Latest news with #options
Bloomberg
3 days ago
- Business
- Bloomberg
South Korean Bourse Wants to Add More Weekly Index Options
South Korea's main stock exchange is preparing to launch a range of short-term derivatives, joining other Asian bourses in expanding the offering of such instruments. The Korea Stock Exchange plans to introduce weekly options expiring every weekday on the benchmark Kospi 200 Index as well as weeklies with Monday and Thursday expiries for the Kosdaq 150 Index of small-cap companies, according to people familiar with the matter, who asked not to be identified discussing private information. It also intends to offer dividend futures tied to the Kospi 200, the people said.
Forbes
3 days ago
- Business
- Forbes
A 1,000% Profit Opportunity With The S&P 500?
Just weeks ago, we highlighted how a reasonably probable options trade on the S&P 500 ETF (SPY) could have yielded a staggering 3,000% return - read You Missed A 3,000% Profit Opportunity On The S&P 500 - Be Prepared For The Next One. That opportunity has passed, but the market's recent surge and looming uncertainties suggest that another significant move may be on the horizon. And here is your chance to go long on volatility, and potentially set yourself up for a 1000% profit opportunity. The S&P 500 has climbed above $590, buoyed by optimism over potential tax reforms and a temporary delay in European tariffs. However, this tranquility may be short-lived. There is likely turbulence ahead. We aren't telling you the direction - all we are saying is that market volatility may increase, and you could take advantage of that by buying a straddle (call and put options both). While these are short-term opportunities that emerge from time to time, real wealth is created by compounding money over the long-term. That's exactly what the Trefis High Quality (HQ) Portfolio is designed for, and has returned >91% since inception, outperforming S&P 500, Dow, and Nasdaq, all of them. Several factors could disrupt the current market calm: You go 'long on volatility' - something not a lot of investors think about. When a shake-up like this happens, volatility spikes. Option prices go up. Therein lies your opportunity with limited risk. SPY put for 5% out of the money strike ($561) expiring 1 month out (27th June) is currently trading at premium of $3.84. For the full contract (100 shares), that becomes $384. Now, if the S&P 500 were to fall sharply over the next 2-3 weeks, not only will the put price gain because of index decline, it will also gain because of the increase in implied volatility - a key ingredient in pricing options. And that means that a 10% down move - to around $530, will be sufficient to 10x the put prices - a 1000% gain opportunity. And let us remind you, SPY hit a bottom of $482 just last month so a retracement to $530 is not out of reach. And if you think the market can explode on the upside too, then hedge your put purchase with 5% out of the money call that's currently trading at an even lower premium of $1.22. Clearly, the market is more fearful about the downside. You could also buy near term options if you think the shake up could happen sooner - that may have an even higher payoff because the premiums will be lower. Remember, the trade can go wrong. The market may stay range bound, or may move but not enough. If that happens, option prices may not move much, or even decay. But here is the thing: you will be entering a defined-risk trade that has the potential to pay off big if things go your way. So the smart thing to do is to limit the contract size to a point where you are comfortable with the risk. And risk = premiums you pay for buying puts, or puts and calls both if you go for a straddle. While the previous 3,000% opportunity has passed, the current market environment presents new possibilities. By staying informed and considering volatility-focused strategies, investors can position themselves to capitalize on potential market shifts. But here's the thing: Short-term volatilities in the market are not uncommon and are often challenging to navigate. However, long-term outperformance is hopefully what matters to you. If so, consider investing in the Trefis High Quality (HQ) Portfolio, which, with a collection of 30 stocks, has a track record of comfortably outperforming the S&P 500 over the last 4-year period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics
CNA
4 days ago
- Business
- CNA
Semiconductor ETF options show caution ahead of Nvidia results
