Change order button 1106 allows a player to change an order. Game state holds the information about the current state of the game, such as time, days, type of game, list of companies, single players versus multi player. LAST represents the last trade. Game time engine 1310 is responsible for keeping track ofthe elapsed time in the game and for notifying the change of time states to the time related elements in the game. Such means may include, for example, a removable storage unit 2022 and an interface 2020. The process begins with step 1502 where control is immediately passed to step 1504. In step 1710 the basic stock formula is used to move the stock. An options simulation engine for an options trading game. News is the pivotal ingredient in the option game of the present invention.
Strike 710 is a list of available strike prices based on security, month, and options. In decision step 1516, it is determined whether the linear news string has played out. This risk based measurement system is performed by risk analysis 1342. During the second and third week of the game, floor broker 1308 will generate an offer. Clicking on help button 108 causes a help screen to appear that defines each component of getting started screen 100. The present invention provides news stories about a company as a combination of linear strings and random events. News tree 1400 is comprised of twelve linear news strings. The ask is the current price at which the player can buy.
The options game ofthe present invention is designed to simulate an actual options trading floor. Volatility 1338 will change at the end of each week with the movement of the stock. In step 1820, the player is given a margin call. Maximum risk 1342 is the amount of money a player can lose for any given stock or option. Software and data transferred via communications interface 2024 are in the form of signals 2028 which may be electronic, electromagnetic, optical or other signals capable of being received by communications interface 2024. Various software embodiments are described in terms of this exemplary computer system.
On a single option ticket order screen, a player can choose market, limit, and stop orders. If a player has not responded to the offer from floor broker 1308, control then passes to step 1920. For example, the action shown to be taken is to buy an option. Back button 722 enables a player to return to the previous screen. Control is then passed back to decision step 1708 to determine whether additional trades are pending. What is also needed is an options game that enables a player to interactively apply what they have learned about options in a fun and interesting way.
Continue button 112 enables a player to proceed to the next screen. In a multi player game, floor broker 1308 is shown to all players. In alternative embodiments, secondary memory 2010 may include other similar means for allowing computer programs or other instructions to be loaded into computer system 2000. The present invention is not limited to thirty second waits between news events. Game time engine 1310 keeps track ofthe following time variables: game time, days of the week, and game days. While the invention has been particularly shown and described with reference to preferred embodiments thereof, it will be understood by those skilled in the art that various changes in form and detail may be made therein without departing from the spirit and scope of the invention. Control then passes step 1906. In decision step 1708 it is determined whether trades are pending to be processed.
Available cash field 502 displays the amount of money a player has left in cash to invest in more stocks and options. All orders that are not placed at the market will remain on the open orders screen until they are filled. Trades placed with this term will be active as open until they are filled or explicitly canceled by the user. Options trading on the floor of an exchange is about speculation. In step 1814, an error message is displayed to the player stating that the following open order could not be executed due to insufficient funds. Trade log screen 222 will help a player track their trading activity and cost basis.
Control then passes back to step 1804. News archive screen 228 is comprised of a list of news articles 1002 and a close button 1004. Cancel order button 1104 allows a user to cancel an order. New options series are created so that there is always an option series available at an attractive price for potential investors. Computer system 2000 may also include a communications interface 2024. Perennial menu bar 202 comprises a stock ticker display 206, a first game meter field 208, a second game meter field 210, a game time barometer 212, a news ticker 214, and a plurality of information screen button 216 through 232. The previous description of the preferred embodiments is provided to enable any person skilled in the art to make or use the present invention. Open order screen 230 shows the detailed status of unfilled limit orders and unfilled stop orders.
Clicking on place order button 220 enables a player to place a trade. To determine the risk, risk analysis 1342 uses the bid price, the price at which the player can currently sell his position. Game engine 1302 is responsible for keeping track of the game time and the state of the game. One reason more investors do not trade options is simply lack of knowledge. One can also place terms and restrictions on trades. Control then passes to step 1704 where the process begins again. Main pit screen 200 is where the action happens!
