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Academy 5 Basic Option Trading

Academy 5 Basic Option Trading. Get connected to B&R Beurs @. Table of Contents. 1. Importance 2. What are options 3. Call vs. Put 4. Shorting options 5. Break 6. Basic strategies 7. Cases. How important are options?. How big is the worldwide derivative market? A. $80 billion

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Academy 5 Basic Option Trading

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

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

  3. How important are options? • 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)

  4. Over the counter market • Banks and institutional investors • Size: $ 600 trillion (600,000,000,000,000,000) • (600.000 miljard in dutch)

  5. What are options? • Right to buy or sell • Stocks, indices, currencies • Specific expiration date • Specific price • European and American options • In Europe we trade American options

  6. Calls and Puts • Call Right to Buy • Put Right to sell • Traded in contracts • Regulair sized 100

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

  8. Option Price • Current stock price-strike price • The longer away the higer the price • Volatility, Interrest rate, Dividend yield, expectation value.

  9. Options v.s Futures • Options: • Right to buy or sell • Stocks, indices, currencies • Future: • Obligation to buy or sell • Stocks, commodities • Always physical settlement

  10. WTI Oil

  11. Break

  12. Option name • ING Groep Call-optie sep-2012 6,00 • Settlement 3rd Friday of the month (tomorrow)

  13. Call option • Long Short • Strike price

  14. Put option • Long Short

  15. Covered call • Buy 100 stocks • Sell 100 call options • (1 contract)

  16. Call spread • You buy 1 call • And You write 1 call

  17. Real life examples • Call spread • AEX

  18. Enough info! Summarize • Option • Call • Put • Contract • Underlying values

  19. Case 1 • Current price philips € 15 • We sell 1 put philips Dec-2012 14,00 • @ €1,50 • Philips drops to € 10 • Do we make a profit?

  20. Case 2 • 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. Case 3 • Current price Arcelor Mittal: €15,50 • We buy 1 call Arcelor Mittal Jun 15 • @2,10 • We sell 1 call Arcelor Mittal Jun 17 • @1,10 • What is your investment? • Arcelor increases to €19, what is your profit?

  22. Final scheduled academy • This was the last regular lecture by us. • Post questions on facebook • Or mail to academy@bnrbeurs.nl

  23. See you at the drink! We hope you have enjoyed

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