Trading options 101

Trading options can improve your return enormously if your view is even at least partially correct. This is because the price of an option is calculated out of a number of different inputs*. For me, the three most important variables are:

TIME – the longer your option lasts, the more expensive it is (this concept is recognised as theta).

DISTANCE FROM THE MARKET – an option with a strike price 100 points away from the market will be more expensive, ceteris paribus, than an option with a strike price 300 points away from the market. The market is more likely to move 100 points than it is to move 300 points, and the change in value of your option will be greater for each 1 point move (delta).

Trading options
Trading options

Volatility is crucial when trading options

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Assidium
Assidium streams P&L valuations on your portfolios as prices update – from over 50 exchanges across the world straight to your PC, Mac, or mobile. For the first time private investors can access the tools that Asset Managers use to measure their risk and group their positions. All analytics come with explanatory videos. Come and learn at www.assidium.com. Assidium leverages a quarter of a century’s experience and financial know-how: see www.risk101.com

Assidium

Assidium streams P&L valuations on your portfolios as prices update - from over 50 exchanges across the world straight to your PC, Mac, or mobile. For the first time private investors can access the tools that Asset Managers use to measure their risk and group their positions. All analytics come with explanatory videos. Come and learn at www.assidium.com. Assidium leverages a quarter of a century’s experience and financial know-how: see www.risk101.com

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