Option Greeks

Sorry ,you will need to tab this photo in another window,soo small for u to see clearly,

Option greeks mean calulation formula of the underlying stock movement
DELTA-Call options, a delta of 0.7 means that for every $1 the underlying stock increases, the call option will increase by $0.70.

Put option deltas, on the other hand, will be negative, because as the underlying security increases, the value of the option will decrease. So a put option with a delta of -0.7 will decrease by $0.70 for every $1 the underlying increases in price.

As an in-the-money call option nears expiration, it will approach a delta of 1.00, and as an in-the-money put option nears expiration, it will approach a delta of -1.00.


GAMMA-The rate of change for delta with respect to the underlying asset's price. .
example when the stock go up by $1 to $51,a call option of delta 0.7 will increase in value of $0.70,after this gamma of $0.05 will be added on to the original 0,7 delta.if the stock increase another $1 to $52.the delta for the option will be 0.705 ,added from the gamma.

VEGA-The amount that the price of an option changes compared to a 1% change in volatility.

Vega changes when there are large price movements in the underlying asset and vega falls as the option gets closer to maturity. Vega can change even if there is no change in the price of the underlying asset, this would happen if there is a change in expected volatility.

For example, if the vega of an option is -96.94 and if implied volatility were to rise by 1% then the option value would fall by $96.94.

Theta-A measure of the rate of decline in the value of an option due to the passage of time. Theta can also be referred to as the time decay on the value of an option. If everything is held constant, then the option will lose value as time moves closer to the maturity of the option.

For example, if the strike price of an option is $1,150 and theta is 53.80, then in theory the value of the option will drop $53.80 per day.

The measure of theta quantifies the risk that time imposes on options as options are only exercisable for a certain period of time. Time has importance for option traders on a conceptual level more than a practical one, so theta is not often used by traders in formulating the value of an option.

For another option greeks Rho, I do not want to explain further,due to it are not so important for traders

Investment recommended tutorial

Investfair 2008 is in great success ,people from around Singapore coming to learn investing,but a lot of people still kind of scared about investment that why learning is important ,i greatly recommend people to join and learn the investment /trading skill .

Greatly recommended course available in Singapore.

1)Wealth academy trader by AKLTG - help you to build up your foundation in trading ,and investing ,through any type of market example forex,futures,stock,options,etc.which is great for people to learn about investment,and through there is able to build up your network .

2)Pattern of excellence by AKLTG - help you to upgrade on your mindset,thinking positively and find out deep inside what is your dream,and help you to get more MUST instead of T-R-Y.

For the first 2 above course ,please go to AKLTG headquarter to sign up for the preview and look out whether you want to sign for the course,and if you go there ,please say that you are recommended by Lu Jun Long(ahlong)from WAT14.

3)Ahlong personal coaching trading class - one on one coaching tutorial ,helping you to learn how to trade,basic of helping u to building up on your psychological thinking,teach you some of the basic of how to get multiple stream of incomes.

please email me if you are interested in my personal trading coaching tutorial,

my email address is franklampardno8@yahoo.com.sg

Posting update on 18/08/08 to 31/08/08

Tomorrow 19/08/08, i will be post more update on the uses of option,using picture to help beginner to understand better ,so please wait for the time being and starting from next week ,i will be touching on topic candlestick pattern
Candlestick pattern are the main chart for all kind of market,example forex ,future,share,etc
so please keep a lookout for my latest posting coming soon,

Investfair 2008 and investor superconfence 2008

Singapore biggest investfair 2008 coming soon on 16/08/08 and 17/08/08
It is an event for investor to learn and be educated on the lastest financial product and services ,identify the investment trends ,understand the market outlook,hear from the experts as to how ,where ,when to invest in.
Like most people who scared of risk .
If you have any doubt to consider about investing ,you can consider go there and have a look ,
many booth there ,include brokerages, trader lesson,investment bank.
And for those who into trading and investing already,go there to learn some extra knowledge ,many talk will be organised ,and most importantly at there will be selling the 1st "investor superconference" which used to be held in USA ,will be now in singapore held at singapore expo convention centre on 25-26 october 2008.
The trainer for this conference will be RON LANIERI,JOHN PERSON,DAVID ELLIOT,TOM SONOFF and PRICE HEADLEY,all the top notch of person in trading.The seat are limited,and

1st 100 seat is at SGD $299 ,(by the way almost estimated 65 seat has been taken )I never lie,organzier buy the seat themself.
register and pay before 1 Sep 2008 is $399
register and pay before 10 Oct 2008 is $499
register and pay between 10th to 24th Oct is $599


I myself as wealth academy trader batch 14 graduate (one of the adam khoo learning technolgies group program)will really recommend people to go have a look on their product.And i will be one of their product reseller so if you wish to join the tutorial ,come this 16/08 and 17/08 to look for me ,and you can also look for me to buy the investor superconference 2008.

I will be the 158cm guy,with AKLTG black polo T-shirt, 19 years old,look very young ,people say i look like secondary student,quite handsome,hehe,if u think so,if you see this feature ,likely to be me ,so come to see me there.

