Stock Options and Futures

Stock options are in essence the right to buy a specified number of shares at a specified price (known as the "strike price") within a specified period of time. If at any given point the current price of a share of stock is higher than the strike price, the options have value. Both stock price and shareholder expectations tend to fluctuate, and not always in the same direction at the same time, so it's quite normal for the two to be at least temporarily out of alignment.

Think of it this way. The value of the options is based on the difference between the current stock price and the strike price, while shareholder expectations are based on what shareholders collectively thought the stock should or would be worth. If a share of stock is worth more than the strike price, but less than the shareholders were expecting, it would result in the situation you describe.

In a word yes. It should be, otherwise arbitraguers would spot this mispirce, and alter the option premia so that it was the cause. (and the misprice would disappear) consider a scenario where the implied vol on the call is 20% and on the put 15%. consider a portfolio long one put, short one call and long one share of the underlying. (you could use a future here also) This portfolio is delta neutral. (- excericise) . notice we buy the undervalued, sell the overvalued. (it doesnt actually matter if the actual volatility is some other number like 50% or 10%) Portfolio will yield risk free returns. ie you will get no payoff at the expiration date. and you will pocket the difference in premia at the outset.

When some schools have a 33 percent dropout rate it is a very serious problem for the future of the US and the individuals. The individuals will not be able to get decent jobs. Some will end up on welfare. Some of them drop out due to pregnancy and drug related problems or crimes. Many drop out because they are part of gangs. This puts a strain on the average worker when they have to pay for government services that have to deal with those drop outs. It also means that less than half of a senior class will go to college because of the dropout rate on their class. We need more kids to co to college and learn the higher levels of knowledge, science, computer science, medical science and general knowledge. The US lags behind on technology and the Asian and some European nations excel. This pace cannot remain because it will affect the economy in the long run.

Suppose that a bond portfolio with duration of 12 years is hedged using a futures contract where the underlying asset has duration of 4 What is likely to be implication on the hedge ratio and the hedging strategy of the fact that 12 years rate is less volatile than the four years rate?

The Commodities Futures Trading Commission (CFTC) is an independent regulatory agency funded by the United States government. It was created by congress in 1974.

I suspect by the nature of your question you might be curious about a common funding misconception in the futures industry.

What is often confusing in futures regulation is that there is a second, and in many views quite redundant "Watchdog" agency in Futures known as the National Futures Association.

Unlike the CFTC which receives government funding, the NFA funding scheme is "Per Trade." NFA receives a payment from each trade. As of January 1, 2011, the NFA assessment fee, payable by clearing firms (Known as Futures Clearing Merchants in Commodities or FCMs) with respect to futures contracts, is $.02 per side on each lot, invoiced and charged to the customers. The assessment fee on both exchange-traded and dealer options is $.02 per side. The assessment fee for NFA Forex Dealer Members is $0.02 per $10,000 of notional value.

The NFA was created in 1982 when volumes were much lower. The result of the payment scheme is that due to larger modern volumes, NFA is awash in cash. Their unique, cash rich funding scheme, their odd market position (self regulatory vs government watch dog), and their clear government granted power over the industry, oft creates confusion to futures outsiders.

The answer to this question depends on how much you have to lose and how comfortable you are with your money in the market. In a general sense no, you should not take your money out. Right now the best thing you could do for yourself, ( If you have money that you can lose, which if you didn't then you should not be investing in the market, because anything is possible.) would be to invest smart, by taking advantage of the low prices of every stock. You have probably heard the term Recession, this is not a term to be afraid of, it simply means the market is at the bottom of its cycle. One of the problems with people not being comfortable with their money in the market, is because they do not trust the government. This should not be the case. the "Great Depression" really only started, once people paniced and took all of there money out, afraid to lose what they have left, but you haven't lost any money until you take it out of the market below what you bought it at. Once people took all their money out, there was nothing to hold up the banks, and the entire market crashed. My advice would be invest smart, learn more about what your investing in, and or hold on for the ride.

If you are afraid your stock is not already at its bottom, speak to your Financial Advisor about a "Leap Put Option." as an insurance policy.

Hope that helps.

A wheat futures contract covers 5000 bushels of whatever wheat (there are different kinds) is specified in the contract.

Futures are the contracts between two parties to buy or sell a specified asset of standardized quantity and quality for a price agreed upon today (the futures price or strike price) with delivery and payment occurring at a specified future date, the delivery date.

see link:

http://www.thestreet.com/s/what-happens-when-a-brokerage-fails/funds/saving-money/10393483.html?puc=aoljjc

The history of options trading goes all the way back to medieval times where the rights to ownership of commodities are secured by contract for a small fee. The history of modern options trading can be traced back to the tulip mania of 1637 during the Dutch Golden Age where the rights to purchase of tulips can be obtained simply by paying 3.5% of the purchase price. Standardized options trading over an exchange begun in US in 1848 with the creation of the CBOE, Chicago Board of Exchange.

All standardized exchange traded options represents 100 shares.

Adjusted options, which are comingled and traded along side standardized exchange traded options, may not always represent 100 shares.

As such you need to be able to tell which are the standardized ones and which are the adjusted ones by reading the options symbols. Link below.

