Mindblown: a blog about philosophy.

Conversions and Reversals are the trader’s favorite tool for risk management. It is most accurately described as a quasi-arbitrage that options traders rely on for pricing purposes as well as for its risk management functions. The synthetic relationships that puts and calls have to each other has already beer seen in the previous section. This…

Synthetics: When I first started trading options I used to have a little card written with this on it. Basically it is Two or more trading vehicles packaged together to emulate another pricing vehicle or spread. Because the package involves different components, price is also different, but the risk is the same. So, for example,…

1. Long puts give you bearish speculation with fixed, limited risk. • Long a put will give you (upon exercise) the control over 1 future sold short. A long put has risk limited to the initial cost of establishing the position. • A long put has potentially unlimited gains as long as the price of…

1. Long calls are bullish speculation with fixed, limited risk. In futures options, cach options contract typically represents one underlying future. A long call gives you control (upon exercise) of long 1 future. A long call position has risk limited to the initial cost of establishing the position. A long call position has unlimited upside…