The duller the market, the lower the index options premium. Well it depends on the expectations of the traders whether the market will move sufficiently in the near future for them to exercise their buy or sell rights. The more volatile the market, the higher then index option premium!
You can find many options types of options contracts. You will find futures options, currency options, stock options, ETF options and so on. Options offer investors far more trading strategies as compared to futures. Such strategies can range from highly speculative to highly conservative. Options are a far more basic instrument than the ETFs and futures. You can easily replicate any ETF or futures contract with an option but the reverse is not true.
Of course for anyone who buys an options contract there should be someone to sell the options contract to make a complete transaction. Now the seller of a call options believes that the market will not move sufficiently up in the near future so he/she can make money by writing a call options contract and selling it to someone who believes the maker will move up.
So in a way, buying and selling of options contracts make options trading a zero sum game. Either the market will move up or it will not. Either the option seller will win or the options buyer will win. The development of the stock index futures and the index options was a major development in'80s for investors and money managers. The buyers of the put options are in a way insuring their portfolio against possible market decline but who are the sellers of the put options. They are primarily those investors who are willing to buy those stocks but only at lower prices.
So in a way, buying and selling of options contracts make options trading a zero sum game. Either the market will move up or it will not. Either the option seller will win or the options buyer will win. The development of the stock index futures and the index options was a major development in'80s for investors and money managers. The buyers of the put options are in a way insuring their portfolio against possible market decline but who are the sellers of the put options. They are primarily those investors who are willing to buy those stocks but only at lower prices. Options are an important component of any money manager portfolio. Many hedging strategies now depend on options.
ETFs give you the familiarity of the stocks but like index futures much higher liquidity and superior tax efficiency. The Exchange Traded Funds (ETFs) gave the investor still more ways to diversify across all market with very low costs.
Index options give the investors the ability to insure the value of their portfolios at the lowest possible prices and save on the transaction costs and taxes. - 31987
You can find many options types of options contracts. You will find futures options, currency options, stock options, ETF options and so on. Options offer investors far more trading strategies as compared to futures. Such strategies can range from highly speculative to highly conservative. Options are a far more basic instrument than the ETFs and futures. You can easily replicate any ETF or futures contract with an option but the reverse is not true.
Of course for anyone who buys an options contract there should be someone to sell the options contract to make a complete transaction. Now the seller of a call options believes that the market will not move sufficiently up in the near future so he/she can make money by writing a call options contract and selling it to someone who believes the maker will move up.
So in a way, buying and selling of options contracts make options trading a zero sum game. Either the market will move up or it will not. Either the option seller will win or the options buyer will win. The development of the stock index futures and the index options was a major development in'80s for investors and money managers. The buyers of the put options are in a way insuring their portfolio against possible market decline but who are the sellers of the put options. They are primarily those investors who are willing to buy those stocks but only at lower prices.
So in a way, buying and selling of options contracts make options trading a zero sum game. Either the market will move up or it will not. Either the option seller will win or the options buyer will win. The development of the stock index futures and the index options was a major development in'80s for investors and money managers. The buyers of the put options are in a way insuring their portfolio against possible market decline but who are the sellers of the put options. They are primarily those investors who are willing to buy those stocks but only at lower prices. Options are an important component of any money manager portfolio. Many hedging strategies now depend on options.
ETFs give you the familiarity of the stocks but like index futures much higher liquidity and superior tax efficiency. The Exchange Traded Funds (ETFs) gave the investor still more ways to diversify across all market with very low costs.
Index options give the investors the ability to insure the value of their portfolios at the lowest possible prices and save on the transaction costs and taxes. - 31987
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Mr. Ahmad Hassam has done Masters from Harvard University. Try these cash printing Forex Signals from heaven. Discover a revolutionary Forex Robot System!
