Wednesday, 30 May 2012

HOW TO TRADE OPTIONS BEFORE RESULTS


Every quarter, Indian. companies announce their latest earnings and sales results. Sometimes, this information is entirely in line with expectations and the market basically shrugs its collective shoulders. At other times, however, a company unleashes an earnings surprise, and the stock market reacts in a decisive fashion. Sometimes, the reported results are much better than expected - a positive earnings surprise - and the stock reacts by advancing sharply in a very short period of time to bring the price of the stock back in line with its new and improved status. Likewise, if a company announces earnings and/or sales that are far worse than anticipated - a negative earnings surprise - this can result in a sharp, sudden decline in the price of the stock, as investors dump the shares in order to avoid holding onto a company now perceived to be "damaged goods"...............

Tuesday, 29 May 2012

OPTION TRADING VS.STOCK CASH


Many traders now a day intend to shift from cash market to option market ,here is a comparison made to make it easy for them.

What is an option?
An option is a contract giving the buyer the right, but not the obligation, to buy or sell an underlying asset (a stock or index) at a specific price on or before a certain date.
An option is a derivative. That is, its value is derived from something else. In the case of a stock option, its value is based on the underlying stock (equity). In the case of an index option, its value is based on the underlying index (equity).

An option is a security, just like a stock or bond, and constitutes a binding contract with strictly defined terms and properties.

Options vs. Stocks


Similarities:
1) Listed Options are securities, just like stocks.
2) Options trade like stocks, with buyers making bids and sellers making offers.
3) Options are actively traded in a listed market, just like stocks. They can be bought and sold just like any other security.
Differences:
1) Options are derivatives, unlike stocks (i.e, options derive their value from something else, the underlying security
2) Options have expiration dates, while stocks do not.
3)There is not a fixed number of options, as there are with stock shares available.
4)Stockowners have a share of the company, with voting and dividend rights. Options convey no such rights.

Friday, 25 May 2012

IFCI BULL CALL SPREAD OPTION STRATEGY


OPTION CALL PUT STRATEGY

Here we present you Bull call spread option trading strategy which is explained in detail in our earlier post http://optioncallputtradingtips.blogspot.in/ This is very short term strategy with current expiry outlook

IFCI BULL CALL SPREAD STRATEGY

LEG1: BUY IFCI 35 MAY CALL OPTION @.80
LEG2: SELL IFCI 37.5 MAY CALL OPTION @ .20
COST =4800       
 RISK PER LOT = (.80-.20)*8000=4800
MAX RETURN 15200

Pay off table
Strike Price
Call Option Price
Strike Price
Call Option Price
Strike rate
Closing price
Lot size
Payoff
35
0.8
37.5
0.2
0.25
33.5
8000
-4800
35
0.8
37.5
0.2
0.25
33.75
8000
-4800
35
0.8
37.5
0.2
0.25
34
8000
-4800
35
0.8
37.5
0.2
0.25
34.25
8000
-4800
35
0.8
37.5
0.2
0.25
34.5
8000
-4800
35
0.8
37.5
0.2
0.25
34.75
8000
-4800
35
0.8
37.5
0.2
0.25
35
8000
-4800
35
0.8
37.5
0.2
0.25
35.25
8000
-2800
35
0.8
37.5
0.2
0.25
35.5
8000
-800
35
0.8
37.5
0.2
0.25
35.75
8000
1200
35
0.8
37.5
0.2
0.25
36
8000
3200
35
0.8
37.5
0.2
0.25
36.25
8000
5200
35
0.8
37.5
0.2
0.25
36.5
8000
7200
35
0.8
37.5
0.2
0.25
36.75
8000
9200
35
0.8
37.5
0.2
0.25
37
8000
11200
35
0.8
37.5
0.2
0.25
37.25
8000
13200
35
0.8
37.5
0.2
0.25
37.5
8000
15200
35
0.8
37.5
0.2
0.25
37.75
8000
15200
35
0.8
37.5
0.2
0.25
38
8000
15200
35
0.8
37.5
0.2
0.25
38.25
8000
15200
35
0.8
37.5
0.2
0.25
38.5
8000
15200
35
0.8
37.5
0.2
0.25
38.75
8000
15200
35
0.8
37.5
0.2
0.25
39
8000
15200
35
0.8
37.5
0.2
0.25
39.25
8000
15200
35
0.8
37.5
0.2
0.25
39.5
8000
15200
35
0.8
37.5
0.2
0.25
39.75
8000
15200




 For Getting Option Tips regularly pls fill free tips form on right side of blog