Think about two different companies that have the exact same stock price. Now, let's consider the same option on those two stocks, an option with the same strike prices and same expiration date. Now, why would the price of one option for a company be so different from the option on the other? The answer: Implied volatility. We will looking at how implied volatility affects options prices and how option prices can impact your choice of strategy. Market volatility -> The VIX What is implied volatility and how is it calculated and why is it important? The relationship between stock prices and implied volatility. When stock prices are expected to make a big move up or down, investors typically purchase more options. For example, suppose the market has been falling for a few days. This might cause investors to become more protective of their stock positions. As a result, these investors might buy more put options as a form of protection. This increase in demand suggests there's ...
The Japanese using technical analysis and some early versions of candlesticks to trade rice in the 17th century. Much of the credit for candlestick development and charting goes to a legendary rice trader named Homma from the town of Sakata, Japan. While these early versions of technical analysis and candlestick charts were different from today's version, many of the guiding principles are very similar. Candlestick charting, as we know it today, first appeared sometime after 1850. It is likely that Homma's original ideas were modified and refined over many years of trading, eventually resulting in the system of candlestick charting that we now use. In order to create a candlestick chart, you must have a data set that contains: opening price highest price in the chosen time frame lowest price in the period closing price values for each time period you want to display The time frame can be daily, 1 hour, 5 minutes, or any other period ...
This will introduce the three main options strategies: speculation income, or protection the advantages and disadvantages of each There are two kinds of options, calls and puts. The first strategy we'll look at is speculation . Usually when a trader buys a call or a put, he is speculating on the stock price. If you think a stock is going to rise, you'd buy a call . If you think the stock is going to fall, you'd buy a put . The advantage of speculating with options, is that it allows you the potential to profit from a securities price movement with a small initial investment for the option contract. However option is significantly riskier than a stock. For example, let's say you're bullish and want to buy a particular stock. Because the stock is trading around $670 per share, purchasing 100 shares would require you to invest about $67,000. However, you can purchase a call option for the same stock for significantly less. Fro example, one contract recently traded for...
Comments
Post a Comment