Control then passes to decision step 1516. Scholes options pricing model combined with an innovative simulation engine to make the options game perform like an actual market. The prices of all stocks and options are linked to news events. Place button 726 enables a player to place the order. Start week button 422 indicates that a player is ready to begin or to resume game play. Close button 1108 enables a player to return to main pit screen 200. In step 1506 a top news story is selected for the company selected in step 1504. The present invention uses infinite liquidity 1332. Trade log information screen 222 lists the following information: week 802, action 804, symbol 806, quantity 808, type 810, and price 812.
Trades placed with a good for one week restriction will be active until they are filled or when the week the order was placed ends. Game time barometer 212 is described below with reference to FIG. Control then passes to step 1916. Control then passes to step 1910. One week of play for the option game of the invention is ten minutes, and thus, one day is equal to two minutes. The second type of company news 1606 is earnings news 1610. Options can also be used in a less speculative, less risky manner. Each week lasts ten minutes with weekends at the end. Once all ofthe required information has been entered, continue button 112 is activated to allow a player to proceed to the next screen.
All option positions are charged on a risk based measurement system. Presently available options trading products are designed for professional traders. Close button 512 enables a player to return to main pit screen 200. Control then passes to decision step 1508. Zoom button 1206 enable a player to view the performance of the companies in the players pit in more or less detail. To confirm that the player wants to cancel the selected order the player must click yes on the confirmation dialog box.
Close button 1210 enables a player to return to main pit screen 200. PCMCIA slot and card, etc. The time frame for the options game of the present invention occurs over a period of four simulation weeks. Event 1404 and rumor 1406 represent a second level news story for the same company. Field 912 displays the last trade price. If trades are pending to be processed, control then passes to step 1712. Clicking on open orders button 230 enables a player to review, edit, or cancel open orders made by the player.
Option order field 703 includes an action field 704, a contracts field 706, a month field 708, a strike field 710, and a type field 712. Alternatively the action could be to sell an option. More particularly, the present invention relates to a game engine for simulating a real world options trading environment. Last weeks close is calculated as soon as the week ends and it is always equal to the last when the week finishes. Portfolio information screen 216 comprises an available cash field 502, a current interest rate field 504, an equity summary 506, an option summary 508, and a profit analysis graph 510. Control then passes to decision step 1918. Company news is comprised of three types of news.
While the present invention is described herein with reference to illustrative embodiments for particular applications, it should be understood that the invention is not limited thereto. In step 1920, floor broker 1308 repeats the offering made earlier. When the player clicks on the start week button to begin a new week, the news archive is refreshed. Good till canceled requires that a trade be active as open until it is filled or explicitly canceled by the user. Side By Side Trading, Inc. Trading restrictions include good till canceled and good for one week. Floor broker 1308 is an animated character named Peg.
The crash scenario will move the market down approximately twenty percent over a series of trades. In step 1906, a strike price is randomly chosen from an available pool of strike prices. Clicking on news archive button 228 enables a player to review the news headlines for the current week. The computer program product of claim 18, wherein said options market simulator means further comprises floor broker means for enabling a processor to provide a floor broker, wherein said floor broker shows up occasionally with an options deal at a price below market value, wherein a player must determine whether the options deal is a good deal or a bad deal. Company object 1334 contains historical volatilities, 60 day prior information, starting price, etc. Select types of games field 102 allows a player to select from the four types of games to play.
Help button 108 allows a player to obtain answers to start game sequence questions. Close button 912 is used to return the player to main pit screen 200. Volatility is a measurement of the amount of expected fluctuation in the stock price in a given time period. LAI Games International Pte. Company news 1606 comprises news stories specific to a company, such as earnings, take overs, etc. Control then passes to decision step 1708.
