Search results
Vega stands for the option position’s sensitivity to volatility. Options tend to increase in value when the underlying stock’s volatility increases. So, volatil-ity helps the owner of an option and hurts the writer of an option. Vega is pos-itive for long option positions and negative for short option positions.
LEAPs and longer-term options are far better value on a per month basis, and they give you more time to be right, thus improving your chances of success. Another method is to buy only shorter-term deep ITM options.
SYNTHETICS: Long call A, short put A A When to use: When you are bullish on the market and uncertain about volatility. You will not be affected by volatility changing. However, if you have an opinion on volatility and that opinion turns out to be correct, one of the other strategies may have greater profit potential and/or less risk.
The Complete Guide to Option Strategies shows you how options can be used to prosper under many market conditions, take advantage of time decay, and limit risk. This comprehensive guide describes numerous risk management techniques in a manner that makes them accessible even to non-professionals.
Covered Call. This strategy consists of writing (selling) a call that is covered by an equivalent long stock position (100 shares). It provides a small hedge on the stock and allows an investor to earn premium income, in return for temporarily forfeiting much of the stock’s upside potential.
For those of you who are new to options and futures, this work will provide valuable insights into these important investment vehicles. For those of you who have not worked with (or studied) derivatives for a long time, this book will serve as an important review of what was once known but has grown rusty.
Long position: A position wherein an investor is a net holder in a particular options series. Out-of-the-money: A call option is out-of-the-money if the strike price is greater than the market price of the underlying security. A put option is out-of-the-money if the strike price is less than the market price of the underlying security.
