Options (part 17)

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Options (part 17)

The iron condor Breakeven points

The formula for calculating Breakeven points is given below:

  • Upper:  Strike price of short Call option plus net premium received.
  • Lower: Strike price of short Put option less net premium received.

The formula for calculating maximum loss is given below:

  • Max Loss = Strike Price of Long Call – Strike Price of Short Call – Net Premium Received + Commissions Paid

Max Loss Occurs When Price of Underlying >= Strike Price of Long Call ...

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Options (part 16)

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Options (part 16)

 

The iron condor, what happens if things go wrong? Another example
 Today, I will show you another case study on what we do if things can wrong.  In trading, we must always expect things from time to time will go wrong.  We are not NostradamusFirstly, we should ask:  How do our strategies work?  Alternatively, I should say expected (or hope) to work?  Nothing is guaranteed in trading, ...
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Options (part 15)

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Options (part 15)

 

The iron condor, what happens if things go wrong? 
Today, I will show you what if things can wrong.  In trading, we must always expect things from time to time to go wrong.  We are not NostradamusFirstly, we should ask:  How do our strategies work?  Alternatively, I should say expected (or hope) to work?  Nothing is guaranteed in trading, you should know ...
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Options (part 14)

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Options (part 14)

The iron condor

ExampleSuppose XJO (ASX 200 index) is trading at $5375 in March. An option’s trader enters an iron condor option strategy by buying April 5200 Put option for $280, writing April 5250 Put for $360, writing another April 5500 Call for $360 and buying another April 5550 call for $220. 

The net credit received when entering the trade is $220, which is also his maximum possible profit.

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Options (part 13)

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Options (part 13)

The iron condor

The iron condor is a limited risk, non-directional option-trading strategy that we began to adopt at FS Securities sometimes late last year with have turned to be a great success and profit generation to our clients.

It is designed to have a large probability of earning a limited profit when the underlying security is perceived to have low volatility.

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Options (part 12)

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Options (part 12)

The iron condor

   The iron condor is a limited risk, non-directional option-trading strategy that we began to adopt at FS Securities sometimes late last year with have turned to be a great success and profit generation to our clients. 

It is designed to have a large probability of earning a limited profit when the underlying security is perceived to have low volatility.

 

The iron condor ...

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Options (part 11)

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Options (part 11)

Definition

For a call option, if the option has intrinsic value it is said that it is “in the money”.  It has intrinsic value IF converted into shares (exercised), and sold immediately; the owner of the shares will receive money. For that to happen, the strike price upon which the shares were bought at is below the underlying share price.

If the option has not intrinsic value, it is said to be out of the money or may ...

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Options (part 5)

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Options (part 5)

Factors that could affect the price of an option

  • Intrinsic value
  • Time value
  • Volatility
  • Interest rate

We begin today our series by explaining each of those factors.

Intrinsic value:  The price of an option consists of two values, the intrinsic value and time value.  The intrinsic value exists if the option was to be exercised immediately after purchased and by converting the option into shares, the value of the shares when sold will return cash in the hand of the owner.

Example: The ...

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Options (part 4)

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Options (part 4)

You may not be aware that FS Securities run classes on trading options.  Here is some of the slide that are presented in our seminars (or webinars)