Welcome to the Educational Reprints from The Value Line Option Strategist. We have posted these reprints to help you use options as an investment tool and to introduce you to The Value Line Daily Options Survey.
This week, we review what are known as the put/call parity rules. If you know one rule - and you remember your high school algebra - you can quickly master all the rules. Mastery of these rules gives you a lot more flexibility when planning your option strategies.
This report shows you how buying calls is really insurance against (1) losing money if the stock falls and (2) missing out if the stock rises. According to our models (and our track record), this insurance is well worth buying.
This report shows you how you can diversify your investments by buying "naked" puts. These puts can be in-, at- or out-of-the-money. Our model picks underpriced puts on stocks that Value Line expects to underperform the market. Our track record shows that even a small allocation to naked put buying can greatly improve your returns over time.
You write covered calls when the call is overpriced compared to how much you expect the stock to move. In this report, we show you some very useful calculations to help you make your covered call selections.
Most people know that you can hedge a stock by buying a put or by writing a call on it. What is no so well known is that you can do both. This long stock + short + long put combination is known as a collar.
These positions consist of owning the stock and buying a put to protect it. Not only are you insuring against losses, you are insuring against opportunity losses as well. Often this insurance is a lot cheaper than you think.
This particular hedge is attractive in times such as these when the demand for nominally cheap insurance is driving up the price of the lower strike puts.
What is an option and what gives it value? Here we show you why options are insurance against financial uncertainty and why this insurance is often a lot cheaper than most people think.
Introduction
Welcome to the Educational Reprints from The Value Line Option Strategist. We have posted these reprints to help you use options as an investment tool and to introduce you to The Value Line Daily Options Survey.
A Primer on Put-Call Parity and How to Use It
This week, we review what are known as the put/call parity rules. If you know one rule - and you remember your high school algebra - you can quickly master all the rules. Mastery of these rules gives you a lot more flexibility when planning your option strategies.
Buying Naked Calls
This report shows you how buying calls is really insurance against (1) losing money if the stock falls and (2) missing out if the stock rises. According to our models (and our track record), this insurance is well worth buying.
Buying Naked Puts
This report shows you how you can diversify your investments by buying "naked" puts. These puts can be in-, at- or out-of-the-money. Our model picks underpriced puts on stocks that Value Line expects to underperform the market. Our track record shows that even a small allocation to naked put buying can greatly improve your returns over time.
Covered Calls: Doing the Math
You write covered calls when the call is overpriced compared to how much you expect the stock to move. In this report, we show you some very useful calculations to help you make your covered call selections.
Hedging Stocks with Collars
Most people know that you can hedge a stock by buying a put or by writing a call on it. What is no so well known is that you can do both. This long stock + short + long put combination is known as a collar.
Hedging Stocks with Protective Puts
These positions consist of owning the stock and buying a put to protect it. Not only are you insuring against losses, you are insuring against opportunity losses as well. Often this insurance is a lot cheaper than you think.
Hedging with Bear Spreads
This particular hedge is attractive in times such as these when the demand for nominally cheap insurance is driving up the price of the lower strike puts.
Understanding Time Premium
What is an option and what gives it value? Here we show you why options are insurance against financial uncertainty and why this insurance is often a lot cheaper than most people think.
Please contact us with any questions you might have at vloptions@valueline.com
Prepared by Lawrence D. Cavanagh,
Managing Editor/Senior Analyst