Amazing Thailand

and so I just came back from a holiday in Bangkok, a city in the midst of political distress, dangerous, and a time where tourists avoid visiting. Nevertheless, my wife, Joshua, my Sister-in-law, brother-in-law and his fiancee had a great time shopping and eating. Although major shopping malls were closed, the ones we usually go to were still open to customers: Mah Boon Krong, Suan Lum Night Bazzaar, JJ Market and Platinum Mall.


ACCA

This is it. Professional, promising career prospects, pays good money, and quite importantly, international. I choose this path over Logistics and Supply Chain after giving some thoughts. I have to work hard when classes commence, I had to. This time, its not just for me. I wouldnt want to disappoint my wife, my son and my supportive Grandpa, who gave me an interest-free loan, by failing the exams. Heard that papers are tough. Thats what it takes to be a professional isnt it?


C Jan11 7.5 Call

Took a small step to get started with options. Bought a long call for 11 bucks(0.11 X 100) before broker commissions, an insignificant amount which will be forgotten. Citigroup was trading between 4 - 5 bucks just for the past couple of days and hope that it gets nearer ITM in the coming months.

I was quite interested to use the long Iron Condor, a little similar to the I mentioned in the previous post since expiry date is just 1 day away and letting it expire worthless, but just realised I didnt have enough in my trading account yet to meet the Options Buying Power requirement.

I plan to purchase C shares with the little amount of money that I have.( I have been saving up to this for a long time) once my money is in from the transfer. Let this money work harder instead of staying in my savings account. And at the same time purchase put options to protect them. This way, I'm in a winning position. Unless C got stucked sideways for long periods of time(which is unlikely), I'm quite certain its going to perform well for the coming months.

The Long Iron Butterfly

This is a strategy that can be used in a sideways market. It combines basic option strategies: the Bear Call Spread (short lower call and long higher call) and the Bull Put Spread (long lower put and short higher put).
Using an example, we can create a long iron butterfly by going
- long 1 Dec Gold Futures 350 Call @ 7.5,
- short 1 Dec Gold Futures 340 Call @ 12.6,
- short 1 Dec Gold Futures 330 Put @ 9.8, and
- long 1 Dec Gold Futures 320 Put @ 7.2

Maximum reward is simply the net credit of the spread. In this example, the maximum reward is $770, [(12.6 + 9.8) - (7.2 + 7.5) = 22.4 - 14.7 = 7.7 X $100 = $770 ]

Maximum risk is equal to the difference between strikes times the value per point minus the net credit received. In this case, the maximum risk is $230 [(350 - 340) X $100 ] - $770 = $1000 - $770 = $230 ]

The upside break-even is equal to the middle call option strike price plus the net credit received. In this example, the upside break-even is 347.70 (340 + 7.7).
The downside break-even is equal to the middle put strike price minus the net credit received, or 322.30 (330-7.7 = 322.30).
Therefore, the profit range for this trade is between 322.30 and 347.70.

This trade is preferred because of its higher reward-to-risk ratio. This often happens when the puts and calls have different implied volatilities. This difference can make one trade better than the other.

Summary

Risk: Limited
Profit: Limited
Time Decay Effect: Mixed
Situation: Look for a sideways market that you expect to close between the wings of the iron butterfly.
Profit: Limited to the net credit received.
Risk: Limited (difference between long and short strikes times value per point, minus net credit received).
Upside Break-even : Strike price of middle short call plus the net credit received.
Downside Break-even: Strike price of middle short put minus net credit received.