Options Trading

Traded options have a reputation as being "high risk", but when examined objectively, they are in fact powerful financial instruments which can be used to either increase or decrease risk and to take positions in the underlying investments in a precise and controlled manner. This section contains papers which cover the methodologies needed to use these instruments and document real examples of their use.

Title:        Spread Betting

Author:    Mike Newman

Date of publication:    29th May 2003

Description:
An introduction, written in August 2004, to this alternate way of investing....and one that is tax-free !


Title:        Trading Naked Options

Author:    Mike Newman

Date of publication:    30th April 2004

Description:
A very comprehensive and detailed way to make money through options....but there are risks !! Revised in September 2004


Title:        An update to "Spread Betting" and "Trading Naked Options"

Author:    Mike Newman

Date of publication:    30th August 2009

Description:
An update to the earlier articles on Spread Betting and Trading Naked Options, detailing how his investment strategy has been adjusted in response to changes in market volatility by moving between "straddles" and "wide strangles".


Title:        My OPTIONS TRADING - A MORE PROFITABLE INVESTMENT STRATEGY THAN TRADING SHARES

Author:    Mike Newman

Date of publication:    5th September 2012

Description:
This article describes the author's positive experiences with options trading over a number of years. Members should be aware however, that when one makes a profit on traded options, that profit represents a loss to some other options trader. So enter the options market only on the understanding that it is a competitive market between highly motivated participants.


Other Derivatives

It may seem strange to place a paper on Guaranteed Equity Bonds in the same category as traded options, as it is often thought of as "the safe way" to invest in shares. But they are in fact options repackaged to appear so. They are a demonstration of how options can be used to convert investment in shares into a lower risk investment, but at the expense of investment return.

Title:        Guaranteed Equity Bonds

Author:    Jim Shoesmith

Description:
A recently popular offering by the investment managers, but one that has some stings in its tail.