Contracts 706 refers to the number of option contracts a player would like to buy or sell. Commerce Studios Llc, Inc. An advantage of the options game of the present invention is that it appeals to the novice as well as the professional trader. Simulation objects 1322 are comprised of a company object 1334 and an internal financial calculator object 1336. In step 1916, floor broker 1308 waits ten seconds for a response from one or more players. In step 1706 a set of trades is posted into a trading queue. Company field 702 displays the company symbol.
It is measured mathematically by the annual standard deviation of daily stock price changes. Earnings news 1610 represents news events that announce earnings of the company. Events 1408, 1412, 1414, 1416 and 1418, and rumor 1406 represent third level events for the same company. Open orders screen 230 updates dynamically, so if a player is viewing screen 230 and an order is filled, the player will get a notice informing the player that the order has been filled. Cancel button 724 enables a player to cancel the order. The price of all options tend to migrate toward their theoretical value over time. Namco Bandai Games Inc.
The filled order will not longer be displayed on screen 230. The player can then edit any field that is not greyed out. After a player has completed entering all the required information needed to begin the game, the player will arrive at main pit screen 200. Joehnk, Fundamentals of Investigation, Sixth Ed, 1996, pp. However, weekends provide a player the opportunity to relax and catch up on the news, stock quotes, etc. It is up to the players to figure out whether these rumors are accurate or not. Trading limitations include the up tick rule.
These animated characters are Dino, Barbara, Synthia, Miles, Ben, and Larry. The stock change range is chosen randomly. While playing the options game of the present invention, players will meet these animated characters. Terms field 714 selects the terms of the order: Market, Limit, or Stop. Portfolio information screen 216 also includes a close button 512. Rumor news 1612 consists of a rumor or opinion that is announced by a virtual trader or animated character in the pit. These products are based on heavy mathematics and require a user to have strong mathematical skills. Control then passes to step 1912.
Control then passes to step 1522 where a 30 second wait is applied. Place order sequence screen 220 also includes a help button 720, a back button 722, a cancel button 724, and a place button 726. Additional option series are created in the options game of the present invention using a strike price generator 1329. In a single player game, the player controls the length ofthe weekend. Trade log indicator screen 222 shows all executed trades. Peg will show up occasionally with an options deal at a price below the market. Crash news 1604 results in an economic crash that causes all stocks to move downward in price. The weekends count as two days for the game days variable. Action 804 refers to a buy, sell, or sell short.
Iconic Worldwide Gaming Ltd. Communications interface 2024 allows software and data to be transferred between computer system 2000 and external devices. The uptick rules states that a player cannot sell short on a downtick or a zero downtick. Field 906 displays the three letter symbol of the company. Events 1420, 1422, 1426, 1424 and 1442, and rumors 1428 and 1440 represent fourth level events for the same company. The new option series is created when an option is priced half way between the highest and the second highest strike price. In step 1922, the process ends. In decision step 1704 it is determined whether a news event related to a company has been generated.
In step 1912, a price is randomly generated that lies between the bid price and the ask price of the option. Options trading is sophisticated, and the strategies are complex. The options game of the present invention begins with a basic tutorial in the theory, mechanics and history of options trading. At week 3 of the options game of the present invention, an earnings news story 1610 is generated for each company. If the stock has not changed then the last stock price is used. Processor 2003 is connected to a communication bus 2002. Identifier 104 requires a player to enter their name for LAN and Internet games only. Players must keep in mind that a cheap option may not always be the best deal.
Perrenial main pit screen 200. In step 1518 a new company is selected. Players will not be able to pause the simulation during the week. When open orders are filled, the player receives a message stating that the order has been filled. As previously stated, the options game ofthe present invention is made up of four trading weeks and four weekends. Trades placed with this term will be active until they are filled or the week that the trades where placed ends. Previous month field 1202 displays the performance of the company in a players pit over the four weeks prior to the beginning play.
