Call Option Trading Secrets » Options

The Joy of Options

admin — Mon, 25 Jan 2010 06:11:39 +0000

Owning stock has only two, maybe three, possibilities. The stock goes up. Or the stock goes down. Or, as a third possibility, it does a little of both. If you buy a stock, all you want it to do is go up.
If you sell a stock short or close a position (or consider buying it and then decide not to , all you want it to do is go down. I call this one-dimensional trading. You’re long, you’re short, or you’re flat. Your gains and losses travel up and down the number line you may remember from elementary school in lock step with the movement of the stock. Not only that, but it takes a big move to make a big profit. And a big move against you can mean a big loss. Potentially all the way down to zero.
You need to add a second dimension to your trading. You need more choices than picking a direction and hoping you are right. You need to limit your losses, improve your returns, and increase your flexibility. You need options.
For many people, options are something to avoid, being dangerous, complex, and scary. I would like to introduce you to the joy of options. Any time you think you want to buy a stock, I’d like to get you in the habit of first looking at how you could do more with less using options.
In the stock and commodities markets, the type of option we just described would be known as a call. A call typically represents 100 shares of a stock. In the commodities markets, a single option contract represents a single futures contract. (For simplicity, from this point forward, I will talk about options on stock. Just remember that the same discussion applies to options on futures.)
Owning a call gives the owner the right to buy 100 shares (usually) of the underlying stock at the agreed upon strike price at or before the expiration date. (I say “usually” 100 shares because, due to splits or acquisitions, there are times when an options contract may represent something other than 100 shares.) Selling a call gives the seller the obligation to sell, if asked, 100 shares of the underlying stock at the agreed upon strike price any time up until the expiration date.
The other kind of option is called a put, and it is exactly the same as a call with one simple difference. A put gives the owner the right to sell 100 shares (again, usually) of the underlying stock at the agreed upon strike price at or before the expiration date. You can think of a put as insurance. No matter how badly the stock price crashes, having a put means that you can sell your stock for the strike price. On the flip side, selling that put means you may be obliged to buy stock at far more than its current market price.
An important distinction to always keep in mind: Buying an option gives you rights. Selling an option gives you obligations. Buying an option cannot cost you more than what you pay for the option. Selling an option can cost you far more than what you receive for selling the option.
Let’s examine the terminology of calls and puts. The underlying is the actual instrument such as a stock or commodity that is being represented by the options contract. In the real estate example, the house would be the underlying. Options are said to be derivatives because their value is directly tied to or derived from that of the underlying. An option has no meaning without an actual asset underlying it. It is the right to buy or sell that underlying asset that gives the option a reason for being and some value.
The strike price is the agreed upon price for which the underlying can be bought or sold under the terms of the option contract. In the real estate example, the strike price was $100,000. The expiration date, obviously, is the date when the option expires. The day after expiration, an option is worthless. This is the single most important fact about options that you must remember. This is why your friends think you are crazy for your interest in options. Unlike a stock, which you can hold forever, an option has a clearly defined shelf life.
One term remains, and that is the premium. The premium is what you pay for the option, when you are the buyer. Or what you receive for an option, when you are the seller. In our real estate example, the premium was $500. That’s what it cost you to hold the right to buy the house any time in that thirty-day period. The last day of the thirty-day period would, again, be the expiration date.
We have barely scratched the surface. I say that not to intimidate you, but to make you realize that you only have enough knowledge to be dangerous to yourself. Please do not think that you are ready to go out and buy calls or place spread trades. You are not. You don’t know how an option moves relative to moves in the price of the underlying. You don’t know what time does to the value of an option. You don’t know what volatility is or how it plays into option prices. You don’t know the types of spreads or what they are used for.
Please, please get yourself better educated before you start putting money into option trades. Resist the temptation to buy some cheap options, just to try it out. This is expensive education. There are plenty of advantages to trading options, but it’s still a ruthless market, happy to take your money, your wallet, and your hand if you give it an opportunity. Learn the rules of the game before you put money on the line.
Trading options can be satisfying, rewarding, stimulating, and fun. I invite you to add another dimension to your trading by including options to your repertoire.

