Directed options trading. Options trading - how an option contract is executed on the Russian derivatives market

Perhaps the best article about options at one time was published in
F&O by grebenik

Directed trading is the traditional and most understandable way to work on the stock exchange. It would seem that everything is very simple - the market grows - we buy, it falls - we sell. But in any case, when making a trading decision, you need to answer a number of questions for yourself: choice of instrument, forecast of price movement (the actual choice of direction), risk management, entry point, exit point. This applies equally to directional trading of any instrument - be it stocks, futures or options. In the case of options, the task becomes more complicated, since it is also necessary to choose a trading strategy, strike price and determine the timing of the market forecast.
Directed trading presupposes the presence of any expectations about the market. Suppose a trader is confident that the market will rise. From an options trading perspective, the most significant question is when and how quickly. Options are an instrument with a limited “life”, and it is important not to make a mistake not only in choosing the direction of trading, but also with the forecast period.
Directional trading most often refers to the purchase of options - Call in anticipation of growth, and Put in anticipation of a decrease in the price of the underlying asset. However, this is only one of the possibilities, which implies many options. Let's figure out the purchase. You can trade from a purchase short-term (intraday), and medium-term, with the transfer of positions. Quite often, novice options traders buy options far out of the money (OTM), seduced by their low cost. This strategy is akin to buying lottery ticket. You can make a lot, even a lot, in one trade, but the likelihood of this is negligible. Conclusion: you can buy options far from the money either in anticipation of a strong sharp movement in the market, or for a small amount every month in case of an unexpected collapse or strong rally.
The optimal medium-term strategy is to buy long-term (for example, three-month) options. Why distant? After all, the closest ones are cheaper... Because the more time remains until the expiration date, the less significant the impact of temporary decay. The option most actively loses value in the last two weeks of its “life”. The choice of strike depends on the trader’s preferences and his vision of the current and future market situation. Let's assume that a trader has analyzed the market and made a forecast of the future price movement of the underlying asset, identifying potential target levels of growth or decline. In this case, it makes sense to buy an option with a strike that corresponds to the target of the underlying asset's movement. If the purchased option goes into the money, you can apply the rolling technique by closing the position and buying the next strike option, the one that is currently “at the money”. Despite the fact that the strategy is medium-term and involves holding a position for several days or even weeks, you should not buy before a long weekend, as time decay can eat away a significant part of the premium.
Options can also be traded short-term, intraday, both from buying and selling. In this strategy, ATM (atthemoney, at the money) options are of greatest interest, since they change in price most quickly when the value of the underlying asset rises or falls. At the same time, it was noticed that the rate of change in the price of Put options is slightly higher than that of Call options, that is, they are more mobile. There is no fundamental difference between short-term trading from buying and selling; in practice, each trader chooses the most comfortable way of working.
At first glance, it may seem that futures are more suitable for short-term trading than options, since they are more technical and liquid, and the profit on them is higher. More technical and liquid, yes, but profitability is a moot point. The difference here is in the funds involved, and the percentage of profit should be calculated relative to the funds invested, and not on the number of contracts. Invested funds mean the amount of guarantee security that is blocked for each specific instrument. The GO of purchased options with a central strike is almost half as much as the GO of the futures, and if you take options “at the money”, then three to four times. That is, instead of one futures, you can buy three or four options. Suppose the futures passed one strike (5000 points), the option went into the money, but added half as much as the futures. However, there were several options. And as a result, the return on investment is at least 1.5 times higher.
What if the trader does not expect any sharp movements in the near future? If we take into account the well-known fact that the market spends approximately 70% of its time sideways, in the absence of a pronounced trend, you can work in the direction of selling. The profit in this case will be the received premium, or part of it.
When choosing between buying and naked selling an option, please note that the amount of funds involved in the position will differ significantly. The security locked up when buying is equal to the option premium, while when selling it is quite large (depending on the distance of the strike from the price of the underlying asset). Information on the size of the guarantee for each option can be viewed, for example, on the RTS website or in the trading terminal used.
Selling options requires O greater caution than purchasing due to unlimited risks. The best way– in advance, even before entering a position, decide on exit points, at least in case of unfavorable developments for you. Selling an option allows you to make a profit both in the presence of a trend and in a sideways trend, since the value of the option decreases under the influence of temporary decay. The ideal option is if, on the expiration date, the sold option is out of the money, that is, it has no intrinsic value. In this case, the profit will be equal to the amount of the premium received.
Let's say you decide to sell. All that remains is to decide on the main thing - choose a strike. Conventionally, we can distinguish three options - options in the money (ITM), at the money (ATM), out of the money (OTM). The deeper an option is in the money, the more expensive it is, and vice versa, the further from the money, the cheaper. But if the price movement is favorable for the trader (for example, you sold a Call option and the market falls), these three groups of options will behave differently. An option deep in the money will repeat the movements of the underlying asset, in our market this is a futures; the out-of-the-money option will depreciate slowly, essentially due to temporary decay. Options at the money, or those that are at one or two strikes in the money, will lose their value the most.
Separately, I would like to dwell on the sale of options far out of the money. The premium of such options is small, while the GO exceeds the premium several times. For example, the premium of a three-month Put option on RTS index futures with a strike of 140,000 at an underlying asset price of 180,000 is about 300 points (about 200 rubles), and the collateral for an uncovered sale is about 1,280 rubles. Therefore, to get 200 rubles of profit, it is necessary to divert six times more funds. No one has canceled the risks, although they are, of course, less significant than when selling options in the money or at the money. If your capital allows you and you are not embarrassed by the low percentage of profitability of such a strategy, you can at least try to assess which strike has the least risk. Many of those who trade options have noticed that closer to the expiration date the market is “held” at a certain level, without passing through certain option levels. These levels are quite simply determined by the number of open positions - the more positions are open at a certain strike, the stronger the level, and the less likely it is that the market will pass this level. However, there are no guarantees, and it is still better to have a plan B.
Another method of directed trading is the so-called spreads. This is a basic options strategy that allows you to take a position in the direction of the expected market movement, but at the same time reduce the amount of funds involved and minimize the possible loss. It represents the purchase and sale of options of the same type with different strikes. There are four main spreads - bullish call spread, bearish call spread, bullish put spread and bearish put spread, but on the basis of them you can build countless strategies, both directional and neutral. In fact, almost any of the known complex strategies can be broken down into individual spreads. But this is a topic for another discussion.
The main thing in this strategy is to determine the target levels of movement of the underlying asset. Let's assume that the current price of RTS index futures is 180,000. The trader assumes that the market will decline to the level of 170,000, but will not fall below 165,000. A bear spread can be constructed. For example, buy a Put option with a strike of 170,000 and sell a Put option with a strike of 165,000. The premium received from the sold option will partially cover the costs of the purchased one. Or you can sell a Call with a strike of 170,000 and buy a Call with a strike of 165,000. With positive expectations, bullish spreads are built according to the same principle. Constructing spreads has a number of advantages. Firstly, a reduction in potential losses, and secondly, a small amount of the total guarantee security for the position.
When talking about directional options trading, it is worth paying special attention to risk management, or risk management. There are no universal recipes for limiting risks when trading options, although some general rules can be withdrawn. First, and most importantly, the amount of risk for each position is determined depending on the strategy. If these are spreads, then the risk is already limited by the strategy itself, and you only need to correctly calculate the position size. The maximum possible loss on a position should not exceed the acceptable one, which each trader determines for himself.
When trading options, it is impossible to work on the principle of buy (sell) and forget. In any case, an option position requires management and control. With the sale everything is obvious. Bearing in mind the unlimited risk, it is unlikely that anyone will leave a sold position unattended. But with a purchased one it’s more difficult. Firstly, despite the fact that, as everyone knows from theory, buying an option means limited risk and unlimited profit, in reality the risk is limited to 100% of the invested funds! And then the size of the loss relative to capital is determined by the size of the position. Secondly, even if the option is in the money at the time of expiration, it will have no time value left at all, only internal, and it is often much more profitable not to wait for expiration, but to close the position during the life of the option. And, by the way, do not forget that not all options are automatically expired (executed). It is important! For three-month options, calculations are made automatically for in-the-money options (no matter what value, even 5 points). For monthly settlement options, only options that are deep in the money automatically expire. More precisely, options with strikes that are half the maximum range from the settlement price are automatically expired. I'll explain. The main session ends on the last day of option circulation. After this, the settlement price and limits (maximum and minimum threshold for futures movement) are calculated. You can calculate the strike from which automatic expiration begins using a rough formula: for Put options, settlement price + (Max - Min) / 2 (rounded up), for Call options, settlement price - (Max - Min) / 2 (rounded up decreasing side). That is, in many cases you need to submit for expiration.
Our market trades margined options, and the profit or loss on the position is credited/written off as variation margin. Therefore, by waiting out unfavorable market movements, you lose real money and your account decreases. It’s good if the market turns in your direction and you can recoup your loss. And if not? With directional trading, however, as always, you need to clearly understand in which case to exit a position - either with a profit or with a loss.
Let's consider options for taking profits.
The reasons for closing a profitable position can be different - for example, reaching the target level for the underlying asset or for the option itself, a change in the market situation when there is no point in holding the position, rolling, and others.
The classic option for taking profit is to close half of the position if the price of the purchased option has doubled. No matter how the market situation develops, the remaining option position will be break-even, since the fixed profit on one half of the position covers the costs of the second.
When buying an option “at the money”, you should not sit in a profitable position; if the option goes into the money, it is better to roll, that is, consistently move the position by one strike in the direction of the market movement. This way you will lock in part of your profit or be able to increase your position size.
As for spreads, it makes sense to close them as soon as the price has reached the point of maximum profitability. It's logical. If you've gotten the most out of a strategy, why hold a position?
Now let's talk about ways to manage risk. There are two main ways to control risk: position size or timely exit from a losing position. In any case, you need to understand in advance what to do if the market goes against you.
For strategies with limited risk (purchased options or spreads), where the potential loss is predetermined and limited, that is, the amount of money spent on a position is the maximum possible loss, it is necessary that the maximum loss on the position does not exceed the maximum allowable for the trading strategy . When choosing strategies with unlimited risk, it is extremely important to “cut” losses in a timely manner. Here, too, there are options - you can simply close the position with a loss, you can hedge (with options or futures), you can strengthen the position with an offset. Again, it all depends on the strategy used.
If it is buying OTM options, i.e. out of money, then it makes sense to accept 100% of the invested funds as a loss, and based on this calculate the position volume. If this is a purchase of ATM (at the money) or ITM (in the money) options, then it will not be superfluous to determine for yourself a conditional stop, either for the underlying asset or for the option itself, that is, the level upon reaching which the position will be closed. The risk when selling options is controlled according to the same principle.
When intraday trading, both buying and selling, it is quite possible to use stop orders. There is an opinion that due to insufficient liquidity, this threatens with serious slippages and, consequently, large losses. Practice shows that there is enough liquidity at the central strikes (at least three) to use stop orders. Although, of course, it is still necessary to monitor the position. The problem is that the stop can only be tied to the value of the option, that is, the size of the premium. Ideally, it would be to use the price of the underlying asset or at least the theoretical price of the option for the purpose of placing a stop order. Unfortunately, this feature is not provided in the standard settings of most trading terminals. However, you can work with stops, but only on the most liquid central strikes.

