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tradingtradingดด..รร . . ศุ�ภกร สุ�นทำรก�จศุ�ภกร สุ�นทำรก�จ

อาจารย์�พิ�เศุษ โครงการปร�ญญาโทำทำางการเง�น อาจารย์�พิ�เศุษ โครงการปร�ญญาโทำทำางการเง�น ((โโครงการ ครงการ MIF)MIF)

และ บลจ เอ$มเอฟซี' จ�าก(ด และ บลจ เอ$มเอฟซี' จ�าก(ด ((มหาช้นมหาช้น))

2

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Four Basic Strategies

4

Value of Option at Expiration

0Stock price

Payoff

Holder

Premium

0

Payoff

Writer

Premium

Stock price

5

Why Option

-200.0%-100.0%

0.0%

100.0%200.0%300.0%400.0%

500.0%600.0%

1 9 17

25

33

41

49

57

P/L Stock

P/L Call

6

Put Option at Expiration

Long Put Short Put

7

Income Strategies

8

Strategy:Covered CallAction: Buy Stock + Sell OTM Call

Written call

Stock

Covered Call

9

Strategy:Covered Call

Action: Buy Stock + Sell OTM CallOutlook: Neutral to BullishRationale:

Buy stock for medium to long term and capturing monthly income by selling call every monthIf the stock rise sell the stock to deliverIf stock falls, keep the premium

10

Protective Put

0

PayoffsStock

Protective put

Put

11

Bull Put SpreadLong lower strike putWrite OTM put

12

Bear Call SpreadAction

Sell lower strike callBuy OTM call

Outlook: bearlish or neutral to bearish

13

Long Iron ButterflyBuy lower strike put+sell middle strike put and call+Buy higher strike call

14

Other Income Strategies

Covered Short StraddleBuy stock + Sell put + Sell callOutlook: Bullish

Covered Short StragleLong stock + Short OTM put + Short OTM callOutlook: bullish

Calendar callBuy long maturity call + Sell Short term call

15

Volatility Strategies

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Volatility Trading: Definition

Trading strategies designed to speculate on change in the volatility of the market or stock instead of its direction.The point is that you don’t care which direction it moves (up or down), as long as it moves explosively in one direction or the other.The trick is spotting something that’s about to make that move

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Volatility Trading

Long volatility: Buy call & sell stockBuy put & buy stock

Short volatilitySell call & buy stockSell put & sell stock

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Volatility Trading: Call & Put Value VS Stock Price

0

5

10

15

20

25

80 85 90 95 100 105 110 115 120

Call

Put

19

Volatility Trading

20

Long Volatility 1:Long Call & Short Stock

21

Long call & Short stock

-10-50

5101520

2530

70 80 90 100 110 120 130

22

Long Call & Short Stock: Delta neutral

-5

0

5

10

15

70 80 90 100 110 120

P/L LCSS

23

Delta neutral VS Not neutral

-10-505

1015202530

1 8 15

22

29

36

43

50

57

LCSSN0

LCSS

24

Long Volatility using Long call Short Stock

-10

0

10

20

30

70 80 90 100 110 120 130

LCSS

LCSS-

LCSS+

25

Long Volatility using Long call Short Stock

-5

0

5

10

90 95 100 105 110

LCSS

LCSS-

LCSS+

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Long Call & Short Stock with changing volatility

-3

-1

1

3

5

80 85 90 95 100 105 110 115 120

LCSS

LCSS-

LCSS+

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Long Volatility: Buy Put Buy Stock

0

PayoffsStock

Protective put

Put

28

Long Volatility: Buy Put Buy Stock

-10-50

5101520

2530

70 80 90 100 110 120 130 140

LP+LS

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Long volatility using Long Put & Long Stock

-7

-5

-3

-1

1

3

5

70 80 90 100 110 120

LPLS

LPLS-

LPLS+

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Short VolatilityCovered Call :Short OTM call & Long Stock

Written call

Stock

Covered Call

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Short Volatility I: Covered call