Place order information screen 220 provides step by step assistance to a player for successfully placing an order. When a player either buys or sells stock his cash usage changes. Control then passes to step 1828. Action field 704 describes the action to be taken. The features, objects, and advantages ofthe present invention will become more apparent from the detailed description set forth below when taken in conjunction with the drawings in which like reference characters identify corresponding elements throughout. Players can only execute short sell orders on a zero or uptick of the stock.
What is needed is an options game that explains options trading in a language that regular investors can understand. In step 1712 a trade is executed. Portfolio Manager Engine 1306 holds all the information on all the transactions made by the player. Type 810 will show equity for a stock trade. Computer programs may also be received via communications interface 2024. Company object 1334 is responsible for keeping all of the information about each company in the options game of the present invention. Game time is the time elapsed since the game started in seconds. Type 712 allows a player to select the order type: call or put.
Place order information screen 220 for a single option ticket comprises a company field 702, an option order field 703 and a parameter field 705. In step 1504, a company is selected by pulling a company name from a hat. Control then passes to step 1514. Navigation tabs 902 are used to select the company in which company information is to be displayed. Parameter field 705 includes a terms field 714, a price field 716, and a restrictions field 718. Field 908 displays the historical volatility of the company. An example of a computer system 2000 is shown in FIG. Options trading is a very complex and risky venture.
Further embodiments, features, and advantages of the present invention, as well as the structure and operation of the various embodiments of the present invention, are described in detail below with reference to the accompanying drawings. Returning to decision step 1516, if the linear news string has not played out, control then passes to step 1520. If the last price was the same, the tick remains unchanged from the previous tick. The net profit and loss of money is the addition of all the profit and losses for all stocks plus the profit and losses for all options. When the option game of the present invention begins, the game time is zero, day of the week is weekend, and game days is zero. The present invention provides an understanding of options theory and enables a player to practice the mechanics of trading options to become a more informed investor. If the player is not trying to make a trade that will place his available cash level below the minimum requirement, control is then passed to step 1810.
Delta 1328 is the rate of change of price of the option for a change of the stock price. Trade log information screen 222 comprises a list of all of the orders a player has executed during game play. Field 904 displays the name ofthe company. Players will be able to fill out order tickets over the weekend, but, as in the real world, these trades will be executed when the market opens on Monday. In step 1520, a 30 second wait is applied. Players trade in and out of options and equity positions as they see fit until the end of the fourth week, at which time the game ends.
That is, the last trade must be on an uptick. The accompanying drawings, which are incorporated herein and form part of the specification, illustrate the present invention and, together with the description, further serve to explain the principles of the invention and to enable a person skilled in the pertinent art to make and use the invention. Help button 720 can be chosen at any time during game play to allow a player to obtain detailed information about place order information screen 220. Game types include single player game, saved single player game, multi player game: LAN, and multi player game: Internet. After the 30 second wait, control then passes to step 1506 where the process begin again for playing a new news string for a new company. The bid is the current price at which the player can sell.
Restrictions field 718 represent the trading restrictions placed on a trade. The changes will be applied to the order the player selected on open orders screen 230. Control then passes to step 1832. Those skilled in the art with access to the teachings provided herein will recognize additional modifications, applications, and embodiments within the scope thereof and additional fields in which the present invention would be of significant utility. The present invention is an options trading tutorial and game simulation. The process begins in 1702 where control immediately passes to decision step 1704. Field 910 displays last weeks close price. Buy stop orders are above the market price and sell stop orders are below the market price.
In a single player game, the object of the game is to amass a large portfolio by the end of the game. Weekend indicator 412 illuminates to indicate that the game is currently in a weekend state. Clicking on tradelog button 222 enables a player to review all of the trades that the player has placed. Regardless, the rumors can also move the stock price. Identifier 106 requires a player to enter a three letter call sign. The profit and loss of money for the options position is determined for a long position and a short position. Control then passes back to step 1804 in FIG. Note that continue button 112 remains inactive until all the requested information of getting started screen 100 has been entered. Exit game button 110, when clicked, enables a player to exit the game.