Based on existing positions in both the futures and stock markets. On the other hand, this is an asset that makes it possible to earn money not only on the directional movement of exchange instruments (on an increase when buying and on a decrease when selling), but also on movement in any direction, the market being sideways, or even when prices do not reach certain levels.

You need to start learning how to trade options from the moment you purchase the first share (or futures), since options help control risk much more effectively than stop orders, and success in stock trading depends on how much the trader is able to minimize risks.

At its core, an option resembles insurance. Imagine that when you buy shares, you can enter into an exchange agreement for a month for the opportunity to sell your shares back at a pre-agreed price (strike price), if the share price, for example, does not rise. Moreover, the cost of such an agreement will average 3-3.5% of the value of the shares. If the price of the shares rises, then the profit on the shares will be formed, minus the cost of the option (since executing the sale at a lower price is impractical). Options perform approximately the same role as “exchange insurance”; by the way, their cost may be lower.

Organization of options trading

Options trading on the exchange takes place on the derivatives market, where futures contracts are also traded. Profit/loss on options is generated according to the principle of accrual/write-off of variation margin at 19:00, and transactions are concluded by reserving collateral (GS), the same as when trading futures contracts. Options trading also takes place from 10:00 to 23:50 according to the derivatives market schedule.

An option is the right to carry out a transaction with an underlying asset under pre-agreed conditions (according to the specification) until a certain date in the future (expiration date).

Rice. 1. Specification of an option on futures on Gazprom shares

Futures are the underlying asset for options. On the derivatives market, options are presented on the same assets as futures: stock indices, currencies, commodities and the most liquid stocks. And since there is almost no difference between the dynamics of stocks and futures for these stocks, an option on a futures can insure positions on stocks.

Rice. 2. Comparison of stock dynamics and futures for Gazprom shares

Types of options and options for their use

Options come in two types: call and put. A call option is a contract for the right to purchase an asset before a certain date in the future at a price and quantity determined at the current moment. A put option is a contract for the right to sell an asset before a certain future date at a price and quantity determined at the current moment.

Those. If you bought a futures or a share, and the price of the asset went down, then, having a put option (the right to sell), you can write off the existing asset that has fallen in price at the price specified in the option - the so-called “strike” price.

Similarly, if you have a short position on an asset and a call option (the right to buy), you can close the position at the strike price if the price of the sold asset moves negatively.

Information on options is presented in the form of option desks, where the strike prices (at which futures transactions will be made) are presented in the center; in the green field on the left - call options; in the red box on the right are put options. Conversely, for each strike, option prices are presented: theoretical price (recommended by the exchange), demand ( best price demand) and supply (best offer price). The remaining prices (not only the best ones, indicating volumes) can be viewed in the order book of the corresponding option.

Rice. 3. Providing trading information on futures options on Gazprom shares

Buying options. It is worth saying that you can trade options without the underlying asset. In this case, profit from a call option is formed when the price of the underlying asset rises above the strike price by values ​​higher than the value of the option itself. To the extent that the price exceeds the given value, this will be the profit on the call (you will have the right to buy the asset at a price lower than the current one). Moreover, it does not make much difference exactly how the price will increase. The price can first fall as deep as you like or immediately increase. The price needs to rise before the option expires (before the expiration date).

