How this course was set up, best practices, progress and quizzes.
Module 1: The Futures Market
If you want to understand options, you need to know some basics of the Futures Markets. What are they and how are they regulated?
Module 2: Trading Futures
How do you trade the Futures markets? Here we discuss all the mechanics behind transactions, specific requirements ect. Note: We are not talking about strategy yet!
Module 3: Finding Additional Information
How to find additional information about Futures e.g. contract specifications, price information etc. We included our own comprehensive Commodities List as a bonus!
Module 4: What Are Options?
Welcome to the world of options! Let's find out what they are and jump into some important terminology.
Module 5: Trading In Options
Discover how options are traded with all the unique buying and selling combinations that they offer.
Module 7: The Greeks
The Greeks!? What are they and how do they influence option pricing?
Module 8: Fear and Greed
We introduce you to the position graph and discuss the pros and cons of being a buyer versus a seller of options.
Module 9: Options Trading Strategies
Explore all the possibilities with which you can develop options strategies to engage in any market condition.
Module 10: Risk vs. Reward
How to visualize your risk and potential reward using a graph.
Module 11: Implied Volatility
What is Implied Volatility and how to use it to measure market sentiment?
Module 12: Course Summary
We review what was covered in this course thus far before we move on to the practical application of trading options.
Module 13: Theory vs. Practice Part 1
Module 14: Theory vs. Practice Part 2
Module 15: Theory vs. Practice Part 3
Module 16: Theory vs. Practice Part 4
Module 17: Theory vs. Practice Part 5
Module 18: Trading Strategies - Trending Markets
Module 19: Trading Strategies - Non-Neutral Markets
Module 20: Trading Strategies - Neutral Markets
Module 21: Trading Strategies - Synthetic Options
Module 22: Starting Your Own Trading Business
Module 23: Course Completion
Shown above is a price chart of a commodity. It could be any commodity but for the sake of this example, we will just look at prices.
Imagine the conversation presented below:
Let’s say that you want protection against prices moving higher than 77 (point 4 on the chart).
You could then approach your insurance broker and have the following conversation:
You: “Mr. Broker, you know, I am about to enter into a business transaction and I am really scared that prices will move above 77. Can you provide me with insurance against prices rising above 77?..”
So your broker will then take out his calculator and ask you:
Broker: ‘Ok.. so for how long do you need this protection for?’
You: “Ahh, I guess about 6 months”
Then he presses a few more buttons and says:
Broker: ‘OK, I can give you the insurance for six months for X amount and I will give you a guarantee that if prices move above 77, that I will sell you the commodity at 77’
You: “geez hmm… that is a bit steep”
Broker: ‘You know, I am the one sticking out my neck here, giving you a guarantee. This commodity is known for moving higher during the second half of the year and if that happens I will be in trouble here but if you were to only look at 3 months of protection instead, then I can reduce the price for you, but 6 months, that’s too risky for me. I’m sorry but that is the price I would have to charge you.’
‘You can always approach another insurance broker – maybe he is willing to give you the same insurance at a better price, but for me… well this is the best I can do.’
It’s now up to you. Do you want that insurance or not? Are you willing to pay the required premium offered or not?
If you do however take the insurance, and prices do rise to let’s say 80, then the insurance company has to pay you out. They have to sell you the commodity at a price of 77 – that was the agreed on insured price.
On the other hand, if prices never reach 77, then the insurer is safe – however, he still took on all the risk.
Regardless of what happens, the premium you paid for the policy is non-refundable – that was the money the insurer collected for being willing to take on the risk in this position.