http://www.Options-Trading-Education.com - Is the current flurry of activity with traders buying puts on SAP part of the greater EU economic picture or does it just have to do with issues internal to SAP. SAP ADR shares are currently lower and have been trending downward for about two months.
2. Is the current flurry of
activity with traders
buying puts on SAP part
of the greater EU
economic picture or does
it just have to do with
issues internal to SAP.
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3. SAP ADR shares are
currently lower and
have been trending
downward for about
two months.
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4. The put to call ratio for
January 2012 puts is
three to one for the
German software giant.
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5. SAP AG is the leader
worldwide in
developing application
software.
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6. It sells as American
Depository Receipts in
the USA.
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7. SAP is current trading
at just over $50 a share
but the three to one
put to call ratio is a
strong indicator that
traders expect the
stock price to fall.
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8. Because SAP is a global
company buying puts
on SAP is a bit like
betting on a worldwide
economic downturn.
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9. Because it is a
European company
buying puts on SAP
falls into the category
of trading options on
Euro Zone stocks in
general.
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10. The economic picture in
the European
Community is not clear.
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11. The southern tier
nations have come near
going into default on
their sovereign debts.
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12. The risk of a breakup of
the EU has driven
stocks and the Euro up
and down for the last
couple of years.
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13. Now that the EU
ministers have agreed
to closer economic
integration there may
be light at the end of
the tunnel.
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14. However, no one
expects quick fix and a
renewed recession in
Europe could lead to a
global economic
downturn.
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15. Folks who are buying
puts on SAP may be
looking exclusively at
Europe or at the bigger
picture.
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17. The stock has traded
between $50 and $68 a
share in the last year and
is at the bottom of that
range and heading lower
if the folks buying puts on
SAP are correct.
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18. To a degree some
traders may be simply
hedging risk with
options.
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19. Anyone who bought the
stock nearly a decade
ago bought at below
$20 a share.
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20. They may still expect
the stock to rise but do
not want to get caught
in a short term fall in
stock price.
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21. Although these may not
be a good times for
owning stocks these
may well be good times
for options trading.
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22. Buying puts or calls on
a stock, provides
investment leverage
for the options trader.
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23. It also allows the
trader to hedge
investment risk. The
buyer of an options
contract is under no
obligation to buy or sell
the stock in question.
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24. However, if the price of
the equity moves as
expected the options
trader can do so and
profit thereby.
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25. The price of an options
contract is significantly
less than that of the
stock in question.
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26. In chaotic times such
as these traders take
advantage of options
trading in order to earn
profits while limiting
risk.
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27. Those buying puts on
SAP expect the stock
price to fall and will
profit if it does.
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28. However, they have
limited their risk in
case of a rise in stock
price to the price of the
options contract.
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29. For more insights and
useful information
regarding options and
options trading, visit
www.Options-Trading-
Education.com.