Rice. 4. Making a profit on a call option on futures on Gazprom shares

To make a profit on a put option (the right to sell an asset), the price of the underlying asset must fall below the strike price of the put itself. A decrease greater than the indicated one will be a profit on the option (you will have the opportunity to sell at a higher price than the asset is currently worth). And it doesn’t really matter how this decrease occurs; the price needs to decrease before the option expires.

Rice. 5. Making a profit on a put option on futures on Gazprom shares

Selling options. Options can not only be bought, but also sold, thereby making money on the non-movement of an asset to the strike price. If you believe that the market will not rise above a certain level (levels can be taken above the current price) before the expiration date, you can make money by selling a call option with the corresponding strike price. If you believe that the asset will not fall in price below a certain level before the expiration date, then you can make money by selling a put option with the appropriate strike (the strike price can be taken below the market).

Rice. 6. Making a profit on a sold call option on Gazprom stock futures

Profit/risk of option buyers/sellers. Thus, it turns out that the buyer and seller of options have different rights and opportunities. If the buyer of the option has the right to fulfill his contract (he may or may not exercise this right, for example, if it is inappropriate), then the seller of the option must fulfill his obligations for the amount paid by the buyer at the request of the buyer.

Rice. 7. Making a profit on a sold Put option on Gazprom stock futures

The risk of the buyer of options is the complete loss of the value of the option if execution is inappropriate (if the price does not go beyond the strike price of the option).

The risk of the option seller is the need to fulfill the buyer’s demand at an unfavorable price (if the option price went beyond the strike price of the option itself).

Thus, the buyer has unlimited profit potential when the value of the underlying asset moves above the specified strike in the direction of the option, but 100% risk if this movement is not realized before the expiration date. (But if you see that the movement is unlikely to go, you can sell the existing option, reducing your risk).

The seller of an option has a limited return (the amount paid by the buyer) by the value of the option itself, but unlimited risk if the price of the underlying asset exceeds the strike price by an amount greater than the value of the option. But the likelihood of the seller making a profit is higher, since the seller only needs to either move the asset in the opposite direction to the strike price, or not move the asset at all. The buyer makes a profit if the asset moves towards the strike price.

An example of making money on increasing volatility. Options can be purchased not only individually, but also in combination, forming a portfolio of options that will generate income in a more non-linear way. So, for example, if you buy both a call and a put at the same strike at the same time, then profit can be generated by any movement of the underlying asset, even if the price rises or falls by an amount exceeding the cost of acquiring both options. This happens because if it rises, the put option becomes worthless, and the call option becomes more expensive. And as soon as the call rises in price above the values ​​of the put and call, a profit is generated. Likewise, if the value of the underlying asset declines, the value of the call depreciates and the value of the put increases. And as soon as the put rises in price above the cost of both options, a profit is generated. This type of option structure is called buying volatility.

Rice. 8. Making a profit from simultaneously purchased call and put options on Gazprom stock futures

Conclusion

To conduct successful exchange trading, training in options trading is highly desirable, since options help control risks. But in addition to risks, you can make money on absolutely non-linear variations in price movements by building various option structures, but this will require more experience.

Many day traders who trade futures also trade options - in the same markets or in different ones. Options are similar to futures in that they are often based on the same underlying instruments and have similar contract specifications. But options are traded completely differently. Options are available on , stock indices and individual stocks. They can be traded separately, using various strategies, or together with futures contracts or stocks, using them as a kind of insurance in the trade.

In the options market, trading is carried out using option contracts. The minimum unit of trade is one. Option contracts specify parameters such as the option type, expiration or exercise date, tick size, and tick price. For example, the option contract specification for ZG (gold, 100 troy ounces) is as follows:

Symbol (IB/Sierra Charts): ZG (OZG/OZP)

Please note that options contracts have three more input parameters than futures contracts: additionally there is a strike price, an execution style and a delivery method.

The contract specification is made for one contract, so the tick cost shown above is the cost per contract.

This article will talk about how to trade without using any particularly complex terms, in order to first of all achieve understanding among those people who are encountering such instruments for the first time.

• Particular attention will be paid to how a particular option behaves in different phases of the market.

Generally, options trading will be of interest to those traders who have trading experience and who are not satisfied with working with stops. There can be many reasons, ranging from those that allow the price to fly past your stops and ending with psychological discomfort.

It is no secret that human psychology is an extremely complex matter and it is very difficult for people to accept mistakes in their own actions. This explains why more than 70% of private investors do not use it at all, which leads to another not very pleasant statistic. More than 80% of the practice of independent options trading on the Moscow Exchange is unprofitable, including due to the failure to adopt loss limitation strategies.

Options trading gives you the opportunity to flexibly change your position and place your risk in one or another instrument in advance. From a psychological point of view, this is a more pleasant alternative, which partly explains why “” is so popular among Forex brokers.

How to trade options on the stock exchange

The cornerstone of options trading is strike price. This is the price at which the underlying asset will be delivered (if the option is on , then they will be delivered). The price can be central (market) or distant.

• For example, today Sberbank costs 100 rubles, and the strike price is also 100 rubles. This price is central. The price is 120 rubles when the market price is 100 rubles, this is already a far price.

The important truth for any options trader is that you are essentially ( movement) market. Let's give shining example. Sberbank shares begin to fall by 3-4% per day. You can easily make money on this by buying a put option with a strike of -40% of the current price (shares cost 100 rubles, and our strike is 60 rubles). In a situation where the same shares begin exactly the same explosive growth of 3-4% per day, we buy a call option with a strike of +40% of the current price (shares cost 100 rubles, and our strike is 140 rubles) and make money on the growth .

In any case, if Sberbank shares move, we will make money.

There is nothing stopping us from buying with one strike value (this strategy is called a “straddle”), depending on the developed movement. We will win if there is movement, no matter where, what matters is that it will happen. But if Sberbank begins a long and persistent consolidation, staying in one place week after week, we will receive a loss. Our purchased options will become cheaper the faster their delivery date approaches.

The logic is very simple: if there is a movement, there is a profit from buying options; if there is no movement, there is a loss.

Thus, when buying options, we have the so-called “bought volatility” in our portfolio.

An inquisitive reader will ask the question: “if there are two positions for conventional instruments - long and short, then for options there should be a reverse position from a purchase?”

and he will be right. The reverse position is selling options. In such a situation, we will make money only if Sberbank remains in its corridor and does not actively grow or fall. A situation of “sold volatility” will arise. We will receive a reward for selling the option and a theoretically unlimited loss if the price develops a move, so selling such options is usually the prerogative.

Video on how to trade options on the stock exchange

How to correctly calculate the purchase volume of an option so that you are not closed by a margin call broker

An option, like a future, has its own GO (warranty coverage). Typically, if you use a reputable broker, you can freely open a position in GO equal to your portfolio. You cannot lose more than the option itself is worth.

An option has intrinsic and time value.

The second depends on the distance of the price from the strike. For example, if we bought a call option with a strike price of 80,000, and the price of the underlying asset is 85,000, the internal value will be equal to 5,000 points. And no matter how volatility falls, the price will not fall below these 5 thousand points. And the time value may vary, depending on that same volatility. In the moment, as volatility increases, time value increases.

