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LESSON 25. RISKS OF PURCHASING OPTIONS

Risks of buying options (Long Call и Long Put) In one of the past lessons, we briefly touched on, so-called, three-dimensionality of option trading. Three factors affect the option position: BA price dynamics, time to expiration and volatility.

LESSON 24. PROFILE / LOSS OF PURCHASED PUT OPTION

Let's take a look at the price chart of a “blue chip” stock such as Sberbank.. Let's admit, current share price 138,44 ruble. Seems, that after such a strong growth of the stock, a correctional movement is possible. To capitalize on a possible decline, we buy a Put option on a futures on Sberbank ATM shares with a strike 14 000 by price 349 rubles.

LESSON 22. PROFILE OF PROFIT / LOSS FOR PURCHASED CALL OPTION

Risk / reward ratio As we already know, option buyers' risk is limited by the premium, but there is no potential profit. When buying a Call option, our profit is not limited in the event of an increase in the price of the underlying asset (futures)

LESSON 21. THREE-DIMENSIONAL OPTION TRADING

The second distinguishing characteristic of options is the so-called multidimensionality or (applicable to futures-style options in Russia) three-dimensionality. When trading options, it is not enough to worry about the movement of the underlying asset and make decisions only based on the price chart of the underlying asset..

LESSON 20. NONLINEARITY OF OPTION

The first important difference between options is the non-linear nature of the instrument.. Most newbies, usually, come to the options market from the world of line instruments (stocks or futures). On these instruments, the size of the profit is equal to the size of the loss with the same increase or decrease in the price..

LESSON 19. INTERNAL AND TIME COST OF OPTION

Prize (price) an option on the market consists of two components: 1. Intrinsic value of an option. This is the amount, which we will receive, if we are now expiring the option and close the position in the underlying asset at the current market price. Example. Futures on an ordinary share of Sberbank costs 14 000 rub. и Long Call 13 500 (Bonus = 830 rub.).

LESSON 18. CLASSIFICATION OF OPTIONS DEPENDING ON STRIKE

1. in money (ITM – in the money) For this option, its exercise allows you to either buy the asset cheaper, what is it on the market now, or sell it for more. Example: Futures on an ordinary share of Sberbank costs 14 000 rub. (100 Shares) – 120 Call (we have the right to buy shares at 120 rub.) And 160 Put (we have the right to sell shares at 160 rub.) 2. on money (ATM – at the money) The strike of this option is approximately equal to (closest) to the BA price. The so-called central strike (remember this concept, it will be used frequently). In this way, exercising this option does not give any advantage, because. the asset price on the market is approximately the same. 140 Call and 140 Put 3. out of money (OTM – out of the money) For this option, its execution is not profitable, because. does not allow you to buy an asset cheaper, what is it on the market now, nor sell it for more. In this case, it is easier to buy (sell) underlying asset in the market, than under the terms of the option. 160 Call and 120 Put Начинающие трейдеры очень часто неправильно думают, что если опцион ITM, then it is profitable, and if OTM is unprofitable. This is wrong. And here are two examples. Example 1. Let's admit, futures on an ordinary share of Sberbank costs 14 000 rub. …

LESSON 18. CLASSIFICATION OF OPTIONS DEPENDING ON STRIKE Read more

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