Exchange Traded Options: An Introduction to Trading Options on the ASX

EXCHANGE TRADED OPTIONS
Part 1: An introduction to trading options
TradersCircle Pty Ltd, ABN 65 120 660 497 is a corporate authorised
representative of OzFinancial Pty Ltd, AFSL number 241041
PH: 03 8080 5788
WEB: www.traderscircle.com.au
EMAIL: admin@traderscircle.com.au

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What are Exchange Traded Options?
1
Exchange Traded Options are a financial
product provided by the ASX.

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What are Exchange Traded Options?
2
Options are classified as a derivative and a
leveraged financial product.

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What are derivatives?
3
A derivative’s value derives from an underlying
variable asset.
Options derive their value from a company
share or an index.

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What is leverage?
4
Leverage occurs when financial instruments
can increase exposure to price movements.

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How do options work?
5
An option is a contract in which the buyer has
the right but not the obligation to buy or sell a
stock at a stated price at any time during the
life of the option.

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6
You can view it as an insurance contract
between a buyer and seller where the buyer
has the right to take up on the contract if
and when they choose...

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7
Where the seller will receive a premium to
insure the buyer.

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Who uses options?
8
Exchange traded options have various uses for
both traders and investors.

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Some of these uses are:
9
Insuring a Stock or Portfolio.

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10
Locking in a buy or sell price of a stock.

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11
Income Strategies using the Collateral
Value of a portfolio.

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12
Trading a view of the underlying stock.
Income Strategies using the Collateral
Value of a portfolio.

Why trade options?
13
Options give traders the
advantage of trading a
leveraged position in
different directions of the
market.

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Why trade options?
14
With education and experience, an options
trader can profit from up down and
sideways moving markets.

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Why trade options?
16
The versatility means an options trader
can act on opportunities within different
market conditions.

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Types of options
There are two different types of options
available:
17

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Types of options
available:
18
1 Put Options

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Types of options
available:
19
1 2Put Options Call Options

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Put options
The buyer of a put option has the right, but
not the obligation to sell a stock at a stated
price (strike price) at any time during the life of
the option.
20

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Call options
The buyer of a call option has the right, but
not the obligation to purchase a stock at a
stated price (strike price) at any time during
the life of the option.
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For example
22
Put option 37.00 strike price
BHP Trading at 36.50

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For example
23
Put option 37.00 strike price
You have the right but not
the obligation to sell stock
at 37.00 which is .50c more
than you can on the market

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For example
24
Call option 36.00 strike price

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For example
25
Call option 36.00 strike price
You have the right but not the
obligation to buy stock at 36.00
which is .50c cheaper than you
can on the market.

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Conclusion
Essentially, options provide versatility
for traders, and create ways to trade
different conditions.
26

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Conclusion
It is vital that before entering the market, you
learn the skills and gain the experience
to trade confidently.
27

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Interested in becoming a trader?
The right education is essential if you want
to reach your trading goals.
Register with us today to learn more about our
trading education programs.
28

Warnings and important information.
Any advice contained in this communication is general only and does not consider
your objectives, financial situation or needs, and you should consider whether it’s
appropriate for you. If you are thinking about acquiring a financial product, you
should consider our Financial Services Guide (FSG) at www.traderscircle.com.au and
the relevant Product Disclosure Statement (if there is one available) first.
Trading options is not suitable for everyone. There is a risk that you can lose more
than the value of a trade or its underlying assets. You should only act on our
recommendations if you are confident that you fully understand what you are doing.
Past returns do not reflect future returns, and it is also possible to make significant
losses. We employ expert traders and use strategies that maximise returns and
minimise risk. However, there is always a risk of loss when trading and investing. This
is general information, and is not prepared for your specific investment objectives,
financial situation or needs. Consult a licensed investment adviser before making
investment decisions. TradersCircle Pty Ltd, ABN 65 120 660 497 is a corporate
authorised representative of OzFinancial Pty Ltd, AFSL number 241041.
PH: 03 8080 5788

Exchange Traded Options: An Introduction to Trading Options on the ASX

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Exchange Traded Options: An Introduction to Trading Options on the ASX