When buying and selling options, only limit orders are used.

Using a market order may result in a loss as volatility within the order book can vary greatly. The exchange broadcasts the so-called “theoretical price”, which is what you should use as a guide. To buy an option, just set +-0.01% of the current price.

An already mentioned aspect that needs to be taken into account when trading options is option analysis. As mentioned above, high volatility increases the immediate price of an option, and it is not always adequate. Due to some news or information releases, volatility may jump, which will increase the price of the option. It is necessary to analyze its chart in order to understand which volatility is normal for this instrument and which is too low or too high.

• This can be done with a simple comparison.

If the volatility of the option for 2 weeks was 80-100, and before the Fed speech soared to 200, you should wait until the unrest calms down and volumes return to their normal range.

Once again, the higher the volatility, the more expensive the option.

Another problem may be that some brokers do not store volatility history, saving on customer service. This information is broadcast only for today and the investor does not have the opportunity to analyze it over a longer period through his terminal. This point must be clarified in advance before opening a trading account. You can analyze it using a regular candlestick chart on a 5 or 15 minute interval.

You should not start your journey by selling options.

This carries and can cause serious psychological discomfort for the trader, given that comfortable trading for a novice player is a very important indicator.

In this part, we will learn how to independently trade options on the stock exchange, set up an options desk and determine optimal time to open a position.

First of all we will build optional desk to navigate the tools that interest us. An example will be given at updated program versions 7 and older.

• Having loaded the default settings, we need to click on the button “ Create window", Further " Customize menu" A large table with two parts will open. Available options will be displayed on the left, and those already selected on the right.
• On the left side of the window we find the heading “ Futures and options", then select " Options board" We accept the changes and now when you click on the “ Create window"we will have the line " Options board" By selecting this item, a window for setting up our future desk will open.

Each desk is built for each option separately. We will build this one based on an option on RTS index. Considering great amount negotiable contracts, we need to select the option closest to us, which will be expired in a month ( monthly). If we consider options on RTS, we can notice that the first option and the last one have the best liquidity. Let's give an example:

Futures for the RTS 6.16 index are traded on the exchange. The greatest liquidity will be for options with expirations of 4.16 and 6.16. When 4.16 ceases to exist, 5.16 will also become the most liquid.

At the moment, the nearest option is April (4.16) and that is what we will choose. It will have a code RI95000BD6, and be called RTS-6.16M210416CA 95000.

If you look closely at these numbers, you can easily find all the information: R.I.– RTS, 95000 – strike, BD6 month and year (as well as marking codes for futures). Letters SA at the end of the name means that this is a call option, a put option ends with PA or P.U..

Let's return to the table that opens. There we add those that interest us option ranges on RTS. Nothing prevents us from adding all their diversity.

The following window will appear. If the trader wishes, one more column can be added: volatility so that you can pay attention to it too. This indicator is the same for both put and call options.

Now let's take a closer look at such an indicator as theoretical price. It is broadcast by the exchange and indirectly affects the actual value of the option. It was created for information so that a trader can always roughly compare this price with the current market. As a rule, this price differs from real supply and demand.

What is it real option price? In fact, this is the amount that buyers and sellers offer for the contract. Looking at our RTS option, we see that at the theoretical price 660 , the price is currently below, between 620 and 630. This spread is still relatively low. On illiquid options it can be much higher. This point will immediately jump out at you if you have previously traded futures or stocks.

Below you can compare the call option chart with the strike price 95 000 and its underlying asset, RTS index futures. Unlike futures and the underlying asset (for example, futures on Sberbank shares), an option does not have to repeat the fluctuations of its parent. The explosive growth of the option with a strike price of 95,000 was due to the fact that RTS began to rise very confidently last days, moving towards this line.

Now let's talk in more detail about the option price. It represents the amount that the trader pays to receive the option and must be included in the break-even point. For example:

Our call option on RTS with strike 95 000 and option price 620 will have a break-even point 95 620 . At the same time, it does not matter to us how the price will move to its strike. Anything higher 95 620 – our profit. Mirror situation with a put option. Now we will need subtract the option price from the strike– at a lower price 94 380 we will earn money. If we have in our portfolio two types of options, then we will start earning money, or when the price drops below 94 380 , or when she grows taller 95 620 .

Two Types of Using Options in Trading

The classic way to use options is insurance(hedging).

How it works? Let's return to the RTS index. Currently the futures price is 95 000 and we believe that it is already too expensive and will soon begin to fall. We open short, for example, for 1 contract. And at the same moment buy an option“call” for one RTS contract with strike 95 000 . We pay ours 620 rubles and get actual insurance. If our calculation turned out to be correct and RTS rolled back to, say, 75 000 , let's earn 20 000 points, minus 620 rubles that were spent on our option, which was not exercised. And if we didn’t guess right, and our index grew, say, by 115 000 , then the futures results in a loss, which we freely fix, after which we exercise our option. By this time, he had managed to rise in price by these very 20 000 and we will remain with our own, minus the cost of the option in 620 rubles This is an ideal trading strategy for people who do not want to use trading stops in their trading.

Now let's look at trading with “pure” options.

If we simply buy a put or call option, we will start making money when the price of the underlying asset (RTS index) exceeds 95 000 (or will fall below 95 000 when buying a put). In such a situation, our option will begin to add “intrinsic value” and will grow as much as the underlying asset grows (+/- time decay and a number of other factors). Roughly speaking, while RTS is worth 94 000 points, call option with strike 95 000 will only cost “time value”, which is equal to ~ 620 rubles But as soon as RTS grows to 96 000 , then this thousand points will be added to the cost of our option and will grow along with the RTS until the option’s life expires, or until we close the position.

From here are formed slang concepts.

• Option " in money" is a contract that has reached its strike and exceeded it (for example, for a call of 96,000 with a strike of 95,000 and for a put of 94,000 with a strike of 95,000).
• Option " on the money" refers to a contract that is clearly at the strike price and has not yet moved in any direction.
• Option " out of money" refers to a contract that has not reached the strike price.

As for the collateral for options, it is usually approximately equal to the collateral value of the underlying instrument. Following the rules options trading It is worth starting with the purchase of call or put options, rather than selling them, since short positions on options are fraught with colossal losses for an inexperienced trader.

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This is what the price chart for a regular oil futures contract looks like, which could be in our portfolio. It is clearly seen that as the price of oil rises, our profits increase. And this is what the profitability chart of a call option on oil with a strike price of $50 and expiration on May 4 will look like. The red line shows the refraction of price with time value, which in turn depends on volatility. Roughly speaking, this is what our portfolio looks like if we bet on oil growth. Now compare this chart with the following one, where a put option was already purchased, with the same strike and expiration date. In the profitability segment, the expiration period is clearly visible, when we stop incurring losses. And the fourth graph illustrates the simultaneous acquisition of 2 types of options, put and call. The break point represents the closing of a losing option. Actual option pricing uses many more parameters to calculate. In addition to time and intrinsic value, gamma, vega, theta and delta coefficients are also used. In fact, delta is precisely the blue line on our charts (i.e. profitability). The remaining parameters are worth studying after mastering the basic skills of options trading, since their analysis requires a certain level of mathematical proficiency. Instead of output The material in this article will help a novice trader correctly open positions from options in his portfolio; it can also be used as a reminder so as not to get lost in concepts and understand the direction of operation of a particular instrument. We deliberately did not touch mathematical formulas and did not understand the concepts of the “Greeks”: delta, gamma, theta, vega and rho, so as not to overload the reader. The influence of these indicators on options can be analyzed later, after mastering this material. Having understood in detail, you can understand that options, although they differ from ordinary trading instruments, are no less interesting and profitable. To work with options, you should have extensive experience in trading underlying assets and futures. Linear trading strategies are very difficult to bear psychologically, recording losses over and over again. Options allow you to determine your loss in advance and not exceed it during trading. However, when using them, it is important to remember that the price changes extremely quickly and is influenced by many more factors than conventional instruments. If you find an error, please highlight a piece of text and click Ctrl+Enter, and we will definitely fix it! Thank you very much for your help, it is very important for us and our readers!

