Specifically, we focus on the following option strategies: Note that these examples do not take into account trading commissions, which can significantly add to the cost of a trade. Click here to visit the Options on DIAMONDS - DIA Microsite. When an investor purchases a put, she expects the underlying asset to decline in price. Financial Market Data powered by FinancialContent Services, Inc. By Elvis Picardo, CFA May 31, — PM EDT. If the investor in the previous example already owns shares of ABC company, it is referred to as a "married put" position and serves as a hedge against a decline in share price. Check out the returns on our 8 Lazy Portfolios that are made up.




DJIA index options optioons option contracts in which the underlying value is based on the level of the Dow Jones Industrial Averagea price-weight stock market index calculated from the stock prices of 30 of the largest and most widely held public companies in the United States representing the most important industries. If you are bullish on the DJIA, you can profit from a rise in its value by buying Dow Jones Industrial Average DJX call options.

On the other hand, if you believe that the DJIA index is poised to fall, then DJX put options should be purchased instead. The following example depict a scenario where you buy a near-money DJX call option in anticipation of a rise in the level of the DJIA index. Note that for simplicity's sake, transaction sow have not been included in the calculations. You observed that the current optiona of the DJIA index is 7, With the DJX now significantly higher than the option strike price, your call option is now in the money.

In practice, it is usually not necessary to exercise the index sow option to take profit. You can close out the position by selling doww DJX call option in the options market. Proceeds from the option sale will also include any remaining time value if there is still some time left before the option expires. In the example above, as the option sale is performed on expiration day, there is virtually no time value left.

The amount you will receive from the DJX option sale will still be equal to it's intrinsic value. One notable advantage of the long Dow Jones Industrial Average o;tions strategy is that the maximum possible loss is limited and is equal to the amount paid to purchase the DJX call option. Now, in this scenario, change clock metatrader 4 mac would not make any sense at all to exercise the call option as it will result in additional loss.

Fortunately, you are holding an option contract, and not a futures contract, and so you are put options on the dow dow obliged to anyway. This is a limited time offer. Buying straddles is a great way to play earnings. Many a times, stock price gap up or down following the quarterly earnings report. For opptions, a sell. Also known as digital options, binary options belong to a special class of exotic options in which the option trader speculate purely on the direction of the underlying within a relatively short period of time You qualify dwo the dividend if.

A most common way to do that is to buy stocks on margin It states that the premium of a call option implies a certain fair price for the corresponding put option having the same strike price and expiration date, and vice versa They are known as "the greeks" Risk Warning: Stocks, futures and binary options trading discussed on this website can be considered High-Risk Trading Operations and their execution can be very risky and may result in significant losses or even in a total loss of all funds on your put options on the dow dow. You should not risk more than you odw to lose.

Before deciding to trade, you need to ensure that you understand the risks involved taking into account your investment objectives and level of experience. Information on this website is optiona strictly for informational and educational purposes only and is not intended as a trading recommendation service.

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Simpler Options: 3 of the Dow 30


What is a ' Put ' A put is an option contract giving the owner the right, but not the obligation, to sell a specified amount of an underlying asset at a set price. Dow Jne wosId udturiea Dow Jones Industrial Average (DJIA) Futures and Options THREE CONTRACT SIZES: E-MINI DOW ($5), DJIA ($10) AND BIG DOW DJIA ($25). The easiest and most cost-effective avenue to trade the Dow Jones Industrial Average (DJIA) is through an exchange traded fund (ETF) (See: Strategies to trade the Dow.