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We frequently receive feedback from clients when we publish articles relating to Options. As this seems to be a popular subject for many, we have decided to take a few steps back and review some of the fundamentals relating to Options trading.
Our previous notes “10 steps to beat the All Ords” and “How to avoid the headline share collapses” are written with a focus on purchasing shares and educate the reader about the methods available to invest in companies directly. This note discusses some of the considerations that must occur when selling a share in a listed business.
Isn't it amazing how many "games of chance" are available these days. In the options market, you will not get rich because of some lucky break. It will take hard work and discipline before those elusive profits find their way into your bank account.
Volatility is one of the most important factors in an option's price. It measures the amount by which an underlying asset is expected to fluctuate in a given period of time. It significantly impacts the price of an option's premium and heavily contributes to an option's time value. In basic terms, volatility can be viewed as the speed of change in the market, although you may prefer to think of it as market confusion. The more confused a market is, the better chance an option has of ending up in-the-money. A stable market moves slowly.
Many investors experience losses and some experience losses that are larger than others. There is however a happy band of methodical investors, whose losses are minimised and returns almost certain. These investors are value investors and focus on the underlying business as separate to the trading price.