Concepts

The Greeks: Gamma
March 23, 2017
Concepts

The Greeks: Gamma

Josiane Lanoue

Our last article showed how delta could help predict the future value of options following a change in the price of the underlying asset. We also learned that delta gives an indication of the equivalent stock position (ESP) on the underlying asset. Gamma Gamma measures the change in the value of delta relative to a change in...

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2 days ago
The Greeks: Delta
March 17, 2017
Concepts

The Greeks: Delta

Martin Noël

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

Martin Noël

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
Synthetic Stock Positions Within Registered Accounts
February 06, 2017
Bullish Outlook

Synthetic Stock Positions Within Registered Accounts

Richard Croft

As the name suggests, a synthetic stock position is equivalent to a long stock position. Similar risk reward parameters but with some structural advantages for investors who want to utilize the strategy within registered accounts.   In this column, we will focus on Canadian bank stocks. What else is new! Like it or not...

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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

Martin Noël

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
Selecting options expiration dates : Thêta
January 24, 2017
Concepts

Selecting options expiration dates : Thêta

Montréal Exchange

Before selecting an expiration date on an option contract, it is important to review some basic concepts of option trading. Options are perishable Absolutely! Remember that the premium of an option is defined as a tangible value, determined by the relationship between the strike price and the price of the underlying stock (also...

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2 months ago
An Electrifying Yield on a Utility Stock
October 12, 2016
Concepts

An Electrifying Yield on a Utility Stock

Christopher Thom

Utility stocks are often loved by yield investors. They provide steady dividends, are regulated businesses, and are less cyclical. Generally they can be called “boring,” but for the investors who own utility stocks that is what they love about them. We’ve seen this sector do well over the last few decades as interest...

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5 months ago
Of Mice and Men and Rolling Options
September 06, 2016
Concepts

Of Mice and Men and Rolling Options

Alan Grigoletto

As anyone who has every traded knows, the best laid plans often go awry. Before making any adjustments, the investor needs to dissect what went wrong. Does he or she still hold fast to their original forecast but has simply run out of time, or was the strategy selection itself incorrect? Remember that closing the position in...

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7 months ago
Understanding Put-Call Parity
August 29, 2016
Concepts

Understanding Put-Call Parity

Alan Grigoletto

Investors will often hear the term put-call parity without fully comprehending its meaning or how it keeps options prices in line. Put-Call Parity states that for a given underlying price with the same strike prices and the same expiry for both puts and calls, the value of a call at a given price implies a value for the put,...

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7 months ago