Market outlook for August

Market outlook for this month
after interest rate hold at Aug 5,market has been overall up ,oil has been retreating due to supply has been met,market up ,due to oil down .
but as long as no solution for financial crisis,the down side should still remain,so if oil is down and usd is up,that limit oil downside ,so once only some bad news for oil ,will cause the market to go down,so if financial still on crisis ,usd will eventually down ,if usd down,oil will be up,(USD is the main currency for buying oil),so if oil up ,hoho.market will be tanking,

OPTION PURPOSES 2

BUYER VS SELLER
Buyer owns something. Seller does not owns anything.
The Buyer will buy The Seller will sell
either a PUT or CALL. (BTO, STC) either a PUT or CALL. (STO, BTC)
Limited risk and unlimited gain Limited gain and unlimited risk
Buyer can only lose Seller can only gain
whatever they own. whatever they promise to sell.
STRIKE PRICE
Definition - The stated price per share for which underlying stock may be purchased
(for a call) or sold (for a put) by the option holder upon exercise of the option contract.
Example:
ABC company trading at – $20
Call Put
In The Money (ITM) 15 25
At The Money (ATM) 20 20
Out of The Money (OTM) 25 15
Rule of Thumb: ITM Call/Put is more expensive than OTM Call/PUT
The Option Premium is made up of;
• Intrinsic value
• Extrinsic value
Time value
Implied Volatility
Intrinsic value
Intrinsic value is the ITM portion of the option’s premium.
Extrinsic value
Extrinsic value is making up of the Time value that determine by theta and implied
volatility that determine by Vega.
Example:
ABC stock trading at $70
ABC strike 65 Call option is value at $8
Stock price – Strike price = Intrinsic value (70 – 65 = 5) ** Call option
Strike price – Stock price = Intrinsic value ** Put option
Option Premium – Intrinsic value = Extrinsic value (8 – 5 = 3)
let talk about these for now,please await for the next post

OPTION PURPOSES

Options are used for the following purposes
- Leverage tool,
- Insurance policy,
- Hedging and
- Advanced strategies.
• Leverage
Options allow you to buy a stock at, let say, 50 dollars for only 5 dollars. This
means a 1:9 leverage of the stock.
• Insurance Policy
Options allow you to protect your stock for the current months at a certain amount
of dollars. If you have a 100 shares of Google, you can choose to protect it by
selling (to open) the current month of the Google options.
• Hedging
Options allow you to hedge to maintain a non-directional position. The Iron condor
is one of many examples that allow you to hedge.
• Advance Strategies
Options allow you to trade bi-directional and even sideways trends.
WHAT ARE THE COMPONENTS OF OPTION?
Options come in only 2 variables:
- CALL
- PUT
Options are made up of only 2 types of retailers:
- Buyer
- Seller
Options have different strike prices, mainly classified as
- ITM (In The Money)
- ATM (At The Money)
- OTM (Out Of The Money)
Options have different contract months (Time)

let talk about this in the future ,please keep a look out for the next few post to see this further

Market around us

They are many market around us .Future,commodity,Forex,Stock ,and many other more,

but now let talk more about Stock market for now

Share/equity/stock that all mean the same things,these mean that u buy a ownership of the listed company.

A slight introduction for option for now,as i am a trader that uses option as a leverage tools Option is a contract of controlling 100 share with limited time
With option u are able to control 100 shares which are a lot cheaper than normal 100 share ,about 1/4 the price compare to 100 share.

Differences between trader and investor

The main different between a trader and a investor is the Time
Trader usually take on trade for 1 year or below whereas
Investor take on trade for 1 year and above

Investor usually go bullish on the trade because they are looking at very long term.
because Dow Jones index has a history that if U buy at any part of time for 10years, U will still make money.
however for trader is to take on a faster trade,both bullish and bearish.
Example Dow Jone may drop for a month before it go up, trader will pick on this chance to catch all type of wave.
Trader may take on trade at these following
1)momentum trade-a few month of holding open position
2)Swing trade - A few week of holding open position
3)Day trade -A few hours of holding open position
4)Scalping - A few minute of holding open position

That my favourite quote in trading

A lots of people may see that investing is dangerous ,but for a smart people think differently ,No investing is dangerous,remember that Inflation is about 6%,that mean if u do not make your money grow,your money will automatically become less worth after time pass.in simple term ,if u have $1million in 2007 that can buy $1million of items 2007 ,after a year later if u never invest/spend/earn ,u still have $1million that can only buy $0.94Million worth of item in 2007.and remember it is compounding interest effect.
Warren buffet averagely can increase his net worth 20+% a year,that make him the world richest man ,inflation 6%can kill billions of people.

General Market Outlook for this few years

Due to my own market analysis ,financial is directly affected the performance of the whole market.think of it this way stock market and financial both are not producing anything ,their role is to arrange the money flow ,now currently due to subprime and mortgage financial problems,problem is likely to persist,even Fed cannot afford to let FRE and FNM to bankrupt ,will probably give blank check to sustain the mortgage financial.however this only "cure outside but not inside",so financial and housing crisis will most likely to sustain and will cause US to be in deep shit ,causing more problem which will result foreign investor to shift their money out of US,which will in turn causing a chain effect,causing US economy to be stagnation even after this recession is over.