Maximizing Option Trading Profits With Fast Puts And Calls

admin — Sat, 23 Jan 2010 17:46:13 +0000

In today’s chaotic stock market, the ability to make a profit trading long Option positions (Puts and Calls) depends on being able to capitalize on short-term moves in the price of a stock or index. Stocks are up one day, and down the next – and it’s anybody’s guess as to what the long-term outlook is. With the price action occurring on a daily basis being more or less a guessing game, the ability to make profits with long option positions depends on being able to buy options that can gain value quickly with a minimum amount of price movement in the underlying security.
In the past, figuring out which option might move the most quickly has been a guessing game. For every equity with options there are several options for each expiration month. In the case of options on Indices, such as SPY or DIA, there are literally dozens of option choices for each month. Clearly, figuring our which of those options will reach a particular target gain on your initial investment, just by looking at the list of choices, is basically a guessing game
The key to a winning Option Trading Strategy it to be able to sort out the relative behavior of all of those options, and find the ones that can make your target investment gain (50%, 100%, etc.) with the least amount of price movement in the stock. The availability of a new Spreadsheet that can analyze and display the behavior of the various option choices, and show clearly which options can provide the desired gains with the least amount of price movement in the stock, eliminates the guesswork.
This analytical spreadsheet provides a number of useful Metrics for characterizing the behavior and future value of options, but the most important are the price gain data in the Matrix displays, which give a visual impression of the rate at which the different options will gain value as the price of the stock or Index changes. This provides the tool for finding the options which gain value at the fastest rate.
The spreadsheet provides two Matrix displays: The first shows the behavior of the options based entirely on the effects of Delta and Gamma, which determine how the price of the options change as the Stock price changes. This set of calculations is most relevant when you expect a very quick move in the stock price – a situation in which time decay (Theta) does not play a significant role. The second Matrix adds to the Delta and Gamma effects calculations of the influence of both Time Decay, and Volatility (Vega). These two variables can be changed independently of each other.
The results of these calculations are illustrated below in two tables. The data in the tables are for Dollar Tree Calls. The first set of values shows the amount that each call will gain based on the increase in the value of DLTR stock shown in the top line of the table (DLTR Price Gain). To make the relative behavior of the different Options clear, each line of the Table shows only the two price gains which bracket the increase in the option Bid price that will allow each option to be sold for double the original price paid, (the Ask price). (The target value can be set to any desired multiple of the initial cost, not just 2x, as in this example):
DLTR @ $35.42, Price changes needed to Double the value of a Call:
Matrix 1 – Delta & Gamma only price gains:
DLTR Price Gain:___ $2.00__$3.00__$4.00__$5.00__$6.00__$7.00__$8.00
DQO CU_______________$1.48___$2.09
DQO CH_______________$1.09___$1.56
DQO CV_________$0.47__$0.76
DQO CI_________$0.31__$0.51
- – - – - – - – - – - – - – - – - – - – - – - – - – - – - – - – - – -
DQO EH_______________________$1.89___$2.45
DQO EV_______________________$1.56___$2.04
DQO EI________________$0.91___$1.28
DQO EW_______________$0.73___$1.03
(These tables are greatly abridged for publication, and many data columns are not shown.)
The second Matrix shows how these same options will behave at some time in the future and, optionally, with a change from the present value of Volatility (Vega). The number of days into the future, and the change in Volatility, are determined by user input, which allows the exploration of many different “what if?” scenarios:
Matrix 2 – Price Gains after 35 Days and with Volatility at 85% of current value:
DLTR Price Gain:____$2.00__$3.00__$4.00___$5.00___$6.00___$7.00__$8.00
DQO CU__________________* * *___* * *__$1.65___$2.53
DQO CH__________________* * *___* * *__$0.52___$1.28
DQO CV__________* * *____* * *__________________$0.43__$0.76
DQO C___________* * *____* * *__________________$0.18__$0.37
- – - – - – - – - – - – - – - – - – - – - – - – - – - – - – - – - – -
DQO EH_________________________* * *____ * * *___$1.58___$2.30
DQO EV_________________________* * *____* * *__________$1.50___$2.15
DQO EI___________________* * *___* * *__________$0.66___$1.06
DQO EW_________________ * * * ___* * *__________________$0.72___$1.06
In this second Matrix, the positions occupied by price gain data appearing in Matrix One are represented with asterisks (if they differ from the new positions), providing a clear visualization of the way in which the Options’ gains in value have been changed by the effects of Time and Volatility.
The Tables above show how an analysis of multiple options can be used to make choosing the fastest option to purchase for a trade a more systematic process. If we anticipate that DLTR is going to make a quick move upward in price over the next couple of days (perhaps because of an earnings announcement), then using the data from the top table we would buy either the DQO CV Calls, or the DQO CI Calls. In cases like this, where there are two choices for an option based on the fastest rate of price gain, there are other metrics, such as price gain to achieve break-even, which can be used to narrow the choice further.
Based on the results of the analysis, these two Calls should double in value if the price of DLTR stock rises by $2.00 – $3.00 over the next few days, as of the time this data was current (early February 2009). The DQO CU and DQO CH options, by contrast, won’t double unless the price of DLTR rises by $3.00 – $4.00. If we were expecting the stock to drop, then we would perform a similar analysis using the Puts for DLTR. This example illustrates the power of this strategy: Buying one of the two fastest options cold result in a 100% profit, after the price of the stock has risen by less than 9%!
On the other hand, if we expect that DLTR will rise gradually over the next several weeks, then we would use the calculations in the second Matrix. Setting the number of days to the expected interval for the trade (in this case, 35 days) and allowing for the likelihood of a 15% decrease in volatility for these options, the best choices for Call options to buy would then be either the DQO CU, or the DQO CH Calls. Note that these March calls will still provide a faster return than the longer expiration options (the the May calls), even though the elapsed time is 35 days. This is not always the case, however.
One of the advantages of the way this data is presented is that anomalies in Option pricing “jump out” at the user very clearly. In the second Matrix, notice that the price gain data for the DQO EI Calls are displaced one position to the left, relative to the DQO EW and DQO EV Calls. This indicates that the DQO EI calls have an advantage over the others under these conditions, and will produce a faster return.
The use of a trading strategy that takes advantage of analytical tools (like the price gain velocity analysis shown here) provides an opportunity to make trading decisions that are based on analytical data, rather than “gut instincts”. This provides Option Traders with a more systematic way to make choices when devising an Option trading strategy, and taking an Option position.