This is a combination of various options, and sometimes underlying assets, in your investment portfolio to achieve your goals and objectives. Depending on the behavior of the market, several types of strategies can be distinguished: bullish, bearish and neutrality strategies (when the price of an asset stands still). Bullish strategies are used when the market is expected to move up, bearish strategies are used, respectively, when the market moves down, and neutral ones when the price stays the same.

For greater clarity, we will use graphs.

Let's look at the chart of the first strategy and find out what you should pay attention to when studying the charts.

At the top of the picture we see our portfolio, that is, what instruments we bought or sold. The columns we need are the following: option type (call or put), strike (exercise price), quantity, option premium (option cost).

When describing the strategy, we will use the concept of “break-even point”. This is the level of strike and underlying prices in the spot market at which our strategy begins to make a profit. The loss zone is the price level at which our positions are unprofitable.

To simplify the understanding of the charts, the underlying asset of the options discussed in the examples will be a futures contract for Gazprom shares.

Let's start our acquaintance with strategies with the simplest.

Part 1 (Options Trading Strategy):

1. First options trading strategy.

Buying a call option (Long call).

As we remember, call option- This is the buyer's right to buy a product at a pre-fixed price. In what situations is this strategy used?

Buying a call option is used in cases where the investor is confident that the price of the underlying commodity on the spot market will go up. You buy an option, and the higher the price of the underlying asset when the trade is executed, the greater your profit. We have already covered all this in our lessons, and now we will try to figure it out on a graph with a specific example.

Chart 1. Buying a call option

The chart shows the purchase of a call option on a futures contract for Gazprom shares with a premium of 1,684 rubles. The option strike is 14,000 rubles. Our strategy will make a profit if the price of the underlying asset rises above the strike price by the amount of the premium, that is, the point of 15684 (14000+1684) rubles will be the break-even point.

Your potential profit is unlimited. The higher the price of the futures, the higher the profit will be. Your losses are limited only by the cost of the option, that is, 1,684 rubles.

2. Second options trading strategy.

Selling a call option (Short Call)

Sell ​​a call option should be done if you are confident that the price of the underlying asset on the spot market will go down. You sell a call option, receive a premium and, if the price of the asset falls, the transaction is not executed. Let's look at the graph.

Chart 2. Selling a call option

You sell the same option as in the previous case with a strike of 14,000 rubles and a premium of 1,684 rubles. If the price of the underlying asset goes down and on the execution date of the transaction is lower than the execution price, the buyer will not execute the contract. Our profit in this case is equal to 1684 rubles, the premium for the option.

You need to be very careful when using this rather primitive strategy. The fact is that our profit is limited by the cost of the option, while losses are not limited by anything. What does it mean? If the price of the underlying asset begins to rise, then we will enter the zone of unlimited losses.

3. The third option trading strategy.

Buying a put option (Long Put).

Put option is the right of the buyer to sell the commodity to the seller of the option at a pre-agreed price in the future. Thus, the meaning of this strategy is to buy a put option and sell the underlying asset at the expiration of the transaction, when the price of the underlying asset is lower than the strike contract price. Let's look at the graph.

Chart 3. Buying a put option

You assume that the price of Gazprom shares will fall in the future, buy a put option with a strike = 14,000 rubles and pay a premium of 867 rubles. Starting from the price of the underlying asset = 13,133 rubles, and below is your profit (14,000 - 867). If the price rises above this level, then your loss will be only the cost of the option, i.e. 867 rubles.

Very good strategy for newcomers to the derivatives market. Your potential profit is unlimited, and your potential loss is limited by the price of the contract.

4. The fourth option trading strategy.

Selling a put option (Short Put).

This strategy is used when the price of the underlying asset of the option is expected to increase in the spot market (the option buyer is unwilling to execute the transaction at expiration).

Chart 4. Selling a put option

Let's say you think that the price of Gazprom shares will go down, and you sell a put option with a strike = 14,000 rubles with a premium of 867 rubles. If the price of the underlying asset rises above 13,133 rubles (14,000-867), then the option is not exercised and you make a profit in the amount of the option premium. You need to be very careful when using this strategy. There is no limit to your losses, and if the price of the underlying asset goes down, you could lose a lot. Your profit, as mentioned above, is limited by the option premium.

These are the 4 most basic strategies consisting of buying or selling only one instrument. Let's move on to something more complex. To implement the following strategies, we will need to add two options contracts to our investment portfolio.

5. Fifth option trading strategy.

Bull Call Spread.

This strategy is used if you are confident that the price of the underlying asset will go up, but growth will be limited.

This strategy involves both buying and selling a call option. Options must have the same expiration date but different strike prices. The strike of the purchased option must be less than the strike of the sold option.

Let's look at the schedule.
Chart 5. Bull call spread

You buy a call option with a strike = 10,000 rubles at a price of 3,034 rubles, thinking that the futures price at the time the transaction is executed will not be more than 15,000 rubles. To get back some of the money you spent on the option, you sell another call option with the same expiration date but a different strike price. Of course, the strike must correspond to your expectations regarding the price of the asset in the spot market at the time the trade is executed. In our case, it is 15,000 rubles. Thus, you reduce the cost of your position from 3034 to 2400 rubles (the difference between the premium received for the sold option and the funds spent when buying the option: 3034-712 = 2322 rubles).

If the price of the underlying asset rises, your profit will start at the point of 12,322 rubles (strike of the purchased option + funds spent: 10,000 + 2,322), and is limited to the point of 15,000 rubles (strike of the sold option).

A loss with this strategy will occur if the price of the underlying asset does not increase. It is limited only by the premium paid for the purchased option, minus the premium paid to you for the contract sold, that is, 2,322 rubles.

6. Sixth options trading strategy.

Bear call spread. Bear Call Spread

The strategy is roughly the same as a bull call spread, but it is used when the price of the underlying asset is expected to decline moderately and the decline is limited.

A call option with the same expiration date but different strikes is bought and sold at the same time. The difference with the previous strategy is that it is necessary to sell a call option with a strike price lower than that of the option that is being purchased.

You can see this strategy on the chart.

Chart 6. Bear call spread

We sell a call option with a strike of 10,000 rubles at a price of 3,034 rubles, hoping that the price of the underlying asset will not increase. In order to hedge our position, we buy a call option with the same expiration date, but with a higher strike.

The chart shows that we bought a call option with a strike of 15,000 rubles at a price of 712 rubles. As a result, our total premium will be 2322 (3034-712) rubles.

