Stock trading Vs Options EXPLORING FUNDAMENTALS

Amit Shankercontactamipro@gmail.com

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Introduction• Do you have any experience with trading Options?

• According to you, what is a good yield?

• What has brought you to this meetup and how can we make it successful?

Exercise: Money laying chicken• Manages to lay £30 every week

• Yield varies depending on how well the chicken is fed

• Food and maintaining it costs: £20 per month (which could go up as per inflation)

• Known to live up to 7-8 years

You have the opportunity to buy a chicken which is 6 months old

“How much would you pay?”

Buffet Quotes“Rule No. 1: Never lose money. Rule No. 2: Never forget rule No.1”

“Risk comes from not knowing what you are doing.”

“If past history was all that is needed to play the game of money, the richest people would be librarians.”

Page 44In 2010 and 2009, gains on equity index put option contracts were $172 million and $2.7 billion, respectively. Under many of the contracts, no settlements will occur until the contract expiration dates, many years from now.

Investing in SharesBUY/SELL Rationale

• Shareholder value driven by return and growth. Long term investors are bullish on the company’s growth and expect its earnings to grow y-o-y

• The price one pays for purchasing shares is a multiple of company’s earnings

• Short term directional traders use resistance-support levels to execute trades

Risks with Investing in Stocks• Time Risk: In the long-term , Stocks tend to perform better

than cash. Timing of investment can turn out to be very important.

• A Black Swann can wipe out all of your capital. You only have to look back at 2008 and see what transpired in the stock market.

• Directional trading can be stressful and overnight positions taken by short term traders can cause sleepless nights.

• Forecasting yield on investment is almost impossible.

• Only source of regular income would be via Dividends.

How does Options help?• The right hedged investment made using options

means you will not risk more than 5% of your capital. Right adjustments can make your investment risk-free!

• Presents opportunity to earn regular income during a bull and bear market.

• Market crash will make you smile when analysts keep discussing about the grim economic situation.

Demo Account (Started 29th March 2016)

What we have lined up?◦ Options Basics

◦ Pricing Option Contracts

◦ Option Spreads

◦ Formulating Basic Strategy

◦ Discussing Real trade examples

Beer O’ Clock