What is a Vertical Spread?

admin — Thu, 21 Jan 2010 17:43:43 +0000

Get Rich with Options: Four Winning Strategies Straight from the Exchange Floor (Kindle Edition)

admin — Mon, 18 Jan 2010 15:28:32 +0000

A detailed guide to successfully trading stock and commodity options After numerous years as an options market-maker in the trenches of the New York Mercantile Exchange, few analysts know how to make money trading options like author Lee Lowell. Now, in the Second Edition of Get Rich with Options, Lowell returns to show you exactly what works and what doesn’t. Filled with in-depth insight and expert advice, this reliable resource provides you with the knowledge and strategies needed to achieve optimal results within the options market. It quickly covers the basics before moving on to the four options trading strategies that have helped Lowell profit in this arena time and again: buying deep-in-the-money call options, selling naked put options, selling option credit spreads, and selling covered calls. Breaks down four of the best options trading strategies currently available Explains how to set up a home-based business with the best options trading software, tools, (more…)

Options Trading Is a Opportunity For The Small Investor Too

admin — Mon, 18 Jan 2010 05:42:30 +0000

The stock market appeals to people for many reasons. Some see it as a quick way to make a nice nest egg to tuck away for their eventual retirement. Some see it as a way to live out their fantasies of being a powerful, corporate type. And some are actually more logical about it, seeing the stock market as a potential way to make money, if they play their cards right. They know that there are no sure things in life and nowhere is that more clear than in the stock market. But options trading is a opportunity for the small investor too.Options trading has grown in popularity, especially with the smaller investors over the course of the past ten years. Unlike other forms of trading that can require large amounts of venture capital, options trading can be accomplished with often a very small initial outlay. Of course, because they can be easily started, it can allow the uninitiated or poorly informed to get in well over their heads in a matter of a very short time. Not allowing yourself to understand the market before you make the first trade is financially foolhardy and personally dangerous. First of all, as the name implies, option trading is not buying actual stocks, but rather busying the right to own or sell them. The options trader can make the same profit with stock options that he would make as if the owned the outright stocks, but that also means that he would face the same risks if that stock did not do well on the market. As with other forms of trading, options trading will require that you learn some facts and make some decisions before hand. Know everything you possibly can about options trading, as well as trading in general. Know how to track stocks for movement and know how to watch for trends. Know what the basic types of options trading is- and understand how each works. And, as with any other type of trading, make sure you know and adhere to your personal limits, including your absolute loss cap. Do not overextend yourself, even if you just got a tip on a great stock. Options trading can focus on stocks that are heading in one of two directions, up or down. Call options will focus on rising stocks, while Put options focus on those on the decline. Both allow you the right to buy the option on a stock at a fixed price, but do not force you to do so. Knowing how to work this system to your best advantage is key.Invest in yourself, learn the basics and expand on that to become profitable in options trading.