This is ours maximum profit provided that the price does not rise above 10,000 rubles. Losses will begin at the point of 12,678 rubles and above (strike of the sold, minus the strike of the purchased, minus the total premium: 15,000-10,000-2322 = 2,678 rubles). That is, losses are limited and the maximum is 2,678 rubles.

7. Seventh options trading strategy.

Bull put spread. Bull Put Spread

The strategy is similar in meaning to the previous ones. It consists of selling an expensive put option with a large strike in the hope that the price of the underlying asset will rise. In order to hedge against a price drop, we buy a put option with the same expiration date as the one sold, but with a lower strike price.

Let's look at the graph.
Chart 7. Bullish put spread

As can be seen in the chart, a put option with a strike of 15,000 rubles was sold for 3,287 rubles. For insurance, we bought a cheaper put option for 609 rubles, but with a strike price of 10,000 rubles. Total, the net premium is 2678 (3287-609) rubles.

The strategy will bring profit if the price of the asset does not fall below the point of 12,322 (15,000 - 2,678) rubles. Anything below this price is our loss. It is limited and in the worst case scenario it will be 2322 (15000-10000-2678) rubles.

8. Eighth options trading strategy.

Bear put spread. Bear Put Spread.

The strategy is used if you have confidence that the market will fall before a certain point. It consists of buying an expensive put option with a large strike. To reduce the cost of the position, the same put option is sold, but with a lower strike. The strike is selected at the price level on the spot market at the time of expiration. The meaning is as follows: the option is sold in order to receive a premium, but if there is a strong fall, we also limit our profit, so the strategy should be applied only when there is confidence that the fall will not be strong! Otherwise, it is better to use the Buy Put Option strategy.

Let's look at an example.

Chart 8. Bear put spread

We bought a put option with a strike = 15,000 rubles for 3,287 rubles. Our assumption is that the price of the asset will fall and stop at approximately 10,000 thousand rubles. Therefore, we sell the same put option with a strike = 10,000 rubles. The greater the difference between the strikes, the greater the likely profit when the market falls and the higher the costs of opening a position, since an option with a lower strike can be sold for a smaller amount.

So, our expenses when opening positions amounted to 2678 rubles (3287 - 609).

The strategy will bring us profit if the price of the underlying asset is 12,322 rubles (15,000-2,678). The maximum profit will be equal to 2,322 rubles (the strike of the purchased put, minus the strike of the sold put, minus the total premium, with the price of the underlying asset equal to the strike of the sold put (10,000 rubles)).

Everything below 12,322 rubles is our loss. They are limited and will amount to the amount of the premium paid (2,678 rubles).

Part 2 (Options Trading Strategy)

1. Straddle, purchase (Long Straddle)

The strategy is used in cases where you are confident of a strong movement in the market, but do not know in which direction this movement will be. The strategy is to buy Put and Call options with the same strike price and expiration date. The strike price is generally equal to the price of the underlying asset in the spot market at the time the option contract is entered into.

Let's consider all of the above using an example:

Chart 1. Straddle buy strategy

As we can see in the chart, we bought call and put options with a strike = 12,500 rubles. The total premium for the two options was 2950 rubles (1428+1522).

The strategy will bring profit if the futures price rises above 15,450 rubles (strike 12,500 + total premium paid 2,950) or if the price falls below 9,550 rubles (strike 12,500 - premium 2,950).

Losses are limited by the premium, that is, if the price of the underlying asset does not fall within the above limits, our maximum loss will be 2,950 rubles when the price of the underlying asset is 12,500 rubles.

2. Straddle, sale

The strategy is used if you expect that the price of the underlying product will fluctuate around the strike. The strategy consists of selling a call and a put option with the same strikes and expiration dates.

Chart 2. “Straddle sell” strategy

We sold a call option and a put option with a strike price of RUR 12,500. Our profit (premium paid by the buyer) amounted to 2958 rubles (1444 + 1514). If the price of the underlying asset at the time of execution of the transaction rises above 15,458 (strike 12,500 + premium 2,958) rubles or falls below 9,542 (12,500 - 2,958), we will incur losses. As you can see in the chart, the profit zone looks like a small triangle. It is limited only by the premium paid at the time of conclusion of transactions.

Losses, as you understand, are not limited by anything. If the price crosses the above boundaries in any direction, the loss can be very serious.

3. Strangle, purchase

The strategy is used if you believe that the price of the underlying asset in the spot market will either rise or fall. It consists of buying a put option and buying a call option. The options must have the same expiration date and the call option strike must be higher than the put option strike. This strategy differs from the straddle buying strategy in that due to different strikes, the cost of opening a position is significantly reduced. At the same time, the likelihood of achieving a positive result also decreases, because The loss zone will be much wider than in the strategy of buying a straddle option.

Chart 3. Strangle buy strategy

As we can see in the chart, put and call options were purchased.

Call option strike = 15,000 rubles, put option strike = 10,000 rubles. The total premium paid is 1279 rubles. (692+587). The strategy will bring us profit if the price of the underlying asset is equal to:

1) Call option strike + premium = 15,000 + 1279 = 16279 if the price goes up;
2) Put option strike - premium = 10000 - 1279 = 8721 if the price of the underlying asset goes down.

Losses when using this strategy, in the event that none of these options are exercised, are limited only by the premium, that is, 1279 rubles.

4. Strangle, sale

This strategy is used when the investor is confident that the price of the underlying asset will not change in the future or will change only slightly.

It consists of selling a call option and a put option with the same expiration date, but with different strikes. The call option strike must be higher than the put option strike. Strikes should be selected based on own opinion about the range in which the underlying asset will be traded. We select the call option strike at the upper level of the expected price range of the underlying asset, and the put strike at the lower level.

Graph 4. Strangle sell strategy

Let's look at the schedule. We sold two options: a call option with a strike price of 15,000 rubles and a put option with a strike price of 10,000 rubles. At the time of selling the option, we receive a profit, which is the sum of the premiums for the two options sold. 692 rubles for a call option + 587 rubles for a put option. Total, our profit = 1279 rubles.

As we can see in the chart, the profit zone begins with the asset price = 8,721 rubles and ends when the price rises to 16,279 rubles. The bottom point of profitability is calculated by subtracting the total premium for sold options from the put option strike price: 10,000 - 1,279 = 8,721 rubles. The upper limit of the profitability zone consists of the call option strike and the total premium: 15,000 + 1,279 = 16,279 rubles.

It is necessary to understand that if any of our options are nevertheless exercised, then our profit will be less than the amount of the total premium.

Everything that is beyond the profit zone is our loss, which is completely unlimited. Therefore, this strategy is classified as risky.

5. Strip

The strategy is used if you expect the price to move and most likely fall.

It consists of purchasing a call and two put options with the same contract expiration date, and the strike prices may be the same or different.

Here we should remember the straddle strategy, where we bought puts and calls. This strategy is also focused on the fall and rise in the price of an asset. The strip strategy differs from buying a straddle in that we are buying two put options. Thus, a price drop is more likely.

Let's look at the graph:

Chart 5. Strip Strategy

As we can see in the chart, a call option with a strike of 12,500 rubles was purchased at a price of 1,458 rubles, and two put options with the same strikes, but at a price of 1,528 rubles. In total, our loss at the time of opening positions is 4514 rubles (1458 + 1528×2).

