Can use options to hedge CFD positions. Giving full leverage benefits of CFD's - only insured with options! Another beer from the bar thanks
Puts are really good way to go instead of shorting stock outright--SPG puts went from 1.50 to 8.40 in about 5 days -even if u used $2500 to buy puts -potential profit top to bottom about $12k If you shorted the stock (if it was avaialble which is not always the case) you wouldve made $10/share --to make 12k you wouldve had to have 1200 shares or almost $120,000 -shorts work really well with puts cause of the inherent nature of fear-swift and furious. No loss of timevalue
QFT. I bought some puts on JNPR first thing this morning and already up $25/contract. I had wanted to buy them yesterday but other priorities kept me away from my computer all day. =(
As every option trader knows, there are a great many ways to make a directional bet with options. Here are some ways (I am using the last traded prices as of today (Wednesday) for Dec SPY options. SPY itself is at 118.60. 1. Buy the 118 call for about 2.68. If you hold until until expiration SPY will have to go to 1120.68 before you make money. But who says you have to hold until expiration? If SPY pops up 0.60 in two days the call will be worth about 2.93. Accept your two day 9% gain and get out. 2. Use a vertical spread. A 118/121 spread will cost you about 1.52. You make money if SPY is over 119.52 at expiration. You are limited to making "only" a 97% gain no matter how high SPY goes. 3. Further reduce your costs by adding to your 118/121 debit spread a 121/124 call credit spread, making a 118/121/124 call butterfly. This will cost you about 0.75. You will make money if SPY is between 118.75 and 123.25 at expiration, with the maximum profit (of 400%) if SPY is at 121. Unlike the vertical spread alone you will lose money if SPY goes too high, but no more than the initial 0.75. 4. Any position in between (2) and (3) can be created with a call condor. E.g., buy the 118/121 debit spread and sell the 122/125 credit spread, for about 0.95. Now you make money at expiration if SPY is between 118.95 and 124.05, with the maximum profit if SPY is between 121 and 122. 4. None of the above tactics require margin. If you are willing to use margin you could, for example, reduce your costs further with a ratio call spread -- buy one 118 call and sell two 121 calls, for a net cost of 0.36. Now you make money if SPY is between 118.36 and 123.64, but your losses can be unbounded if SPY flies past that point. 5. Still pining for futures? Create one with a synthetic long. Buy the 118 call and sell the 118 put. You can do this for free (aside from the margin requirement) as the price of the put is about equal to the price of the call. "Wait," sez you, "with SPY at 118.60 shouldn't the net cost be 0.60?" Well, SPY pays a 0.57 dividend, and that makes the puts more expensive and the calls cheaper, so they work out to having about the same value. You have a margin requirement and potentially unbounded losses (as with a future) but have no time decay and a delta of 1, just like for a future. If SPY goes up enough to overcome the bid/ask spreads you'll make money. But if it doesn't, you lose.
/\ Yep, yep. Listen to that | man. Those that don't like options just don't understand how they work and what all can be accomplished with them. This is just one good example.
Very good examples Rew... Is there some piece of software to give you those scenarios worked out.... So far I calculate manually usig excel? Thanks