"Cashing in" stock options is done by exercising them then immediately selling the stock. You can't just take the stock option to the company accountant and ask for money. If you don't hold the stock long enough, your gains are taxed as ordinary income. (If you hold the stock long enough - there are two concurrent calendars, and you've got to hold the stock for two years after you got the option plus one year after you bought the stock, and the second issue only comes into play if you waited more than a year to exercise the option, then you're taxed at the capital gains rate.)

EPS stands for encapsulated postscript file format and its used in prepress and printing process.

Any stock website that gives you the price of the stock itself will have a link to the price of the options. For every stock there are many options to choose from ranging in price and date.

Study Options Weekly before trading options.

Ready to run, business solution.

Developed multiple arbitrages for the financial markets. Arbitrages that produce just a few percent a year, to arbitrages that produce over 30 percent a year.

In 2001 i started developing, as of now, a dozen arbitrages. I lock in an X percentage, and Y time later, i close out the arbitrage. Over 30%/yr.

Risk-Free Investing is not only possible, but in abundance. Just that people are told and taught that it is impossible. No risk has been in front of all, but not seen.

The market is unlimited.

Thomas Adair

thomasadair@hotmail.com

A friend has no legal rights as related to a rental contract and the option. If a person or multiple people are on a contract then their rights are largely detailed in the contract. If someone is dating someone else there is no extension of the rights. If the two people were to marry then the situation could change slightly as the rights of one might become co-mingled or otherwise considered joint property. If you really want a legal definition find a lawyer in the specific state and expect they will want to review the contract. If you are just trying to make sure that both the person on the contract and the girlfriend both have a stake in the property sign a new contract with the landlord, agree an addendum or exercise the option and put the property in both names.

nothin

Same Day Sale is when an individual performs two actions regarding Stock Options at the same time. The first is the sale of the stock on a stock exchange and the second is the exercise of the stock option. The advantage of the Same Day Sale is that the individual does not have to actually pay for the exercise of his stock option. Part of the money the individual receives from the sale of the stock is used to pay for the exercise of the option.

Same Day Sale has tax ramifications that should be reviewed with an individuals tax adviser or CPA.

The option premium changes based on the change of stock price, days to expiration, change in implied volatility and dividend price.

Options Weekly has a nice tutorial on options, see related links.

Short answer: yes. Long-winded answer: There's a difference between shorting stock and shorting options. When you sell stock short, it means you're selling shares you don't own. If you want to short Acme, you first call your broker and ask him to do a locate on some Acme for you. The broker finds however much Acme you want and borrows it for you. He then loans it to you, and you sell it. (Sometimes this timeframe is inverted--once you execute the short sale you have three business days to deliver the securities, so once Joe knows there is some stock for him to short he can execute the sale then deliver the stock after he's got it.)

But futures always have a short side and a long side. Being short on an option means you sold, or wrote, it; being long means you bought it. And it is very, very possible to write puts and calls now.

You may be thinking about naked options--those where the option is traded without owning the underlying asset. You can do those too. Basically, there are eight ways to trade stock options: buying and selling covered puts, naked puts, covered calls and naked calls. Of these, I don't believe there's a difference between a covered and naked put if you're short or a difference between a covered and naked call if you're long. On the other side there's a world of difference: if you're short on a naked call or long on a naked put and it's exercised you have to buy the security so you can deliver it, losing money in the transaction. But if you're short on a put, it doesn't really matter whether the counterparty owns the security--the option gets exercised, he delivers, end of story. And in reality, if you've got some extra scratch in your brokerage account and know some stocks that are about to get bad quick, buying naked puts isn't a bad way to make money. If you buy the put at a strike price of $20 and pay 50 cents a share premium, and the stock falls to $16 when you execute, you buy enough stock to cover for $16, turn it over, take your $20 and wind up with a $3.50/share profit. Not bad.

yes

A futures contract is a exchange traded device where someone can speculate on or hedge price risk regarding a specific commodity, bond market or stock index asset.

The contract is a binding agreement of delivery of an asset at a predetermined time in the future.

At first futures prices vs. the current price of the underlying asset they represent are not the same due to the time value of future money, market forecast opinion, news, etc.

But as the futures contract comes to it's time conclusion it's price starts to closely track the spot or actual cash market price of the asset.

In the end they are both at parity as the futures contract ends at the delivery date and thus is then equal to the then current cash market price of the underlying asset.

It depends on the investor.

An example: You buy a call on 100 shares of Acme at a $20 strike price, and you pay a $1 per share premium for it. Your intent is to make $100 profit, and to do so you'll have to sell the stock for at least $22 per share plus whatever your broker's commission is--if you have a broker that charges $10 for stock sales and $20 for exercising calls, you'll have to sell the stock for $22.30 per share to make your $100 profit.

If you are selling call options on stock you own (covered call) then there are two returns to think about: return-if-flat (meaning stock doesn't change between today and the option's expiration), and return-if-called (the return if the stock is called away from you). There are tools available to calculate both of these (see www.borntosell.com).

Company gain? More a process to clean things up. Its in bankrutpcy, it can't pay it's debts...if it wasn't stock representing equity, but sau partnership interest, those partners could be personally responsible to pay those debts. Only because it's stock, which limits liability to the amount invested and not to the actual Corp liabilities, do the owners not have responsibility. It really doesn't make a difference as those options are to stock that is going to be relinquished anyway - probably to bondholders or banks or others that are asked to not get paid what they are owed as part of the resolution of the BK.