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By James B. Bittman

Designed and written for lively investors who're drawn to sensible info that may increase their effects, buying and selling Index suggestions deals tried-and-true ideas and not using a lot of thought and math. Bittman offers investors with the knowledge to guage functional events and deal with positions. one of the key good points: the fundamentals of index strategies, together with numerous spreads; how one can fit thoughts with forecasts; possible choices for wasting positions; the significance of expense habit and volatility. A windows-based software that gives a number of choice pricing and graphing is integrated within the package deal.

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Trading Index Options

Designed and written for energetic investors who're drawn to functional details which can increase their effects, buying and selling Index thoughts bargains tried-and-true recommendations with no lot of thought and math. Bittman presents investors with the information to judge functional occasions and deal with positions.

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Fourth, calculate the profit or loss. Fifth, plot the profit or loss on the grid. Sixth, repeat steps 3 through 5 until the profit and loss diagram is complete. Although 22 strategies were presented in this chapter, there are many more possibilities. Option strategies are limited only by one's imagination. Page 47 Three Option Values and How They Change Introduction This chapter explains option values in two parts. First, it demonstrates the analogy between options and insurance. Second, it discusses how option values change as the different inputs change.

29 ⇐Put value up Inputs ⇐Increase in strike price only Outputs Change in Dividend Yield Like changes in interest rates, the impact of changes in dividends is minor relative to changes in underlying price, time to expiration, and volatility. This is especially true for index options, because, even though individual companies in an index may change dividend policy, the overall impact on the yield of an index is typically minor. Table 3-5 shows that changes in dividends have the opposite effect on option values that changes in interest rates have.

An in-depth discussion of the impact of changes in interest rates is both beyond the scope of this book and unnecessary, because the impact of interest rates on short-term option values is quite small; therefore, they have little impact on short-term trading decisions. Interest rates do, however, have a greater impact on the values of longer-term options. The effect of dividends on option values is opposite that of interest rates. An increase in dividends tends to decrease call values and increase put values.

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