NEW YORK :Traders in the options markets are bracing for industry-wide volatility when AI-chipmaker Nvidia reports results on Wednesday, with defensive options contracts on a major semiconductor ETF drawing heavy trading. For VanEck Semiconductor ETF, the largest semiconductors ETF with some $22 billion in assets, about 2.4 put options changed hands daily over the last 10 days against every call option traded, the most defensive the trading has been in about 10 months, according to Trade Alert data. Call options convey the right to buy shares at a fixed price in the future while put contracts offer the right to sell the shares at a given price. "The put buying in SMH ahead of Nvidia's earnings reflects growing concern about potential volatility for the entire sector following the report," said Chris Murphy, co-head of derivative strategy at Susquehanna Financial Group. On Tuesday, some 105,000 put options changed hands against about 16,000 call options, by 3 p.m. ET (1900 GMT), Trade Alert data showed. In one notable trade, one investor last week bought 50,000 put options in SMH that would guard against the ETF's shares slipping about 10 per cent, to below $220, by the end of May. Nvidia accounts for about a fifth of the semi ETF's assets but due to its dominance in the artificial intelligence market, the chipmaker's influence goes beyond its weight in the fund, analysts said. While investors have been focused on defensive plays in the SMH ETF, options action on Nvidia itself was more mixed, Murphy said. Murphy said investors were selling options to take advantage of heightened volatility expectations around the chipmaker's earnings, meaning they were betting the reaction to the chipmaker's results will not be overly severe. "It's been hedging in SMH while in NVDA they're tactically monetizing elevated premiums ahead of earnings," he said. Susquehanna makes markets in the securities of Nvidia. Interactive Brokers' list of the 25 most active securities by client orders showed Nvidia ranked second, underlining the heightened investor interest in the results. Still, the stock was only one of two names for which investors were net sellers. "That likely reflects some caution ahead of earnings after a solid run," Steve Sosnick, Interactive Brokers' chief strategist, said in a note. Nvidia will be the last of the "Magnificent Seven" megacap tech and growth companies to report results for this period. Their stocks have been mixed in 2025 after leading the market higher as a group in the last two years.
Reuters
4 days ago
- Business
- Reuters
Semiconductor ETF options show caution ahead of Nvidia results
NEW YORK, May 27 (Reuters) - Traders in the options markets are bracing for industry-wide volatility when AI-chipmaker Nvidia (NVDA.O), opens new tab reports results on Wednesday, with defensive options contracts on a major semiconductor ETF drawing heavy trading. For VanEck Semiconductor ETF (SMH.O), opens new tab, the largest semiconductors ETF with some $22 billion in assets, about 2.4 put options changed hands daily over the last 10 days against every call option traded, the most defensive the trading has been in about 10 months, according to Trade Alert data. Call options convey the right to buy shares at a fixed price in the future while put contracts offer the right to sell the shares at a given price. "The put buying in SMH ahead of Nvidia's earnings reflects growing concern about potential volatility for the entire sector following the report," said Chris Murphy, co-head of derivative strategy at Susquehanna Financial Group. On Tuesday, some 105,000 put options changed hands against about 16,000 call options, by 3 p.m. ET (1900 GMT), Trade Alert data showed. In one notable trade, one investor last week bought 50,000 put options in SMH that would guard against the ETF's shares slipping about 10%, to below $220, by the end of May. Nvidia accounts for about a fifth of the semi ETF's assets but due to its dominance in the artificial intelligence market, the chipmaker's influence goes beyond its weight in the fund, analysts said. While investors have been focused on defensive plays in the SMH ETF, options action on Nvidia itself was more mixed, Murphy said. Murphy said investors were selling options to take advantage of heightened volatility expectations around the chipmaker's earnings, meaning they were betting the reaction to the chipmaker's results will not be overly severe. "It's been hedging in SMH while in NVDA they're tactically monetizing elevated premiums ahead of earnings," he said. Susquehanna makes markets in the securities of Nvidia. Interactive Brokers' list of the 25 most active securities by client orders showed Nvidia ranked second, underlining the heightened investor interest in the results. Still, the stock was only one of two names for which investors were net sellers. "That likely reflects some caution ahead of earnings after a solid run," Steve Sosnick, Interactive Brokers' chief strategist, said in a note. Nvidia will be the last of the "Magnificent Seven" megacap tech and growth companies to report results for this period. Their stocks have been mixed in 2025 after leading the market higher as a group in the last two years. For the year, Nvidia shares are up about 0.7%, while SMH shares are up about 1.2%.
