The Greeks: Delta
March 17, 2017
Concepts

The Greeks: Delta

In the last few articles, we have seen that there are several variables that have an impact on the value of options. This table illustrates how an increase in one of the variables affects the values of call and put options. As you can see, with all other things being equal, when one of the variables moves, we should expect the...

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1 week ago
Term Structure of Implied  Volatility
March 04, 2017
Concepts

Term Structure of Implied Volatility

Changes in implied volatility provide information on options market participants’ expectations regarding future fluctuations in returns on a specific stock. For the purposes of this discussion, we will analyze volatility in the stock price of the Great Canadian Gaming Corporation (GC), which closed at $23.79 on February 24,...

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3 weeks ago
Dividend Impact on Options’ Intrinsic Value
February 06, 2017
Other

Dividend Impact on Options’ Intrinsic Value

As we mentioned in earlier articles, an option’s intrinsic value is the premium value related to the difference between the stock’s price and the strike on the option. VIoa = max(S – X; 0) VIov = max(X – S; 0) In the previous article, we saw that the evolution of interest rates had an impact on the actual value...

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2 months ago
Impact of interest rates on the intrinsic value of options
January 31, 2017
Concepts

Impact of interest rates on the intrinsic value of options

The intrinsic value of an option is the value of its premium related to changes in the underlying stock’s price compared to the option’s strike price. So the intrinsic value of a call option (IVco) is the difference between the market price of the underlying (U) and the strike (X) of the call option, while the intrinsic...

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2 months ago
Variables with an impact on the value of options
January 24, 2017
Other

Variables with an impact on the value of options

You have done your homework on a stock, analyzing its fundamental and technical data, and you are bullish about its potential over the next few months. You decide to buy call options to make the most of your forecast. Over the next few weeks, the stock climbs slightly, and you see the value of your call options declining...

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2 months ago
 A reverse call ratio spread (call backspread) on BCE Inc. (BCE)
January 16, 2017
Bullish Outlook

 A reverse call ratio spread (call backspread) on BCE Inc. (BCE)

As you can see in the following graph, shares in BCE Inc. (BCE) have been trading in a range of $57 to $59 since mid-November, with points of momentum suggesting a slightly bullish trend.   Daily Graph of BCE ($58.19 on Friday, January 13, 2017) We can also see that the stochastic oscillator (the lower indicator) has begun...

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2 months ago
no-cover
January 09, 2017
Other

Writing covered calls as a hedge against a slight drop in the shares of Sun Life Financial Inc.

Writing covered calls as a hedge against a slight drop in the shares of Sun Life Financial Inc. As can be seen in the following weekly chart, shares in Sun Life Financial Inc. (SLF) have broken out of a range of $35 to $45 that has characterized trading since the beginning of 2014. In principle, $45 should now be a support...

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3 months ago
Follow-up #1 – Mixed Horizontal Calendar Spread on Units of XIU
January 09, 2017
Other

Follow-up #1 – Mixed Horizontal Calendar Spread on Units of XIU

  In our article dated November 28, 2016, we established a mixed horizontal calendar spread on units of XIU (the iShares S&P/TSX 60 Index ETF), looking to take advantage of relatively stable prices until the options mature on December 16, 2016.   Initial position as at November 25, 2016 (value as at December 16,...

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3 months ago
Final follow-up – Profiting from a Potential Drop in the Price of Domtar Corp. Shares
December 19, 2016
Other

Final follow-up – Profiting from a Potential Drop in the Price of Domtar Corp. Shares

Underlying asset   Domtar Corp. (UFS) Domtar is a Quebec paper producer with its head office in Montreal. It is the third largest North American manufacturer of office paper. Domtar also owns forests, which figure among the best managed based on the principles and criteria of the FSC certification and labelling system....

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3 months ago
Mixed Horizontal Calendar Spread on Units of XIU   
November 29, 2016
Other

Mixed Horizontal Calendar Spread on Units of XIU  

  Units of XIU (iShares S&P/TSX 60 Index ETF) closed the week at a price of $22.23, but this was shortly after climbing to $22.50. The RSI indicator and the stochastic oscillator are down slightly, after both giving overbought readings. Although nothing can be said for sure, this situation may indicate that XIU is...

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4 months ago