During the weekend, a player is allowed to review the company information 226, news 228, portfolio 216, and trade log 222 screens. If the last price was higher, the tick is negative, and a minus sign is shown. If a crash scenario is to be generated with the present options game, the crash scenario will begin after the first half of the game has been played. Although N is set equal to 10 in the above equation, N is not limited to a value of 10. In a single player game, the pace of the game is controlled by clicking on the start week button 422. Cash usage is the amount of money being used to maintain a portfolio as a whole, including options and stocks. An eighth linear news string is comprised of news events 1402, 1404, 1412, 1424, and 1434.
Control then passes to step 1914. In particular, the computer programs, when executed, enable the processor 2003 to perform the features of the present invention. This is accomplished using the hat method. Konami Computer Entertainment Studios, Inc. Logical Information Machines, Inc. Game low represents the lowest the last price has been since the game started. Konami Computer Entertainment Osaka, Inc. Example messages are as follows. In step 1908, a call or a put is randomly chosen.
The game cannot be paused during the week. In yet another embodiment, the invention is implemented using a combination of both hardware and software. Control then passes to step 1814. These computer program products are means for providing software to computer system 2000. Close button 1004 enables a player to return to main pit screen 200. The process begins with step 1902 where control is immediately passed to step 1904. In LAN and Internet game play, the weekend is controlled and lasts for a period of two minutes. Open orders field 1102 contains a detailed status of unfilled limit orders and unfilled stock orders.
The probability of generating a crash scenario for the present options game is a one in ten chance every time the game is played. In step 1904, a company is chosen at random. The options simulation engine of claim 1, wherein one or more players trade in and out of options and equity positions as they see fit by analyzing news, rumors, and information about one or more companies until the trading options game ends. The first type of news is stock news 1608. The simulation then generates a random series of 5 to 7 trades that result in the randomly chosen percentage change in the price of the stock. If an investor anticipates an upward movement in the stock, a call option offers an opportunity to share in the upside potential of the stock.
Price 812 refers to the purchase price of the trade. Main pit screen 200 is composed of the perennial menu bar on the top 202 and a pit on the bottom 204. Company information screen 226 comprises navigation tabs 902, a company name field 904, a company symbol field 906, a historical volatility field 908, a last weeks close field 910, a last trade field 912, a week change field 914, a company profile field 916, a two year stock performance chart 918, and a close button 920. The options simulation engine of claim 1, further comprising a strike price generator for creating option series to enable the availability of option series at attractive prices for potential investors. Scroll bar 610 enables a player to scroll through options details 606. The call sign is used throughout the game to identify the player. Day of the week is the day of the week that is currently being played.
Such computer programs, when executed, enable computer system 2000 to perform the features of the present invention as discussed herein. The computer program product of claim 18, further comprising strike price generating means for enabling a processor to create option series to enable the availability of option series at attractive prices for potential investors. The default is the next expiration month. Control then passes to step 1922. That is, how much the price of the option changes when the stock price changes. Open order screen 230 comprises and open orders field 1102, a cancel order button 1104, a change order button 1106, and a close button 1108.
In decision step 1804, it is determined whether a player is trying to make a trade that will place his available cash level below the minimum requirement. Close button 612, when clicked, returns a player to main hit screen 200. Additionally, this weighted affect is randomized so that if the same story is repeated it will have a different affect. Option simulation engine 1300 is comprised of a game engine 1302, an option market simulation 1304, and a portfolio manager engine 1306. Next, a player chooses three companies out of a total of 15. Week 802 refers to the week in which the order was placed. When the player has finished making changes, the play can then click place order to place the order. Returning to decision step 1818 in FIG. The options game of the present invention requires that certain trading rules and trading limitations be followed.
