For a simple options pricing model, the following values are needed. Exercise price Time to expiration Price of underlying Interest rates Dividends Volatility 1. Exercise price Price at which the underlying can be bought (call) or sold (put). For example for an AAPL 120 strike June contract, means the buyer can purchase 100 share [...]
When you look at the premium for an option (how much it is trading at now), you should break the price up into two components. Intrinsic value and Time value. Intrinsic value is what the option would be worth if it had to be executed now. If the option is In The Money, then it [...]
A Futures contract requires delivery of an asset at a fixed price at a certain date in the future. The seller must make delivery and the buyer must take delivery of the asset. With an Options contract, the buyer has a choice whether or not to exercise the Option. The seller has the obligation to [...]
The Turtle Trading system as taught by Richard Dennis supposedly returns an 80% annualized return. Well.. that sounds interesting & worth testing. I’ve build a simple database of historical stock prices using yahoo finance. Let’s see how this goes. Update – July 2011: Could not get profitable backtesting so canned automated project. However profitable in real trading [...]