Currency Options â a Simple Strategy for Mega Profits

admin — Fri, 15 Jan 2010 05:37:27 +0000

Currency options if you buy them offer you unlimited profits and limited risk â thatâs good, but your chances of success arenât good 90% of options expire worthless.

On the other hand, if you sell options you have a 90% chance of success and if you do it correctly, then you can build huge profits over the longer term.

Below we are going to look at a strategy that has the odds in your favour and maximizes your chances of success when selling premium.

So if the chances of success are so great why donât more people sell options?

This can be summed up in one word â RISK

On the face of it doesnât look good taking an unlimited risk to get a limited gain, but of course if you constantly pile up small profits by collecting premium with currency options then you can make big profits â letâs look at how to do this and keep the risk down.

Getting 90% + Odds On Your Side For Huge Gains

If you want to use a currency trading system based around options selling keep the two points below firmly in mind to get the odds even more on your side.

1. Sell Greed and buy fear.

Option premiums become high when a market is driven by greed and fear – these set ups provide you woth a chance to trade and build big profits from your forex trading signals.

So when markets skew a long way from the âfair valueâ you sell.

The two indicators below are great for spotting contrary trades and are explained more fully in our other articles.

This is the set up you are looking for:

Look for markets that are very bullish or bearish by checking the % bullish indicator and look for below 15% bullish and above 85% to isolate opportunities. Next, look for commercial buying of bear markets and selling of bull markets via the commitment of traders report.

Use your charts to enter and sell options behind the next level of support or resistance.

2. Get time on your side

When you are buying option premium, you want lots of time on your side when you are selling go for the opposite.

Time decay at the end of the life of an option kills it quickly, so use it to your advantage and sell options with short times to expiry.

This is not a game for amateurs

If you want to do a forex trading strategy that includes selling currency options – keep the following in mind:

The above is a simple strategy and it works and it needs courage to do â Selling options is a big boys game and you need to be well capitalized, have strict money management and be prepared to trade against the consensus and the majority of forex traders.

Trade with 90% odds of success

If you can adopt the right mindset, spot the opportunities driven by greed and fear and have the courage to trade them by selling currency options, you can trade with 90% odds of success on your side and pile up huge profits.

Trading Options at Expiration: Strategies and Models for Winning the Endgame (Hardcover)

admin — Tue, 12 Jan 2010 21:27:11 +0000

“Learn and profit from Jeff Augen’s book: It clearly explains how to take advantage of market inefficiencies in collapsing implied volatility, effects of strike price, and time decay. A must-read for individuals who are options oriented.” –Ralph J. Acampora, CMT, Director of Technical Analysis Studies, New York Institute of Finance “A fantastic, insightful book full of meticulously compiled statistics about anomalies that surround option expiration. Not only does Augen present a set of effective trading strategies to capitalize on these anomalies, he walks through the performance of each across several expirations. His advice is practical and readily applicable: He outlines common pitfalls, gives guidance on timing your executions, and even includes code that can be used to perform the same calculations he does in the text. A thoroughly enjoyable read that will give you a true edge in your option trading.” –Alexis Goldstein, Vice President, Equity Derivatives Busin (more…)

