Choices Strategies for Earnings Period
As the global economic crisis continues to wreak havoc across Europe, especially in the Aegean peninsula, financial traders are becoming increasingly aware of the potential opporunities the economic downturn offers saavy traders.
Leverate made some nice achievements in the past. Leverate provides various software solutions for forex brokers, received a significant investment from Danish forex broker Saxo Bank.
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Forex Weekly Outlook Feb. I have previously written about their MT4 binary options tool, as well as MetaTrader for iPhone. This partnership will also enable Saxo Bank to offer Leverate's tools to banks and brokers.
If you had sold the 100 call strike you would have given the call buyer the right to buy your shares at $100/share regardless of how much higher the stock is trading above 100 (Although technically, it would have been bought from you at 105.25 since you also took in 5.25 in premium). You can see that it traded from around 112 to 130 during the week that it reported earnings (see NFLX daily chart below) and this shows the upside risk that selling a call can present to a trader.
In addition, the amount you took in by selling the call is the maximum downside protection you have. You are open to losses if the stock moves more than the premium you took in. Here's a good example of this again using NFLX earnings on 04/23/2012.
Click graphic to enlarge. Now see where NFLX traded after the earnings report where it traded roughly around the 85 price level which is more than $10 below the theoretical breakeven level of the covered call. If you sold the 105 strike call for 6.35, your total downside protection would be current stock trading price (101.85) minus 6.35 which would be 95.50.
I hope I made it simple and succinct enough to understand after one run through. There are a host of other strategies one can employ into binary events such as earnings, FDA announcements, etc but I wanted to focus on more simple ways to use options in conjunction stock positions.
The range of outcomes are binary and widely dispersed.
Hence, Greek bank stocks trade like options.
And so just a little bit of good news (like the fact that maybe perhaps there will be a coalition government, even though that's unlikely) is sending the bank stocks wild.
I've previously reported about Leverate's MT4 iPhone application, as well as their product for integrating binary options on MT4. All the details about their new CRM software for
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Forex Weekly Outlook Feb. Enhanced reporting, sharing and management capabilities were added. The provider of software solutions for brokers, Leverate, introduces a second version of their CRM tool for forex brokers.
economic numbers or the prices of gold and currencies would reach a certain level by a certain future date, and whether specific acts of war would occur by a certain future date. Through the website, Intrade and TEN allegedly unlawfully solicited and permitted U.S. customers to buy and sell options predicting whether specific future events would occur, including whether certain U.S.
Obviously, since this strategy involves buying calls as well as selling puts, one will not want a narrow sideways price action if this structure was put on for a debit. This strategy allows you to profit on a big directional move upwards(via the calls) as well as the loss in value of the puts one sold.
However, one can argue that the fundamentals of the company may change based on the numbers they present. If both the OTM calls and puts both have the same maturity, this structure is also referred to as the risk reversal. Be aware of the leverage involved in this strategy as you are long calls as well as being short puts (both are delta positive positions).
Combination
In the last example, you can see how you don't get to participate in any up move. It's beyond the scope of this post to argue the merits of technical vs. fundamental analysis, though, so we'll leave that to the readers. You can opt to play it both ways-buy call(s) and sell put(s).
Binary options can yield up to 400% its initial investment in less than an hour and that's precisely why so many trader's are turning to binary option trading for substantial profits during the current economic downturn. Binary options may already be familiar to many traders, as it has become increasingly popular over recent years, but many vetaran trader's have yet to take note of the full potential it offers.
Recent market share reports clearly show that binary option trading, which derives its name from the simple two choices given to the trader, is becoming increasingly popular among freelance traders and other part-time traders. Yet professional financial traders are not the only ones attempting to take advantage of the ongoing market volatility. Rookie traders across the globe are also attempting to exploit the current market direction by using a reletively new type of asset trading, called binary option trading.
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