Thursday 8 October 2009

Option Buyer, Seller and Writer

So before I go into example, I want to make a concept clear. We need to think of option as a contract and for a contract there is a buyer and a seller. There is only one type of buyer which is someone who buy the option. On the other hand, there are actually two types of seller. Type 1 is someone who buy the option in the first place and sell it later on. Type 2 is someone who don’t own any option but who is able to create an option contract and sell it to someone else. For Type 2 seller, which we will call writer from now on to save any future confusions. Therefore to “create an option contract” means to “write an option contract”. The risk for option buyer is limited as oppose to the unlimited risk of being an option writer. Sound scary isn’t it. I will show you how to control the risk later.
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7 comments:

  1. Unknown8 October 2009 at 19:54

    more than happy to visit your blog.
    moreover, It is a option trading lecture room!
    I will ask for being your student here and share my idea also . Becasuse I am a beginner in option playing game. But I will regard it as a life-long "career"for me .
    So firstly present my congraduation here .

    Hewick_yu

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  2. Unknown8 October 2009 at 19:58

    another comment:
    will you try to build up a simulating trading schedule , to teach us how to "sell and buy" and how to "long and short" especially in HKindex option.

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  3. Tradingforreal8 October 2009 at 20:52

    Hehe... Master Yu, thank you for visiting my site and for giving your advice. This is platform we can share trading ideas freely. Yes you are right this is a bit like a lecture room, at first I will focus on basic and I will talk about my trading system and my trades. Regarding HK index option, it is another professional topic which I will cover some basic at a later stage. But to be honest I don't have a lot of experience with Index option. My trading is mainly with Stock option at the moment.

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  4. Unknown11 October 2009 at 15:51

    real-trader:
    please help how to find the data of IV for stock option. I search on HKEX / bigchart/ aastock, but cant get it . any idea ?
    i think most of blue chip HK were around the middle line of bolinger channel . UP trend maintenance or ? any idea ?

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  5. Tradingforreal12 October 2009 at 02:12

    Actually the don't think the IV data is available on HKEX or bigchart. I think the reason to get the IV data is to check whether the option is relative expensive or cheap. Since I can't find the IV data either. But I have an idea for you, as I told you to use the width of Bollinger Band as a marker of high or low volatility. If the width is relative large that should implied high IV too and if it is narrow, than the IV should be low too.
    My view on the current Market is very Bullish, the HSI should test the 22000 very soon. This is current stage 2 of the Market cycle.

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  6. Tradingforreal12 October 2009 at 19:56

    Master Yu, I find the IV data for stock option and index option on HKEX. Go to there homepage, look into data and statistics icon. Go in then click derivative market. Then go to daily market report inside there choose stock option. Hope this help. Cheers

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  7. Unknown16 October 2009 at 23:25

    thanks much
    i think you win much this month
    i will go China beijing for 5 days
    call back you aftere I back

    ReplyDelete

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