Sunday, November 23, 2008

Last weekend I attended Wealth Academy Options course conducted by Mr Ron Ianieri from Options University. Ron is a former floor trader, market maker and specialist on the Equity Option and Foreign Currency Option Trading Floors. (His Bio). Ron is also a well-respected option trainer and he has been invited to speak on U.S markets and movement on CNBC Asia TV channel several times. (CNBC's Interview)

Option is a derivative product. It is tradable at stock exchanges and its price is derives from the underlying product. There are options for stocks, indexes, currency, commodities, bonds, etc. The advantages of option are cost efficiency, better percentage return, limited loss and portfolio protection.

In this beginning course, you get to learn things like Volatility, The Greeks, Options Pricing Model, synthetic positions, trading strategies and morphing techniques. Besides learning these that I mentioned, you also entitled to ‘Options 101 Home Study Course’ learning materials from Options University (Click on my blog recommended course).

Before you begin with options trading, it is important to understand the basic knowledge such as volatility and the Greeks. Learning this basic knowledge will certainly help you to decide which and when to apply the correct strategies. Have you ever wonder why the current market situation causes the VIX to hit the record of 80? Why volatility has to do with options pricing? I heard many experienced options traders mentioned the phase ‘buy options when volatility is low, sell options when volatility is high’. I got my answers through this course.

Volatility is one of the factors that affect the option prices (on the extrinsic value). Volatility is widely discussed in any options trading books. It is defined as dispersion of an asset’s returns from their mean and usually modeled through a bell shaped curve with the standard deviation values. Understanding the volatility will able to help you to better understand what is Historical Volatility (HI) and Implied Volatility (IV). Knowing the HV and IV, you will able to determine the theoretical value of option prices (most of the broker software platforms have this value available, so you do not have to worry about applying the complex mathematical formulas) and thus allowing you to make judgment of why options are priced at respective values.

I invite you to check out this course and take some time to go through it if you are thinking of taking your first step into becoming a professional option trader.

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