Our strategy will bring us profit if the price falls below 10,243 rubles (12,500 -4514/2) or rises above 17,014 rubles (12,500+4514). However, since we have two put options, our profit will be higher if the price goes down.

Our loss is limited by the amount of the premium paid (4514 rubles) and will occur if at the time of execution of the transaction the price is between the points 10243 and 17014 rubles.

6. Strap

The strap strategy is a mirror of the previous strategy. It is used if it is not known exactly where the price of an asset will go, but there is a high probability that it will go up. We buy two call options and one put option with the same expiration dates, but with different or the same strikes.

Chart 6. Strap strategy

On the chart you can see that a put option was purchased with a strike of 12,500 rubles at a price of 1,528 rubles. and two call options with the same strike at a price of 1,458 rubles. Our profit will start at the point of 14757 (12500+4514/2) rubles if the price goes up and 7986 rubles (12500 - 4514) if the price goes down.

Our losses are limited to the price paid to purchase the options (1528+1458×2 = 4514). They will appear if all options turn out to be useless at the time of transaction execution. In this case, the maximum loss will be at the point of 12,500 rubles.

7. Reverse bull spread. Bull Backspread

The strategy is applied if you are confident that the market will rise or, at least, not fall.

Since you are confident that the price of the asset will rise, you buy a regular call option and also sell a put option. The point of selling a put is to recoup the cost of purchasing the call. The position may have no cost.

Let's look at the chart:

Chart 7. Inverse bull spread

We buy a call option with a strike of 15,000 rubles at a price of 682 rubles and at the same time sell a put option with a strike of 10,000 rubles at a price of 582 rubles. That is, our losses at the time of the transaction will be only 100 rubles (682-582).

The strategy will bring us profit if the price of the asset rises above 15,100 (call strike + total option premium) rubles. Everything below this value is a loss zone. Losses in this strategy, as well as profits, are not limited. If the asset price falls to 10,000 rubles, our loss will be 100 rubles. If the price drops below 10,000 rubles, unlimited losses will increase in proportion to the decrease.

8. Reverse bear spread. Bear Backspread.

The meaning is approximately the same as in the previous strategy, but in this case you need confidence in the fall in the price of the underlying asset. We buy a put option and sell a call option with the same expiration dates. The strike of the purchased put must be lower than the strike of the sold call.

Chart 8. Inverse bull spread

In this case, we bought a put option with a strike of 10,000 rubles at a price of 582 rubles and sold a call option with a strike of 15,000 rubles at a price of 682 rubles. In total, our profit at the time of entering into the position was 100 rubles.

From the point of 15,100 (15,000 + 100) rubles and above, our call position will bring us unlimited losses. From the point of 10,000 rubles to the point of 15,000 rubles, our profit will be equal to the premium (682-582 = 100 rubles). And finally, everything below the 10,000 point (the strike price of the sold call) will become our profit. It is not limited by anything, which means that the lower the price of the asset, the greater the profit.

9. Proportional call spread

The strategy is applied if you are confident that the market will grow slightly to a certain level. You sell two call options with a strike price around this level and buy one call option with a lower strike price.

The idea is this: if the price falls, by selling options, we will insure our position of buying a call; if the price rises to the strike price of the sold options, we will make a profit; if it grows above this level, we will lose money.

Let's look at the graph:

Chart 9. Proportional call spread

We are selling two call options with a strike of 18,500 at a price of 1,416 rubles each. At the same time, we buy one call option with a strike of 17,000 rubles at a price of 2,317 rubles. Our profit at the time of the transaction = 515 rubles (1416×2-2317). Let's look at the chart: if the price of an asset falls, we only receive a premium of 515 rubles, if the price rises to the strike price of the purchased call, then we begin to receive additional income. At the point of 18,500 rubles (strike of sold calls), our profit will be maximum: 2015 (18,500-17,000+515) rubles. Then, as the price of the asset increases, the profit will decrease and at the level of 20,515 rubles (18,500 + 2015) we will begin to have unlimited losses.

10. Proportional put spread

This strategy is exactly the opposite of the previous one. It is used when the price fluctuates and is likely to fall to a certain level. This strategy requires you to buy one put with a higher strike and sell two with a lower strike. Thus, we insure our position against price increases, but at the same time, in the event of a significant drop, our losses are not limited in any way.

Chart 10. Proportional put spread

We bought a put option with a strike of 12,000 rubles at a price of 1,540 rubles. and sold two puts with a strike price of 11,000 rubles at a price of 894 rubles. At the time of the transaction, our profit amounted to 248 (894×2-1540) rubles.

The graph shows that if the price rises, our profit will be at the level of the premium received during the transaction (248 rubles).

From the level of 12,500 rubles (strike of sold puts), our profit increases and at the point of 11,000 rubles (strike of purchased put) it will be maximum (12,500-11,000-248 = 1,748 rubles). The profit zone will end at 9252 (11000-1748) rubles. The loss zone begins below. In the event of a further price drop, they are unlimited.

Part 3 (Options Trading Strategy)

1. Proportional reverse call spread. Call Ratio Backspread.

This strategy is used if the price of the underlying asset can either fall or rise significantly. It consists of buying two call options and selling a call option, but with a lower strike.

The meaning of the strategy is as follows: you sell an expensive option and use the money received from the sale to buy several cheap ones.

Chart 1. Proportional reverse call spread. Call Ratio Backspread.

We bought two cheap call options with a strike of 15,000 rubles and sold one expensive one with a strike of 10,000 rubles. Our profit when opening a position was 1623 rubles (2977-677×2).

Now let's look at the graph. When the price of the sold underlying asset is 10,000 rubles, our sold call option goes into the money. In other words, we are starting to lose our premium. At the point of 11623 rubles (10000 +1623) we enter the loss zone. At a level equal to 15,000 (strike of purchased options), we will receive the maximum loss, since the call we sold has already gone into the money, and the calls we bought have not yet begun to generate income. The maximum loss is equal to 3377 rubles (Strike purchased - Strike sold - Total premium = 15000 -10000 -1623 = 3377).

When the asset price rises above 15,000 rubles, the purchased options go into the money and profit appears. The break-even point is at the level of 18377 (15000+3377) rubles. Above this level, unlimited profit begins.

2. Proportional reverse put spread. Put Ratio Backspread.

The strategy is applied if a price change is expected, and its fall is more likely. If the price does not change, then our losses are limited.

The strategy consists of selling one expensive put option and buying two cheaper options with a low strike price.

Let's look at the chart:

Chart 2. Proportional reverse put spread. Call Ratio Backspread.

As we can see in the chart, we sold a put option with a strike of 15,000 rubles at a price of 3,285 rubles. At the same time, two puts with a strike of 10,000 rubles were purchased at a price of 585 each. At the time of opening a position, our profit is 2115 (3285-585×2) rubles.

Let's look at the profit curve. If the asset value is more than 15,000 rubles (strike of the sold option), we are in the black; then, when the price of the asset decreases, the profit decreases, and, having reached the point of 12,885 rubles (Strike of the sold put - Cumulative premium), we enter the loss zone. The maximum loss occurs when the asset price is equal to the strike price of the purchased options = 10,000 rubles. This is due to the fact that the expensive sold option went into the money, and the purchased puts are not yet profitable.

