Academy 5 Basic Option Trading Get connected to B&R 1.

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Presentation transcript:

Academy 5 Basic Option Trading Get connected to B&R 1

 1. Importance  2. What are options  3. Call vs. Put  4. Shorting options  5. Break  6. Basic strategies  7. Cases 2

 How big is the worldwide derivative market?  A. $80 billion  B. $800 billion  C. $8 trillion  D. $80 trillion   NL GDP: €600 billion (600,000,000,000  US GDP: $14 trillion (14,000,000,000,000) 3

 Banks and institutional investors  Size: $ 600 trillion (600,000,000,000,000,000)  ( miljard in dutch) 4

 Right to buy or sell  Stocks, indices, currencies  Specific expiration date  Specific price  European and American options  In Europe we trade American options 5

 Call Right to Buy  Put Right to sell  Traded in contracts  Regulair sized 100 6

 Writing options  Selling an option you don’t own  Obligation to buy or sell  Margin  Covered short selling  Premium 7

8 Underlying value Time valueOther  Current stock price-strike price  The longer away the higer the price  Volatility, Interrest rate, Dividend yield, expectation value.

 Options:  Right to buy or sell  Stocks, indices, currencies  Future:  Obligation to buy or sell  Stocks, commodities  Always physical settlement 9

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 ING Groep Call-optie sep ,00  Settlement 3rd Friday of the month (tomorrow) 12

13

 LongShort  Strike price 14

 LongShort 15

 Buy 100 stocks  Sell 100 call options  (1 contract) 16

 You buy 1 call  And You write 1 call 17

 Call spread  AEX 18

 Option  Call  Put  Contract  Underlying values 19

 Current price philips € 15  We sell 1 put philips Dec ,00 €1,50  Philips drops to € 10  Do we make a profit? 20

 Current price Aegon € 3,50  We Buy 1 call december-2012 €3,00 €0,90  We Buy 1 put december-2012 €4,00 €0,90  Aegon increases to €5,- in december  Do we make a profit? 21

 Current price Arcelor Mittal: €15,50  We buy 1 call Arcelor Mittal Jun 15  We sell 1 call Arcelor Mittal Jun 17  What is your investment?  Arcelor increases to €19, what is your profit? 22

 This was the last regular lecture by us.  Post questions on facebook  Or mail to 23

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