Forbes
4 days ago
- Business
- Forbes
As Options Gain Popularity, Traders Must Arm Themselves With Education
Michael Martin is Vice President of Market Strategy at TradingBlock, a provider of custom trading technology solutions. Options trading has exploded in popularity over the past several years, and there are no signs of slowing down. More than 1.2 billion options contracts were executed in the U.S. in March alone, an increase of more than 30% over the previous year, according to the Options Clearing Corporation (OCC), a Chicago-based equity derivatives clearing organization. However, as the number of contracts rises and the throng of new retail traders speculating with options grows, so does the failure to understand the risks involved. Retail traders often chase leveraged returns with options, only to learn too late that pricing and risk aren't as linear as equities. These examples not only reflect bad investor habits, such as emotional decision making and risk-prone trading, but also underscore a widespread lack of understanding of options strategies, how options pricing works and how to properly utilize them. Engaged investors and options-curious traders who want to learn how to leverage derivatives effectively need more education. As an options broker for more than 15 years, here are a few key things I recommend traders bone up on at the outset of their options education journey. The five essential options Greeks—Delta, Gamma, Theta, Vega and Rho—are risk management tools that measure an option's sensitivity to various factors, from price changes to the passage of time. They provide a way to see what may happen with an option given certain variables. For example, Theta quantifies time decay—the erosion of an option's value as it nears expiration—and shows how much value an option loses daily. Not understanding this Greek is why many long option traders lose money. Delta, perhaps the most important of the Greeks, shows how much an option's price may change relative to a $1 change in the price of the underlying asset. Delta also gives us a ballpark range that an option has of expiring in the money, giving it value. For example, if you bought a 55 call option with a delta of 0.10, there's roughly a 10% chance it expires in the money. Knowing all the Greeks is critical for effectively trading options because they help traders understand how various market conditions will impact the price of the option, empowering them to make more informed decisions. Without the Greeks, options trading can become a guessing game. Implied volatility (IV) is another essential concept in options trading and reflects the market's expectation of future price movement, not actual movement. Traders can use the Greek Vega to measure and better understand how much IV can impact an option's value. A higher IV means the market expects bigger swings and more uncertainty, which would result in higher option premiums (even if the stock price holds steady), while a lower IV signifies that the market expects calm and more stability. Understanding how IV works is crucial because it affects what a trader will pay or receive for an option, and having this insight will empower them to spot overpriced or underpriced products. Options traders must be aware that short calls and puts expose them to something called early assignment risk, which is the chance that they will be forced to buy or sell the stock before the option expires. This can have significant financial consequences. If a short put option is assigned, a trader will end up with 100 long shares of stock in their trading account the following day. Conversely, if a short call option is assigned, they'll receive 100 short shares of stock. Assignment risk increases as expiration approaches and the option moves deeper in the money. The more in the money the option is—and the closer it is to expiration—the higher the likelihood that it will be assigned. Traders should know that short calls are also exposed to dividend risk. As what's called the ex-dividend date approaches, in-the-money calls are more likely to be assigned. The call buyer will likely exercise early to capture the dividend, leaving the call seller with short shares and no dividend payment. While learning about effectively utilizing options, it's also extremely valuable for traders to consider their own attitudes and behaviors. They should evaluate how much they want to be engaged in the market. If they are committed to only cursory engagement, then options probably aren't right for them. Successful options traders are regularly engaged in the market and want to get under the hood to explore the ins and outs of these sophisticated products. It's also important for a trader to understand their risk profile, which helps define the level of risk they are willing to take to reach their goals as an investor. Factors like how much market volatility or loss they are comfortable with, their time horizon and experience all play a role in forming this critical piece of the investment puzzle. Options traders should consider their psychological biases and ability to control their emotions because, as soon as emotions get involved in any type of trading scenario, things quickly go awry. Traders with strong track records keep their emotions in check and lean on systematic and strategic approaches. As options grow in popularity, it becomes increasingly important for traders to arm themselves with the right knowledge—not only about options but also about themselves. And while they ought to be wary of the get-rich-quick methods promulgated by social media influencers and the overhyped products that pepper financial newsletters, traders should tap into options resources built by industry veterans and made freely available on the internet. From growing video libraries and in-depth blogs to virtual trading and options calculators, these tools can help them develop a deeper understanding of this risky derivative and how to unlock its potential. The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation. Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?