Stock Trading for Bold Brave Investors

admin — Tue, 12 Jan 2010 17:34:53 +0000

Stock trading is one of the last true meritocracies. All that matters for your investment success are your own decisions. Stock trading is a precision-based activity and one tiny mistake in judgment could send you plummeting right to the bottom and result in a huge loss.
Likewise, the opposite could happen. You may make a great buying decision that will put you on the path to riches. Traditional stock trading is done at stock exchanges, which are places where buyers and sellers meet and decide on a price, although electronic trading is gaining in popularity. Stock trading is affected by how well the economy is doing and by basic supply and demand considerations.
Stock Trading is a get rich slow process. Money can be made, but it takes time. Stock trading is something that interests many people because it offers them a chance to make money without breaking into a sweat. In addition, it has a lot of excitement attached to it especially when using short term strategies that help pit traders against the stock market.
Stock Trading is trading stocks and shares of different types of companies and organization at the stock exchange. In every country, there is a stock exchange where various companies get their shares listed, when they arrange to raise required funds by means of issuing shares.
Stock trading is a very competitive field and in order to succeed you need to FOCUS on a set of simple strategies that you can implement without hesitation. The real “secret” of the stock market game is enclosed within the trading set ups and market signals you rely on to decide when to buy or when to sell shares. Stock trading is a business (because it is done for making money).
So as in a business, in stock trading, one needs to complete solid planning before making any buy/sell/trade. Stock trading is viewed by some people as a very complicated matter. This is regarded by many as an arena better reserved for those who have extensive exposure and experience in stock trading.
Stock trading is a game in which you cannot afford to be average. Thousands of new and inexperienced traders are being charged hundreds, even thousands of dollars by scam artists and self proclaimed experts for dubious stock picking services and mechanical buy and sell signal generators.
Stock trading is a relatively simple activity compared with other professions, particularly with the tools available in today’s Internet world. It is certainly within your abilities, and as you educate yourself on and build your skills, you’ll find that your fears subside as your confidence grows.
Researching a stock and then buying online it is one part of the story. The other part being how to plan a trade with an exit strategy? You must research the risks attached to online trading to make sure you are prepared for the worst. Be determined and goal orientated.
Exchange traded funds are good to use for trading and investing. By keeping trading simple, there is less stress and more opportunity to profit. Exchange Traded Funds, also known as ETFs, are index funds traded on the major stock exchanges just like stocks. An index fund involves a collection of securities, much like mutual funds, except that ETFs differ from mutual funds in some distinctive ways.
Options are bets about the future price movement of exchange traded securities. The prospect of unusually high returns always signals unusually high risk so be careful about trading options. Timing is everything.
Options are a great way to both earn and lose a lot of money. If you’re interested in involving yourself in the more unpredictable, risky, and spontaneous part of the stock market then trading options is something you should investigate. Option strategy is about selection of the best stock opportunities and following your signals. Here, you can achieve success if you are acquainted with the correct option trading strategy .
There are online resources available that will provide you with free simulated stock and option trading. You will easily find enough information to start your trading venture. You can practice trading stocks, options, spreads, futures, short sells, and so forth. Just run a search for “demo stock trading accounts” and you will find a good list to research.
Stock and option trading is a big game in many ways. But as it is a game involving the exchange of money if you play you need to take the game seriously.

Beware the Hype in Options Trading

admin — Mon, 11 Jan 2010 17:30:18 +0000

Selling education on options trading is a big business. We see infomercials on television and receive emails advertising free trading software and foolproof trading systems. Unfortunately, there are many “snake oil salesmen” operating in options education. They are busy selling the dream of instantaneous riches without effort – and their price tag isn’t cheap.I recently came across the following statements on option education web sites or advertisements for those web sites:

Make all the money you ever dreamed of trading options! Trade options like a pro tomorrow! Want to make 627% trading options?

The first statement doesn’t even deserve comment. The second statement is extremely misleading. It is certainly true that ordinary people of average intelligence can learn how to trade options – but it won’t happen tomorrow! Learning the fundamentals of options terminology, how options trade, how they are priced, and then all of the different options trading strategies and their behavior in differing markets simply does not happen overnight. It requires time, effort, and practice. In my experience, a minimum of six months is required for the fundamental education, paper trading, and then some taste of success trading in small lots before scaling up in volume.The advertising line, “Want to make 627% trading options?”, is preposterous, but apparently it sells and brings in people. Certainly, it is possible to make returns of several hundred percent trading options. But it is also true that you could easily lose 100% of your money very quickly if you did not know what you were doing. Options trading strategies with the potential of several hundred percent returns are inherently trades with low probabilities of success. So, yes, I would like to make 627% trading options, but the presumption in this advertisement is that you can do that on most, if not all, of your trades. That is simply not true.If you are interested in learning to trade options, here is a checklist to ensure your success:1. Find a reputable options education firm.2. Continue your search if the options education firm hypes the potential returns or suggests this will be quick and easy. 3. Check references from former students.4. Expect to spend at least three months learning the fundamentals and trading on paper.5. Hire a trading coach who will be on call to help and answer questions as you begin to trade with real money (this will actually save you money).6. Scale up slowly.Learning to trade options and generate a steady income from the markets is indeed feasible. But it requires time, effort, practice, discipline, and coaching to be successful. Don’t be deceived by the hype.