Cover Call1

-30

-20

-10

0

10

20

70 80 90 100 110 120 130

32

Short volatility using covered call

-25-20-15

-10-505

1015

70 80 90 100 110 120 130

Cover Call0

Cover Call-

Cover Call+

33

Short volatility: Sell put + Sell stock

SPSS

-30

-25

-20

-15

-10

-5

0

5

10

70 80 90 100 110 120 130

34

Short volatility: Sell put + Sell stockPayoff

-30

-20

-10

0

10

1 9 17

25

33

41

49

57

SPSS0

SPSS-

SPSS+

35

Short volatility: Sell put + Sell stockPayoff Zoom

-10

-5

0

5

10

1 2 3 4 5 6 7 8 9 101112131415161718192021

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Straddle Long Call and Long Put

StrangleStripStrapShort BitterflyShort Condors

Other Strategies

37

StraddleLong call + long put with same exercise price

A

+B

=C

Long call

Long put

Straddle

P+C

38

A Straddle Combination

Profit

STK

A straddle involves buying a call and put with the same strike price and expiration date.

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Straddle

Straddle

-5

0

5

10

15

20

25

70 80 90 100 110 120 130

40

Long volatility using straddle

-5

0

5

10

15

20

25

70 80 90 100 110 120 130 140

Straddle

Straddle-

Straddle+

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Strip

Profit

K ST

A strip consists of a long position in one call and two puts with the same strike price and expiration date.

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Strap

Profit

K ST

A strap consists of a long position in two calls and one put with the same strike price and expiration date.

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Using Volatility

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Volatility

Implied volatility is a market forecast of the future volatility of the underlying stock or indexLong volatility position gains when realized volatility is higher than implied volatility at inceptionChanges in implied volatility affect the MTM of the position

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Can volatility be forecasted?

Volatility cannot be predicted over long periods of time

Option market can provide “market forecasts” for period ranging from 1 month to 1 year

Statistical models may be used to forecast volatility over short periods of time

Importance of taking into “exogenous news” and events, macro news

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VIX Index

VIX is the ticker symbol for the Chicago Board Options Exchange Volatility Index, a popular measure of the implied volatility of S&P 500 index options. Referred to by some as the fear index, it represents one measure of the market's expectation of volatility over the next 30 day period.

47

0

10

20

30

40

50

Jan-9

7

Jul-97

Jan-9

8

Jul-98

Jan-9

9

Jul-99

Jan-0

0

Jul-00

Jan-0

1

Jul-01

Jan-0

2

Jul-02

Jan-0

3

Jul-03

Jan-0

4

Jul-04

Jan-0

5

Jul-05

Jan-0

6

Jul-06

Jan-0

7

Jul-07

VIX Index SP500

VIX Index

Source: MFC, Bloomberg

Figure 3: VIX index of S&P implied volatility

Russia/LTCM

SE Asia

ENRON WCOM

Subprime

Shanghai Surprise

49

Traditional SD & GARCH

0

0.005

0.01

0.015

0.02

0.025

0.03

1

118

235

352

469

586

703

820

937

50

SET50 & Volatility(EGARCH)

0

100

200

300

400

500

600

700

800

900

1000

Jun

-03

Sep -

03

Dec -

03

Mar

-04

May

-

04

Aug -

04

Nov -04

Feb -05

Apr -05

Jul-05

Oct -05

Jan

-06

Mar

-06

Jun

-06

Sep -

06

Dec -

06

Feb -07

May

-

07

Aug -

07

฿0

฿0

฿0

฿0

฿0

฿0

฿0

SET50

SD

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Using MA & Traditional SD for Trading Signal

0.005

0.01

0.015

0.02

0.025

1

118

235

352

469

586

703

820

937

52

GARCH & MA as a signal (1 Yr data)

0

0.005

0.01

0.015

0.02

0.025

1 32

63

94

125

156

187

218

249

Series1

20 per. Mov. Avg. (Series1)