Beruflich Dokumente
Kultur Dokumente
James Bittman
Senior Instructor
The Options Institute at CBOE
Disclosures
In order to simplify the computations, commissions have not been included in the
examples used in these materials. Commission costs will impact the outcome of all
stock and options transactions and must be considered prior to entering into any
transactions. Multiple leg strategies involve multiple commission charges.
Any strategies discussed, including examples using actual securities and price data,
are strictly for illustrative and educational purposes only and are not to be construed
as an endorsement, recommendation, or solicitation to buy or sell securities.
Options involve risks and are not suitable for all investors. Prior to buying or
selling an option, an investor must receive a copy of Characteristics and Risks of
Standardized Options. Copies are available from your broker, by calling 1-888-
OPTIONS, or from The Options Clearing Corporation, One North Wacker Drive,
Suite 500, Chicago, Illinois 60606. Investors considering options should consult
their tax advisor as to how taxes may affect the outcome of contemplated options
transactions.
CBOE, Chicago Board Options Exchange, OEX and XEO are registered
trademarks and The Options Institute and SPX are servicemarks of CBOE. All other
trademarks and servicemarks are the property of their respective owners.
Copyright © 2009 Chicago Board Options Exchange, Incorporated. All rights reserved.
American-Style Exercise:
can be exercised on any business day before
the deadline*
European-Style Exercise:
can be exercised only on the last day before
expiration.
American-Style Exercise
– Stock and ETF options, OEX Index options
European-Style Exercise
– SPX, XSP, DJX, NDX, MNX, RUT, XEO
– Do not confuse “exercise” with “buy and sell.”
– Positions can be closed on any business day.
Be chosen to fulfill
Assigned means _______________
the obligation of a
short option
Long 5
SPX none 910
880 Call
Long 5
XSP none 89.00
95 Put
Short 5
SPX none 990
950 Put
Short 10
XEO none 440
460 Put
+0.80
+0.60
+0.40
Profit / (Loss)
+0.20
0.00 ][ ][ ][ ][ ][
950 975 1000 1025 1050
(0.20)
(0.40)
(0.60)
+0.80
+0.60
+0.40
Profit / (Loss)
+0.20
0.00 ][ ][ ][ ][ ][
950 975 1000 1025 1050
(0.20)
(0.40)
(0.60)
Underlying SPX
Underlying VIX
Cash Settlement
3 Expirations Available
Quotes in Pennies
Long Binaries:
Pay Premium
Short Binaries:
Margin equals max risk
($100 – premium)
Example:
Buy SPX Binary 975 Call @ 0.70
Sell SPX Binary 1025 Call @ 0.30
Net Cost 0.40
Constructed similar to a Bull Call Spread
Payout at expiration within a range.
Note: spreads involve extra commissions.
+0.80
+0.60
+0.40
Profit / (Loss)
+0.20
0.00 ][ ][ ][ ][ ][
950 975 1000 1025 1050
(0.20)
(0.40)
(0.60)
Protection a Portfolio
Protecting a Diversified Portfolio
Cost = __________________________
120
110
SPX
100
DJIA
90 NDX
RUT
80
70
6/1/07
7/1/07
8/1/07
9/1/07
1/1/08
2/1/08
3/1/08
4/1/08
5/1/08
10/1/07
11/1/07
12/1/07
4/24 – 5/18
SPX + 2.9%
DJIA + 4.6%
RUT – 0.2%
NDX + 2.0%
8/14 9/18
SPX @ 1,004 1,054 (+5.0%)
RUT
Buy Sep 560 Call 21.00
Buy Sep 590 Call ( 9.00)
SPX
Sell Sep 1,050 Call 11.00
Buy Sep 1,080 Call (4.00)
RUT
Buy 1 Sep 560 Call 21.00 (21.00)
Sell 2 Sep 590 Call (9.00) 18.00
Buy 1 Sep 620 Call (3.00) ( 3.00)
SPX ( 6.00)
Buy 1 Sep 1,020 Call 27.00 (27.00)
Sell 2 Sep 1,050 Call (11.00) 22.00
Buy 1 Sep 1,080 Call (4.00) ( 4.00)
( 9.00)
CHICAGO BOARD OPTIONS EXCHANGE
Index Options – 57
Compare the Three
* If indexes do not move in the same direction, the risk can exceed
the initial cash outlay.
bittman@cboe.com
CHICAGO BOARD OPTIONS EXCHANGE
Index Options – 61
ANSWERS
Index Options
Unique Features & Strategies
Exercise / Assignment Problems 1
I-T-M Receive
Long 5
SPX none 910
Long 5 $3,000
880 Call Exercise = $15,000
Short 5
O-O-M
SPX none 990 None
950 Put Expire
+0.80
+0.60
+0.40
Profit / (Loss)
+0.20
0.00 ][ ][ ][ ][ ][
950 975 1000 1025 1050
(0.20)
(0.40)
(0.60) At or Above: Payout = $100 – make $60
+0.80
+0.60
+0.40
Profit / (Loss)
+0.20
0.00 ][ ][ ][ ][ ][
950 975 1000 1025 1050
(0.20)
(0.40)
(0.60)
Below strike – Keep $40
At or Above – Pay $100 – Lose $60
CHICAGO BOARD OPTIONS EXCHANGE
Index Options – 68
975-1025 Binary Call Spread at $0.40
+0.80
+0.60
+0.40
Profit / (Loss)
+0.20
0.00 ][ ][ ][ ][ ][
950 975 1000 1025 1050
(0.20)
(0.40)
Payout within a range.
(0.60)
975 Binary Pays $100 – 1025 Binary Expires – profit = $60
CHICAGO BOARD OPTIONS EXCHANGE
Index Options – 69
Portfolio Protection with Index Puts
Buy____
55 DJX ________
DEC 93 Puts @ ______
5.30
Cost = __________________________
55 x 5.30 x $100 = $29,150
5.8% of portfolio value
1 DJX Put protects $9,300
# of options = $500,000 $9,300 = 55
Strike price is at the money
CHICAGO BOARD OPTIONS EXCHANGE
Index Options – 70
How the Protection Works
= Butterfly Spd