tailieunhanh - Trading Strategies Profit Making Techniques For Stock_4

Tham khảo tài liệu 'trading strategies profit making techniques for stock_4', tài chính - ngân hàng, đầu tư chứng khoán phục vụ nhu cầu học tập, nghiên cứu và làm việc hiệu quả | CHAPTER 8 Buy a Put Strategy Price Action Implied Volatility Time Decay Gamma Profit Potential Risk Buy a Put Bearish Increasing Helps Hurts Helps Limited Limited STRATEGY Buying a put is a bearish strategy that requires a price drop in the underlying instrument UI . Nonetheless the most critical factor in trading puts profitably is an ability to predict the future price moves of the UI. The rest of the discussion on buying a put is secondary to the problem of market timing. The options chart in Figure shows the return from buying a put. There is theoretically unlimited profit but limited risk. EQUIVALENT STRATEGY The major difference between the long put strategy and the short instru-ment long call strategy is the commission. It is significantly less expensive to simply buy a put. 103 104 BUY A PUT However some investors will buy a call to protect a profit or to provide a stop-loss point when they initiate a short sale of the instrument. The net result is that they have duplicated a long put. In other words they leg into the short instrument long call position rather than consciously put it on from the very beginning. RISK REWARD Maximum Return The maximum profit potential is limited by the fact that the price of the UI cannot go below zero. The profits climb as the price of the UI drops a purchase of a put will gain one point for every point the underlying index drops if it is in-the-money at expiration. Before expiration the price change of the put will be approximately equal to the price change of the UI multiplied by the delta. For example assume the OEX is trading at 151 and the April 150 put option has a premium of 4. Each point move of the OEX below the strike price of 150 will cause a move of one point in the put premium. Thus the put premium on expiration would be 149 if the OEX were at 1. Although the put profits are theoretically limited as a practical matter the profits will be proportional with the .