Option Hedging Strategies
@helenparent you are trying to spam your way to success. Good luck with that... banned
On Friday, the largest trade in LinkedIn's options was an "iron condor," a complex strategy that involves buying and selling of call and put options simultaneously.
Buying a call conveys the right to purchase shares at a fixed price in the future, while buying puts conveys the right to sell shares. Selling calls and puts creates the opposite obligation.
The trade would have delivered its maximum return if LinkedIn shares effectively flatlined around Friday's level near $131 over the next two months. But then LinkedIn shares shot up 47 percent after the Microsoft news, torpedoing the trade and leaving the trader with an estimated loss of nearly $1 million.
The trader, whose identity is not known, bought 500 LinkedIn calls betting on the shares rising above $185 by mid-August, and sold the same number of calls betting on the shares staying below $160 by that date.
At the same time, the trader also bought 600 puts that would profit if the shares dipped below $115, and sold the same number of puts that bet the shares would stay above $125.
Options Tools | Options Brokers
Have you guys happened to deal with optionstars while trading binary options? Do you have any experience you can share about them?
A review of top 5 options books came out on a site called theoptionprophet. I never heard of that site. However, this seems like a nice review listing decent books and giving a good overview of what each option book strengths, weaknesses and the target audience are.
I am familiar with all five books nominated in that review. Just my 2c - I would definitely endourse 3 out of the five options books mentioned there. McMillan's "bible", Natenberg's Options volatility and Cottle's Options Hidden Reality for the advanced traders. The other two books are markedly lower quality. Although I have not read Dan Pasarelli book on options greeks cover to cover, so I will reserve my judgement. The Mark Sebastian's The Options Trader's Hedge Fund left me cold. The book is not comprehensive, haphazardly structured. Above all the author gets seriously carried away with his catchy metaphor of hedge fund. This is just a nice, catchy phrase to sell the book as similarities between an individual trader and a fund or an insurance company are rather far fetched. Yet the author keeps bringing that up again and again...and then some more as if that makes any difference for the reader.
F.A.Q. | Announcements
SPX Monday-Expiring Weeklys Options to Launch on August 15
CBOE plans to list S&P 500® Index (SPX) Monday-expiring WeeklysSM options, beginning August 15, pending regulatory approval. With the expected introduction of SPX "Monday Weeklys," CBOE will offer SPX Weeklys options (SPXW) with Monday, Wednesday and Friday expirations. CBOE presently offers End-of-Month SPX options which feature expiration dates that fall on the last business day of the month.
SPX Weeklys options are one of CBOE's fastest-growing products. SPX Wednesday-expiring weekly options had record average daily volume of more than 114,000 contracts last month.
Contracts with weekly expirations allow investors to:
• Implement more targeted buying, selling, spreading or hedging strategies
• Trade around breaking news or known economic events
CBOE pioneered short-term options trading in 2005 by introducing the first weekly expiring options contract.
For more information on SPX Weeklys options, please visit www.cboe.com/SPXW.
Puts and calls still allowed in retirement accounts, as are futures, under a new rule designed to make advisors do what’s best for their clients according to Barron's article.
Last week, the Labor Department backed away from a controversial plan to ban the use of options in retirement accounts. It was an entirely unexpected outcome.
Until the final moment, options had seemed destined to become victims of a broad government effort intended to protect investors from unscrupulous financial advisors. Somehow, options and futures were pulled from the final 1,000-page rule requiring advisors to ensure that the retirement advice they provide serves the client’s best interests.
The fiduciary rule, which becomes effective in April 2017, replaces a more permissive suitability rule that lets advisors deliver investment products as long as they reflect a client’s needs, goals, and financial wherewithal. Under the old rule, if there were two equally good products, the advisor could be tempted to put the client into the one that produced the highest fee, even though that wouldn’t be in the client’s best interests.
A fiduciary rule is Wall Street’s version of the Hippocratic oath, under which doctors pledge to do no harm. Despite the usual nattering against any financial regulation, this is a decent development. Bad advisors might now think twice before fleecing naive clients. The rule will create some implementation headaches for the financial-services industry, but nothing terribly onerous.
Still Institutional investors are better informed then crowd. Recent example is the last job report - institutional were buying one day before the job report while the crowd was selling http://www.spreadvectors.com: