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  • Options Trading for All Types of Market Environments - Part 3 | Online Stockmarket Trading Update
    past few weeks We considered a covered collar was appropriate for this position Based on technical analysis you can see from the chart that the 42 50 resistance level has held for over a year So we bought protection at 39 00 by buying 3900 SEP11 Put for 0 645 and then wrote the 42 50 SEP11 Calls for 0 775 We received a credit for this trade and the position remains open We are protected until September expiry down to 39 00 and profits will be capped at 42 50 Chart 1 Newcrest Mining Covered Call Collar Trade You can plan and analyse your trade as shown above using the Derivative Profiler option in the Market Analyser software MarketAnalyser also provides a payoff diagram for further trade analysis as follows Chart 2 The payoff diagram for the Newcrest Covered Call Collar trade Trade Note Newcrest NCM is still trading between the 39 00 and 42 50 option strike levels and only time will tell whether the share price will end up at expiry but we are protected until September expiry down to 39 00 and profits will be capped at 42 50 The Trade Options can be used in order to reduce your risk while still participating in potential profits from a modest move in the underlying stock Here we ve explained the Covered Call Collar strategy which allows you to participate in some of the future gains up to the sold strike price while being protected by the put position In future articles we will talk about the High Yield Covered Call strategy and the Stock Repair strategy which is particularly relevant to this market Utilise the features in the Market Analyser software to plan your trades for the particular options strategy using your specific trade selection criteria You will save time and potentially reduce your trading risk Sign up for a free 14 day software trial here By Michael Hevern Head of Research See Also Options Trading for All Types of Market Environments Part 1 The Protective Put Options Trading for All Types of Market Environments Part 2 The Covered Call For buy and sell recommendations on ASX listed companies register for a free trial of MDS Financial Research MDS Financial Advisory Services offers general advice on trading options to generate consistent steady income on your investment portfolio Call 1300 610 024 for further information Tags covered call Financial Advisory Market Analyser Newcrest Mining options options trading Trading Strategies Book Review The Trading Book ASX Company News Sedgman Secures 22 million Coal Handling Contract This entry was posted on Friday August 12th 2011 at 1 53 pm and is filed under ASX Trading News Trading Strategies You can follow any responses to this entry through the RSS 2 0 feed You can leave a response or trackback from your own site One Response to The Covered Call Collar Part 3 of Options Trading for All Types of Market Environments Kerrie Setiawan says August 12 2011 at 7

    Original URL path: http://blog.traderdealer.com.au/2011/08/12/options-trading-for-all-types-of-market-environments-part-3/ (2013-02-02)
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  • Options Trading for All Types of Market Environments – Part 4 | Online Stockmarket Trading Update
    over the subsequent months but for those buy and hold investors there is still hope utilise the Stock Repair Strategy to recover losses in your stock when that stock is expected to rise moderately near term The stock repair trade for ANZ was priced on September 7th 2011 when the October options had 48 days until expiry and ANZ shares were trading at 20 10 Trade Details Buy 1 contract of at the money ATM 2000 Oct11 call options for 0 96 contract for every 100 shares you own and then write sell 2 of the 2100 OCT11 out of the money OTM call options at 0 46 contract for every 100 shares you own This trade costs 4 cents contract to place and if you are exercised you will sell youf original share parcel at 22 00 5 cents shy of the purchase price Note cost calculations do not include associated transaction costs Chart 1 ANZ Stock Repair Trade You can plan and analyse your trade as shown above using the Derivative Profiler function in the Market Analyser software Trade Note The Stock Repair strategy simply involves buying 1 contract of at the money ATM call options for every 100 shares owned and then writing twice as many out of the money OTM call options The Stock Repair strategy costs next to nothing to put on and if the stock drops further the ATM calls simply expire with the OTM calls which completely offset each other causing no additional losses to your original stock position This strategy reaches its maximum profit potential when the stock price is equal to or greater than the strike price of the out of the money OTM options The goal of the ANZ trade is for ANZ to be trading above 21 00 at the October expiry so that the position is repaired with minimal or no loss Please note that ANZ is due to go Ex div around 4 Nov 11 around 0 74 cents per share so if the stock does not get exercised then the dividend will offer some comfort Using the Stock Repair Strategy the stock needs only move up by 5 to reach breakeven however the stock could drop 10 and the position s loss would be the same as if the Stock Repair Strategy was not implemented The Trade Options can be used in order to reduce your risk while still participating in potential profits from a significant move by the underlying stock Today we ve explained the Stock Repair Strategy which allows you to double down on your current losing position for minimal cost however your profits will be restricted to breakeven on the trade Note this strategy does not offer any protection to the downside In future articles we will talk about the High Yield Covered Call strategy and the High Yield Covered Put strategy which is particularly relevant to this market Utilise the features in the Market Analyser software to trade plan your options trades

    Original URL path: http://blog.traderdealer.com.au/2011/09/09/options-trading-for-all-types-of-market-environments-part-4/ (2013-02-02)
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  • Limited Risk Short Selling Strategy – Part 5 of Options Trading for All Types of Market Environments Series | Online Stockmarket Trading Update
    would fall further given that their overseas peers globally have been leading the current share market selloff due the eurozone debt crisis Chart 1 Macquarie Share Price at time of trade entry There have been rumors the Macquarie Bank is a potential takeover target especially considering they were trading at a yield of 8 an PE of 8 and they had fallen 50 since the 2009 peak Even though we thought the likelihood of a takeover in this current macro environment was highly unlikely but we wanted to short MQG stock but limit our risk so we opened a Bear Put Spread Technical analysis was used to decide on the levels of option strike price that we would select refer to Chart 3 below and note last month s low was 21 25 The Bear Put Spread trade for MQG was priced at 2 Sep 11 when the October options had 55 days until expiry and MQG shares were trading at 25 10 The trade was established by buying 1 contract of 2300 Oct11 put option for 0 79 contract and then simultaneously writing selling 1 of the 2150 OCT11 out of the money OTM put option at 0 39 contract This trade costs 40 cents contract to place and would achieve a maximum profit of 1 10 contract Note cost calculations do not include associated transaction costs You can plan your trade using Market Analyser see below Trade Note You can plan and analyse your trade as shown above using the Derivative Profiler option in the Market Analyser software Market Analyser also provides a payoff diagram for further trade analysis as follows Chart 2 The Bear Put Spread Trade Payoff diagram This Bear Put Spread strategy is currently working as seen in Chart 3 below This strategy reaches its maximum profit potential when stock price is equal to or greater than the strike price of the sold out of the money OTM options Chart 3 Macquarie Trade Current position The goal of the Macquarie Bank trade is for the stock to be trade below 21 50 so the position is closed for maximum profit of 1 10 contract refer to the payoff diagram above Using the Bear Put Spread Strategy the stock needs only move down by 0 40 the cost of the trade to reach break even however the stock could surge higher then the loss will be limited to the initial cost of the trade Conclusion Options can be used in order to reduce your risk while still participating in potential profits from a significant move by the underlying stock We have explained the Bear Put Spread strategy which allows you to take a short position in a stock with limited risk however your profits to the downside will be restricted to the level of the short put strike The bear put spread offers an outstanding alternative to selling short stock or buying put options outright when a trader or investor wants to speculate on lower prices

    Original URL path: http://blog.traderdealer.com.au/2011/09/23/thebearputspread/ (2013-02-02)
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  • Options Trading for All Types of Market Environments – Part V: Dividend Capture Covered Call Collar | Online Stockmarket Trading Update
    the dividend WBC goes Ex div 0 74 on 8th November then you could take advantage of this Dividend Capture collar strategy We entered the share position on the day of the recommendation at 19 67 The share price is now trading around 22 00 and has now been trading sideways for the past 2 weeks but it will go Ex div 0 74 on 8th November Given the turmoil in the eurozone which has been triggered by the problems with the European financial system and the debt crisis we considered a Dividend Capture covered collar was appropriate for this position Based on technical analysis you can see from the chart that the 22 50 resistance level has held for over six months So we bought protection at 21 00 by buying 2100 DEC11 Put for 1 00 and then wrote the 2250 DEC11 Calls for 0 44 This trade cost 56 cents but we are protected until December expiry down to 21 00 and profits will be capped at 22 50 Chart 1 Westpac Dividend Capture Covered Call Collar Trade You can plan and analyse your trade as shown above using the Derivative Profiler option in the Market Analyser software MarketAnalyser also provides a payoff diagram for further trade analysis as follows Chart 2 The payoff diagram for the Westpac Dividend Capture Covered Call Collar Trade Trade Note Westpac WBC is still trading between the 21 00 and 22 50 option strike levels and only time will tell where the share price will end up at expiry but we are protected until December expiry down to 21 00 but profits will be capped at 22 50 The Trade Options can be used in order to reduce your risk while still participating in potential profits from a significant move by the underlying stock We have explained the Dividend Capture Covered Call Collar strategy which is allows you to participate is some of the future gains up to the sold strike price and hopefully the dividend while being protected by the put position In future articles we will talk about the High Yield Covered Call strategy and the Covered Call Stock Reversal strategy which is particularly relevant to this market Utilise the features in the Market Analyser software to trade plan your options trades for the particular options strategy using your specific trade selection criteria You will save time and potentially reduce your trading risk By Michael Hevern Head of Research Please note your may need to refer to a tax profession regarding eligibility of franking credits See Also Options Trading for All Types of Market Environments Part 1 The Protective Put Options Trading for All Types of Market Environments Part 2 The Covered Call Options Trading for All Types of Market Environments Part 3 The Covered Call Collar Options Trading for All Types of Market Environments Part 4 Stock Repair For Buy and Sell recommendations on ASX listed companies register for a free trial of MDS Financial Research MDS Financial

    Original URL path: http://blog.traderdealer.com.au/2011/10/21/options-trading-for-all-types-of-market-environments-part-v-dividend-capture-covered-call-collar/ (2013-02-02)
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  • Hedging With a Bear Put Spread: Part 8 of Options Trading for All Types of Market Environments | Online Stockmarket Trading Update
    the short strike as the long put option will rise in price along with the underlying stock price while the short put options continue to decay in premium The maximum profit potential of a bear put spread is when the price of the underlying stock drops down to the strike price of the out of the money OTM short options as beyond that price any gain in the long put options is matched exactly by a loss in the short put options Profit Calculation of the TOL Bear Put Spread Maximum Return Difference in strikes Net Debit Net Debit Following up from the recent trade example Buy to open 10 TOL MAR12 525 Put for 23 5c per contract and sell to open 10 TOL MAR12 476 Put for 7c per contract Maximum Return 525 476 23 5 7 23 5 7 31 5 17 5 180 Maximum Risk Net Debit 23 5c 7c 17 5 if TOL share price is 5 25 Break Even Higher Strike Net Debit 525 17 5 5 075 In summary the Bear Put Strategy offers a maximum risk limited to the Net Debit Paid while the maximum loss is limited and the maximum upside profit is also limited These risk rewards are shown in the Payoff diagram Note this strategy can be used in order to hedge an underlying Toll Holdings stock position while the investor is still eligible for the dividend payment in early March The Trade Options can be used in order to reduce hedge your risk while still participating in potential profits from a significant move by the underlying stock We have explained the Bear Put Spread strategy which can be used to allow you to protect an existing share position while maintaining the benefits of ownership of the underlying stock In future articles we will talk about the High Yield Covered Call strategy and the Covered Call Stock Reversal strategy which is particularly relevant to this market Utilise the features in the Market Analyser software to plan your options trades for a particular options strategy using your specific trade selection criteria You will save time and potentially reduce your trading risk By Michael Hevern Trading Desk Please note your may need to refer to a tax profession regarding eligibility of franking credits See Also Options Trading for All Types of Market Environments Part 1 The Protective Put Options Trading for All Types of Market Environments Part 2 The Covered Call Options Trading for All Types of Market Environments Part 3 The Covered Call Collar Options Trading for All Types of Market Environments Part 4 The Stock Repair Strategy Options Trading for All Types of Market Environments Part 5 Limited Risk Short Selling Strategy Options Trading for All Types of Market Environments Part 7 Dividend Capture Covered Call Collar For Buy and Sell recommendations on ASX listed companies register for a FREE trial of MDS Financial Research MDS Financial Advisory Service offers general advice on trading options to generate consistent steady

    Original URL path: http://blog.traderdealer.com.au/2012/02/10/hedging-with-a-bear-put-spread-part-8-of-options-trading-for-all-types-of-market-environments/ (2013-02-02)
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  • The Bull Call Strategy: Part 9 of Options Trading for All Types of Market Environments | Online Stockmarket Trading Update
    the money call to give you more leverage on the position FIGURE 1 Payoff diagram for the Bull Call on Newcrest at expiry This trade can be analysed using the Derivative Profiler option in the Market Analyser software Risks and Profit Potential The Bull Call profits when the stock price trades above the strike price For the buyer of a call option the maximum risk is limited to the initial premium paid for the call option The maximum profit is unlimited Profit Calculation of the NCM Bull call Maximum Return Unlimited Following up from the recent trade example Buy to open 10 NCM 3150 APR12 Call for 95c per contract Maximum Return Unlimited Maximum Risk Net Debit 95c if NCM share price is Break Even Strike Price Net Debit 31 50 0 95 32 45 In summary the bull call strategy offers a maximum upside profit which is unlimited while the maximum risk is limited to the Net Debit Paid These risk rewards are shown in the Payoff diagram An interesting aside is to examine the payoff as the trade progresses as shown in the diagram below Note that the break even is reached sooner because of the time value left in the option FIGURE 2 Payoff diagram for the Bull Call on Newcrest at two days into the trade Note this Bull Call strategy can be used in order to gain an exposure to Newcrest while limiting your outlay and risk to the premium paid The Trade Options can be used to gain leveraged exposure with limited risk while still participating in potential profits from a significant move by the underlying stock Here we ve explained the Bull Call strategy which can be used to allow you to participate in the rising stock price of the underlying stock while limiting your loss to the premium paid In future articles we will talk about the High Yield Covered Call strategy and the Covered Call Stock Reversal strategy which is particularly relevant to this market Utilise the features in the Market Analyser software to plan your options trading strategy using your specific trade selection criteria You will save time and potentially reduce your trading risk By Michael Hevern MDS Trading Desk Options Trading for All Types of Market Environments Part 1 The Protective Put Options Trading for All Types of Market Environments Part 2 The Covered Call Options Trading for All Types of Market Environments Part 3 The Covered Call Collar Options Trading for All Types of Market Environments Part 4 The Stock Repair Strategy Options Trading for All Types of Market Environments Part 5 Limited Risk Short Selling Strategy Options Trading for All Types of Market Environments Part 7 Dividend Capture Covered Call Collar Options Trading for All Types of Market Environments Part 8 Hedging With a Bear Put Spread For Buy and Sell recommendations on ASX listed companies register for a FREE trial of MDS Financial Research This report was prepared by Michael Hevern It represents the views and

    Original URL path: http://blog.traderdealer.com.au/2012/03/09/the-bull-call-strategy-part-9-of-options-trading-for-all-types-of-market-environments/ (2013-02-02)
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  • Dividend Capture Covered Call Collar: Part 10 of Options Trading for All Types of Market Conditions | Online Stockmarket Trading Update
    buying 360 JUL12 Put for 0 05 and then sold the 380 JUL12 Calls for 0 03 This trade cost 2 cents but we are protected until the end of July expiry down to 3 65 and profits will be capped at 3 80 Chart 1 Telstra Dividend Capture Covered Call Collar Trade You can plan and analyse your trade as shown above using the Derivatives functionality in the Market Analyser 7 software refer to the Market Analyser 7 Derivatives Video Tutorial for a demonstration Trade Note Telstra TLS is still trading between the 3 60 and 3 80 option strike levels and only time will tell where the share price will end up at expiry However we are protected until July expiry down to 3 55 but profits will be capped at 3 80 The Trade Options can be used to reduce your risk while still participating in potential profits from a significant move by the underlying stock The Dividend Capture Covered Call Collar strategy allows you to participate is some of the future gains up to the sold strike price and hopefully the dividend while being protected by the put position Note due to the low volatility in the Telstra stock you could have simply just bought the puts because you are paying approximately 1 5 of the stock value to protect your position down to 3 55 until the end of July with the prospect of a 4 dividend plus franking credits due in August Utilise the features in the Market Analyser 7 software to trade plan your options trades for the particular options strategy using your specific trade selection criteria You will save time and potentially reduce your trading risk Contact me at D2MX Trading on 1300 610 024 and I can help you trade using a number of strategies that will give you the tools to navigate this market and help you boost your returns on investment Banking stocks like Commonwealth Bank are ideal for this strategy I trust that this information has been helpful Please note your may need to refer to a tax professionial regarding eligibility of franking credits Michael Hevern Investment Adviser D2MX Trading This report was prepared by Michael Hevern It represents the views and opinions of the author It is not intended for use by any third party without the approval of Michael Hevern While this report is based on information from sources which are considered reliable its accuracy and completeness cannot be guaranteed Any opinions expressed reflect my judgment at this date and are subject to change Contracting Hevern Pty Ltd is a Corporate Authorised Representative No 408868 of D2MX Pty Limited ABN 98 113 959 596 AFSL No 297950 D2MX and Michael Hevern has been appointed as an Authorised Representative of Contracting Hevern Pty Ltd Opinions conclusions and other information expressed in this report are not given or endorsed by D2MX unless otherwise indicated The information contained in this Report is General Advice only as the information or

    Original URL path: http://blog.traderdealer.com.au/2012/06/22/dividend-capture-covered-call-collar-part-10-of-options-trading-for-all-types-of-market-conditions/ (2013-02-02)
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  • Calendar Call Spread | Online Stockmarket Trading Update
    rally to continue or simply closing out the position Recent Trade National Bank NAB A recent trade taken by our clients was to buy a NAB Calendar Call Spread two weeks prior to the November options expiry National Australia Bank NAB shares had suffered a 15 slide since its recent peak when it was trading at over 27 00 The share price had fallen to around 23 00 and was trying to establish support around this level The 22 50 support level has held for the past 18 months and this was a trade for a bounce from these levels While the chart looked oversold there was a chance NAB would just trade sideways around the 23 50 level so the trade was entered to profit from a sideways and bullish move on NAB while helping to reduce the risk To profit from this view we opened a NAB Calendar Call Spread The objective of this trade is for NAB to ideally be below the sold call strike at expiry So instead of trying to profit from a sharp bounce from NAB we were looking to profit from a steady recovery of NAB near term To put it more simply we felt NAB would hold around 23 51 before November options expiry 29 Nov 12 and trade higher from then on The maximum possible profit on this trade would be achieved if NAB held just below the short strike 23 51 level at November options expiry The maximum risk on the trade was the initial debit this would occur if NAB is above 23 51 at November options expiry or significantly below that level CHART 1 National Bank NAB Calendar Call Spread Trade Details In this trade we entered the position when NAB was trading around 23 84 two weeks prior to expiry The trade was established by Buying to Open NAB 2350 DEC12 Call for 58c and simultaneously Selling to Open the NAB 2351 DEC12 Call for 36c The total cost was limited to the initial 23 cents premium paid Payoff Diagram at Expiry CHART 2 Payoff Diagram at Expiry for the NAB Calendar 2351 NOV12 DEC12 CALL Spread Note if your view changed during the trade you could have bought back the short call or closed the trade prior to expiry Risks and Profit Potential The Calender Call Spread profits when the stock price trades sideways or finishes below the short strike price The maximum risk is limited to the initial premium paid for the option spread The maximum profit is also limited In summary the Calendar Call Spread strategy offers limited upside profit while the maximum risk is limited to the Net Debit Paid These risk rewards are shown in the Payoff diagram above Note the Calendar Call strategy can be used in order to gain an exposure to National Bank while limiting the outlay and risk to the premium paid Result NAB shares traded sideways up to expiry and we were of the view that they

    Original URL path: http://blog.traderdealer.com.au/tag/calendar-call-spread/ (2013-02-02)
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