Example of a Bull Call Spread

admin — Sat, 09 Jan 2010 18:39:31 +0000

Written on 15th February 2008 (see below for further updates)

I thought I’d provide an example of a Bull Call Spread (BCS) using the Commonwealth Bank as an example. There is a lot of volatility in the market at the moment. If you have studied my course then you will know that high volatility is a great advantage for the Option Seller – a decrease in implied volatility means a decrease in the Option premium – but let’s get back to this example!

Since making a high around $62.00 in November 2007 CBA has spent the last few months falling to its current price of $47.00. Can it go lower? Is this the bottom? I have no idea! Instead of buying the stock and watching it plummet even lower let’s look at a strategy where we know EXACTLY what our MAXIMUM risk and MAXIMIM profit is – a Bull Call Spread.

When you BUY a CALL Option your view is that the underlying Stock will rise. So with CBA closing last night (14th Feb) at $47.05 you might to decide to BUY a CALL Option with a Strike price of $48.00 that expires on the 27th March 2008. The quoted price for this option is $1.69. If you bought 2 contracts it would cost you 2,000 @ $1.69 = $3,380 (plus brokerage). In 10 days time if the stock price increased by 4% to $48.93 the Option price would be somewhere around $2.15. You could then Sell the CALL Option and profit $920 or around 27%.

To reduce the cost of Buying the CALL Option you can SELL a CALL Option at a higher strike price. Building on the above example you would SELL 2 March CALL Options at a strike price of $51.00 and receive a premium of $0.71 which means you receive 2,000 @ $0.71 = $1,420. So your total cost would be the price that you paid for the contracts that you bought ($3,380) less the money that you received for the Options you sold ($1,420). Total Cost $1,960.

The advantage is that you are reducing the cost of entering the trade. The disadvantage is that you are limiting your profit to the upside if CBA trades above $51.00. I like the Bull Call Spread trade because you know your maximum profit and maximum loss before you enter the trade. The best way to view this is via a picture (listed on the next page).

Please note that this trade is purely for educational purposes only. I’ll send an update of this trade in a week or two to see how it would be progressing. If you have any questions you are more than welcome to send me an email glenn@optiontrader.com.au.

Cheers

Glenn Dove

www.optiontrader.com.au

Update written on 22nd February 2008

It’s always worth reviewing your trades especially when you trade Options. One week ago I provided an example of a Bull Call Spread Option strategy on CBA shares. At the time of the Option trade CBA was trading @ $47.05 and we had entered a long position.

How would we be going on the 22nd February with the price of CBA trading at $42.40?

The trade has not gone in the direction that we wanted but there’s a lot we can learn from this type of strategy. The Bull Call Spread (BCS) that we entered entitled us to Buy 2,000 CBA shares @ 48.00 and to sell 2,000 CBA shares at a maximum price of $51.00 anytime before 27th March. The total cost of the BCS position was $1,960.

So what’s so good about that?

• We are in control of $96,000 of CBA shares (2,000 @ $48.00) and it only cost us $1,960 to enter the trade. This works out to around 2% of the total trade value.

• We are limited to a maximum loss of the premium that we paid $1,960. If we had of bought 2,000 CBA shares at the market price (on 15/2) we would have paid $94,100. With the current price of CBA at $42.40 we would be sitting on a paper loss of $9,300.

So as you can see even though the trade has not gone in the direction that we wanted the BCS has provided great leverage while limiting our loss potential to only 2% of the trade value. Also remember that we still have until 27th March for this trade to work. You could also decide to close the position if you thought that the CBA had no chance of getting back above $49.00 by the 27th March which would leave you with a loss of $1,297.

It’s also worth mentioning some of the disadvantages even though I believe the advantages far outweigh the disadvantages:

• If there are any dividends payable during the Option period we are not entitled to them (as we don’t really own any shares)

• We have a limited time (until the Option expiry date) for the trade to become profitable. Once the contracts expire they become worthless.

• Our profit potential is limited due to the fact that we SOLD Option contracts to reduce the cost of the Options that we bought.

If you have any questions send me an email: glenn@optiontrader.com.au