Maximum loss = Strike of sold put - Strike of purchased puts - Total premium = 15,000 - 10,000 - 2115 = 2885 rubles.

With a further reduction in price, we enter the profit zone at the level: 10,000 - 2885 = 7115 rubles. The lower the price goes, the higher the unlimited profit will be.

3. Butterfly purchase

The strategy is applied if the price of the underlying asset should remain in the current range. The main objective of the strategy is to insure our position against a price drop and limit losses.

To do this, buy an expensive call option with a small strike and a cheap call option with a large strike. At the same time, two call options with a medium strike are sold. By selling call options we insure our losses.

Let's see the graph:

Chart 3. Butterfly purchase

A call option with a strike = 10,000 rubles and a call option with a strike = 15,000 rubles were purchased. Two call options with strikes = 15,000 rubles were sold. The total loss for the entire position was 820 rubles (3022+694-1448×2).

As soon as the price of the underlying asset rises to 10,000 rubles, our loss begins to decrease and at a price of 10,820 rubles we reach the break-even point (10,000+820).

The strategy will bring us maximum profit at a strike of 12,500 (strike of sold options) and will be equal to 1,680 rubles (12,500-10,820). After the price rises above 12,500 rubles, the profit will decrease at a price of 14,800 (12,500+1,680) rubles. we will again enter the zone of losses, which are limited by the premium paid (820 rubles).

Of course, this strategy is designed to limit losses when the price falls, but, unfortunately, it also limits our profits.

4. Butterfly sale

The strategy is used if the price of the underlying asset will rise or fall (high volatility).

To implement the strategy, we buy 2 call options with a medium strike, sell a call option with a small strike and sell a call option with a large strike.

Let's look at the chart:

Chart 4. Butterfly sale

As you can see in the graph, our profit when performing the operation is 820 rubles (3022+694-1448×2). With the “butterfly sell” strategy, the maximum profit is equal to the premium received as a result of the transaction.

Further, when the price of the asset rises to the strike price of the expensive sold call option (10,000 rubles), the profit begins to decrease, and, as a result, when the asset price is 10,820 rubles (10,000+820), we enter the loss zone. The loss zone is the triangle at the bottom of our chart. The peak of the triangle is the maximum loss of this strategy. In our case, they will be equal to 12500 - 10820 = 1680 rubles. Then, when the price rises to the level of 14,180 rubles (12,500+1,680), we will again enter the profit zone, which is also limited by the received premium of 820 rubles.

So, this strategy limits our profit to the premium received when making options transactions. It also limits our loss in case of low volatility and the price leaves the range.

5. Condor purchase

This strategy is very similar to the butterfly buying strategy. The only difference between them is that there we sold two options with the same strike, and here we sell two options with different strikes to increase the percentage of the price value “hitting” the profit zone.

According to this strategy, you need to buy an expensive call with a small strike and a cheap call with a large strike. At the same time, you need to sell two options with average strikes of different sizes.

In this case, our loss on the premium will be higher than in the “buying a butterfly” strategy.

Let's look at the chart:

Chart 5. Condor purchase

As we can see in the chart, a call option with a strike of 8,000 rubles was purchased at a price of 4,696 rubles, a call option with a strike of 17,000 rubles was purchased at a price of 462 rubles. It also follows from the chart that two call options, one with a strike of 10,000 rubles at a price of 3,022 rubles, and the second with a strike of 15,000 at a price of 694 rubles, were sold.

In total, our total loss at the time of the transaction is 1,442 rubles (4,696 + 462 - 694 - 3,022).

The strategy will begin to make a profit after the price of the underlying asset reaches a value equal to the strike of the expensive purchased option + total premium (8000+1442), that is, at a price level of 9442 rubles.

Maximum profit = 10,000 - 9,442 = 558 rubles.

If the price rises to 15,558 rubles (15,000+558), then our strategy will begin to generate losses.

So, this strategy is, of course, very similar to the “buying a butterfly” strategy, but the potential profit is significantly reduced by selling options at different strikes, and the chance of making a profit is increased.

Condor sale

The strategy is similar to the butterfly sell strategy. The difference is that to increase the chance of the asset price falling into the profit zone, we buy options with different strikes. Accordingly, our potential profit is also less.

Let's look at the chart:

Chart 6. Condor sale

The graph shows that when performing transactions with options, we received a premium of 1,442 rubles. When the price rises to the lower strike level = 8,000 rubles, our profit begins to decrease and, having reached the value of 8,000 + 1,442 = 9,442, we enter the loss zone.

Maximum loss = 10000 - 9442 = 558 rubles. As soon as the asset price level reaches the upper strike of the purchased call option (15,000), losses will begin to decrease, and at the level of 15,558 (15,000+558) rubles we will enter the profit zone.

So, according to this strategy, losses are limited, but our profits are also limited by the amount of the premium.

Part 4 (Options Trading Strategy)

By using combinations of different options we can create synthetic underlying assets.

It is necessary to use an option and an underlying asset - a futures.

1. Synthetic long put option

This strategy replaces buying a put and consists of buying 1 call option and selling the underlying asset. It is convenient when there is no liquidity at the desired option strike (that is, such options are not bought or sold on the exchange).

Let's look at the strategy on a chart:

Chart 1. Long put option

As you can see in the figure, we bought a call option with a strike of 12,500 rubles and at the same time sold the futures, which is the underlying asset of the call, at a price equal to its strike. Thus, we received a put option with a strike price of 12,500 rubles (see chart).

If the price of the underlying asset (that is, our futures) rises, then we receive losses in the amount of the call option premium; if the futures price falls, then after the level of 11,039 rubles (option strike minus option premium), we receive unlimited profit. As you can see, this combination is exactly identical to the strategy “buying a put option (lesson “option strategies”, first part, “buying a put option.” - editor’s note).

2. Synthetic long call

This strategy replaces the purchase of a call option and consists of buying a put option and purchasing the underlying asset. It is used when it is not possible to buy a call option.

Let's look at the chart:

Chart 2. Synthetic call option

We purchased a put option with a strike price of 12,500 rubles and at the same time bought futures.

If the price rises, the higher it rises, the greater our profit will be. If the futures price goes down, the only loss will be the premium paid for the put option.

The profit zone begins, as in the call option strategy, from the strike + premium level, that is, from the point of 13973 (12500+1473) rubles.

3. Synthetic short put

This strategy is formed by selling a call option and buying the underlying asset. It is used when the market is growing or not falling.

Chart 3. Synthetic Short Put

We sell a call option with a strike price of 12,500 rubles and at the same moment buy a futures contract. As we can see in the chart, our profit is limited by the call premium, and our loss is not limited by anything. The loss zone begins at the futures price level of 11,039 (12,500-1,461) rubles. If the price decreases, our loss, as well as when selling a put option, is unlimited.

4. Synthetic short call

This synthetic option is formed by buying a futures contract and selling a put option. This strategy is applied, as in the case of selling a call option, when the market falls.

Attention to the chart:

Chart 4. Synthetic short call

We sold futures at a price of 12,451 and a put option with a strike of 12,500 rubles (the difference is insignificant and does not matter). The premium for the put option was 1,492 rubles. If the market falls, this will be our profit. If the market grows, after the level of 13992 (12500+1492) rubles, an unlimited loss will begin.