Advanced Option Strategies

Français : La Tour de la Bourse de Montréal, v...

Montreal Exchange Tower

Saturday March 3, 2012 was Options Education Day in Toronto. Co-sponsored by the Montreal  Exchange  (MX) and the Options Industry Council (OIC), this event was one of several Option Education Days being held for our neighbors to the north. The event, attended by 274 investors, began with breakfast at 8:30 and lasted until 4:30 pm, with two tracks available for investors and one common workshop.

Package 1 (the beginners track) was taught by instructors from the Montreal Exchange. It began with a 2 ½ hour Introduction to Options presentation from Patrick Ceresna.  After lunch an Introduction to ETFs and ETF Options presentation was given by Jason Ayres.

Package 2 (the more advanced track) was given by me, representing both NYSE Amex Options  and the OIC. The morning session focused on advanced option strategies including Diagonal and Back Spreads. The afternoon session was spent Getting to know the Greeks and Volatility. Both sessions required some basic option knowledge as we did not spend much time reacquainting ourselves with Mr. Put and Mr. Call.

The OIC holds Investor Education Days in the US and the Montreal Exchange holds Option Education Days up north because a solid understanding of options and option strategies is something investors should have. Options are tools and the variety of strategies available makes them versatile investment vehicles. With Options an investor can hedge risk, generate income or speculate on movement in the underlying equities and ETFs.

Since the Canadian option markets are not as large as the US option markets, our friends in Canada reach across the border and are active in our markets. The strategies used by both the US and Canadian markets are the same. A Bull Spread is a Bull Spread. It doesn’t matter if the underlying security is Canadian Allied Petroleum (I Love Lucy fans will know what I’m talking about) or Exxon Mobil, the risks and rewards of the spread are the same. Now, if the Debit Bull Spread seems a little expensive, maybe you should take a look at the Credit Bull Spread. See the similarity? No. Then maybe you need some options education.

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