17th, 2010 at 2:19am Hi Peter, I know that i can reverse the position by selling in the same market. But in electronic trading generally bids are not available for deep ITM OTM options, while in OTC market I can easily reverse the position by paying some what higher to the broker. Hence kindly clarify how to deel with such situation in e-trading like quotIndian Niftyquot. Peter September 15th, 2010 at 6:39am Yep, you can just reverse the option position by selling the same option contract in the option market. Meghna September 15th, 2010 at 5:25am HI, Say if I am buying an in the money European option with an expiry of 4 months and If the option is deep ITM or OTM during at the end of 2nd month and if i want to crystallize my profits than is there any way out for it Peter September 5th, 2010 at 5:15am It039s hard to beat Interactive Brokers on brokerage and platform functionality. Although I039ve heard that Think or Swim have a great platform also. ramesh September 5th, 2010 at 12:32am Which firm has best trading tools and low commissions Peter September 2nd, 2010 at 5:55pm I use and can recommend Interactive Brokers. They are a US based company and you don039t have to live in the US to open an account with them. NaZZ September 2nd, 2010 at 7:02am I stay in Thailand(in Asia), how can I start to trade because I do not any account with any broker in USA. Can you suggest me broker039s web site to open account and trade. Peter August 29th, 2010 at 5:07pm Hi Sam, thanks for the feedback Yes, I think that simple naked long positions are still useful and obviously have the most bang for buck so to speak. It039s just that option traders need to understand the factors that affect an option039s value - specifically volatility. Often you may purchase a call option and even though the stock does rally the call option won039t gain any value - or could even lose value in the market. This is because the drop in implied volatility has played a larger role in the option039s value than the move in the stock price. This can be discouraging to new option traders. But this doesn039t mean that naked call and put buying should be avoided. just needs to be understood. Sam August 29th, 2010 at 10:41am hi Peter, it039s really nice website you have. Anyway, talking about options strategy. based on your experience, is it still useful using only simple long call or put. because i heard that these are useless, mostly worthless. Peter August 29th, 2010 at 5:44am Hi Rajesh, are you located in the US If so, the following companies provide option courses and training rajashekargoud August 27th, 2010 at 12:11pm i am interested option please suggest me good insitituion for traning and from where i should start option(instial investments)and for dealing in option we should have any experiance Peter August 26th, 2010 at 12:31am Hi Raju, thanks for the feedback. if you have any other suggestions for the site, please let me know. raju jee August 25th, 2010 at 9:59pm hi. jst go thru ths site and m stant abut knowing option stategy. plz teach me more and CONGRAT 4 ur valuable meteriel. Peter August 18th, 2010 at 6:57pm Hi Dale, HPQ is currently at 41.36 so your put options are ITM for the buyer, which means you039re looking at being exercised and taking delivery of the stock at 45. With expiration tomorrow your put has a delta of -1, which means you039re effectively long the stock now. What you do now depends on your view of HPQ. By selling a put, I would say that you must have been somewhat bullish in the first place to be prepared to hold the stock at 45. although HPQ has take a sharp dive lately, maybe your view has changed. If that039s the case you could sell out of the puts tomorrow and cut your losses on this trade. Or, if you want to continue holding the stock, then why not have a look at writing some September 43 calls You will limit your gains if the stock gets there but will have the immediate gain of income from the premium received. Dale Brooks August 18th, 2010 at 6:00pm I am short the hpq jan 12 45 put, what is a good stategy to limit my risk on the down side. Should I go long the same put at the same strike. Thank you Dale Peter August 14th, 2010 at 4:00pm Hi Amit, there are two firms that provide this kind of training Amit Sharma August 14th, 2010 at 2:06pm Want to learn Option Strategy with prctical Knowledge Contact. 9818759927, 9211663645 Peter August 14th, 2010 at 6:28am shamsul idrisi August 13th, 2010 at 12:27pm i want to learn option trading please suggest me some good training center Peter August 6th, 2010 at 2:00am Interesting. do you know of a good place to source the putcall ratio numbers Brad August 6th, 2010 at 12:44am I think that the best overbought oversold indicator and a reversal signal is when lets say a stock is in an up trend than for a couple of days in bound-range. the signal comes with a sudden PUTCALL ratio change with a significant volume AUMKAR August 3rd, 2010 at 1:21pm What will be happen if the NIFTY STRAIT go 100 anjanappa July 30th, 2010 at 2:04am call opt put optns strategies, i am very succsed in this field pl anybody try and earn get more money thank u Peter May 26th, 2010 at 12:57am No, OTC can mean a transaction between two parties for any type of financial instrument - even stocks can be traded OTC. Maria May 25th, 2010 at 9:16am When somebody talks about OTC Commodities: does this only mean Commodities options Peter May 11th, 2010 at 6:34am It039s where you buysell the underlying to reduce your delta exposure. piyul May 7th, 2010 at 8:24am what is hedging stratges roshan March 27th, 2010 at 8:18am wat is option101 Peter July 19th, 2009 at 8:18am Hi Yogesh, any strategy that has unlimited updside profit potential e. g. Long Straddle, which allows for unlimited profit if the stock trades up or down. yogesh July 18th, 2009 at 5:11am which strategies use for give the more profit plz reply the answer priyal May 9th, 2009 at 4:25am for understanding option u have to read more books amp be practical Vinesh May 6th, 2009 at 9:55pm Hi, i am Indian Investor and trader. I have just this website few days back and i want to tell you this is best site on Options Trading and imparting knowledge on the subject. Congratulations. Admin December 8th, 2008 at 3:21am Yes, you sure can trade online. I use interactivebrokers who have a great font end and pretty low brokerage. You could also try tradeking lisa Ascolese November 22nd, 2008 at 8:56am Who would I call if I wanted to trade options. Is this something that I could do online chandi November 12th, 2008 at 7:00am I want to know what r the Riskless Strategies in Option Trading. That will give money in any market condition. Admin November 7th, 2008 at 7:03pm Sorry, I don039t understand your question. Could you be more specific please prafulla November 3rd, 2008 at 11:39am what r the proces for invest on it. Add a CommentOption Trading Strategies NSE Central brings you information on profitable NIFTY Index Options Trading Strategies on the NSE-India exchange. The strategies are computed and published at the end of every trading day. Data for options expiring in the current month and two subsequent months are computed and published. Though NSE Central list various strategies, the site will not recommend any specific picks. Users can select a winning strategy after doing a thorough analysis of the market trends. Have a sense of market direction before you pick a strategy. Why use spread strategies Bulls and Bears take turns to create turbulence in the market. One can profit in the trending market by choosing an appropriate strategy. Along with the clear direction of market trend (bullishbearish or range bound), one must use the market volatility data, both historic and implied, as well as Open Interest information to pick a credit or debit strategy One can also predict where the market WILL NOT reach by expiry date and bet on an OTM position, say you choose a Bull Put Strategy with Break Even Point well below the Strong Support of NITY and you are sure NIFTY will not breach the support level by expiry, and make some easy money every month At the end of each trading day, various strategies are computed for various combinations of StrikePremiums. Use the filters in table columns to narrow down your selection. The Risk-Reward Chart will help you visually see the strategy risk reward, break even points and the current level of NIFTY. Finally, spread strategies will help you limit the losses incase the market moves against your directional call. Use STRATEGY SELECTOR to narrow down on the right strategy Option Spread Stratagies Computed on. 07-MAR-2017 E. O.D