Blackrock Financial Management, Inc. In step 1806, the trade is not allowed. Control then passes to step 1506. This channel 2026 carries signals 2028 and may be implemented using wire or cable, fiber optics, a phone line, a cellular phone link, an RF link and other communications channels. My Blue Skies, Inc. An option is a contract that gives the buyer the right to purchase or sell the underlying security at a specific price for a specific time period.
When a player selects a limit or stop order, a player must enter a price in price field 716. In step 1910, a random number between 100 and 500 is generated. Navigation tabs 602 allow a player to select a company to view the specific option and equity information for that company. Alternatively, if an investor anticipates a downward movement in the stock, a put option protects against the downside risk without limiting profit potential. At the start of week 3, currently running news stories for a specific company will be completed prior to playing the earnings news story 1610. The news earnings story is selected using that running average. An eleventh linear news string is comprised of news events 1402 and 1418, and rumors 1406 and 1440. Stock graph information screen 232 comprises a prior month field 1202, a current month field 1204, a zoom field 1206, a key field 1208, and a close button 1210.
The invention is directed to such computer program products. Months 708 is a list of available months based on security and options. After the floor broker repeats the offering, the dialog for the offering is dismissed. In step 1514, the selected news story is played. News archive screen 228 only logs the news of a players current week of game play. Note that no dividends are employed in the option game of the present invention. The following table shows how a particular news earning story is selected using the running average. If a single player chooses to resume game play at a later time, the player can pick up where the player left off. Company news 1606 also includes rumor news 1612.
If a player has responded to the offer, control then passes to step 1922. When a user places a trade, the number of contracts in the trade never exceeds the market. The following table shows how the value of a news story causes a percentage change in the stock price. In fact, in one embodiment, the invention is directed toward one or more computer systems capable of carrying out the functionality described herein. Once a user has completed the tutorial, the user is ready to play the game. In an embodiment where the invention is implemented using software, the software may be stored in a computer program product and loaded into computer system 2000 using removable storage drive 2014, hard drive 2012 or communications interface 2024. Profit and loss of money mechanism 1346 determines the profit and loss of money for equity positions, option positions, long positions, and short positions.
The type of option is either a call or a put. Briefly stated, the present invention is an options simulation engine for an options trading game. If the last price was lower than the current one the tick is positive and a plus sign is shown. News stories 1602 are divided into the following categories: crash news 1604 and company news 1606. In other words, it is the maximum risk. Trade log information screen 222 also includes a close button 814. If an investor anticipates a certain directional movement in the price of a stock, the right to buy or sell that stock by purchasing an option contract can offer an attractive investment opportunity.
Event 1402 represents the top level news story for a particular company. In step 1812, the order is canceled. In decision step 1918, it is determined whether a player has responded to the offer made by floor broker 1308. The present invention is not limited to 5 to 7 trades. The last trade price is the price at which the last trade was made. Symbol 806 refers to the symbol ofthe company on which the trade was placed. Control then passes to step 1908. The computer program product of claim 18, wherein one or more players trade in and out of options and equity positions as they see fit by analyzing news, rumors, and information about one or more companies until the trading options game ends.
Company information 916 provides a company profile for the selected company. Infinite liquidity 1332 implies that there is an infinite market. Game high represents the highest the last price has been since the game started. Game time barometer 212 displays the amount of time that has transpired in a game. Each company will start with a specific historical volatility for the past 30 days. Once the game starts, the news engine may play a news event or a rumor for one of the three companies at random. Returning to decision step 1708, if there are no trades pending to be processed, control then passes to step 1710 where the basic stock formula is used to move the stock. In either case, options, used intelligently, are just another investment tool, and as such, must be understood to be used effectively.
To begin the game, a player clicks a start week button found on a main pit screen. Week change field 914 indicates whether the price has gone up or down since the last week and the amount of change for the week. Close button 814, when clicked, returns a player to main pit screen 200. News headlines roll across news ticker 214. Stock news 1608 refers to news events about the company that affect the price of the stock. In step 1804, if it is determined that the player is trying to make a trade that will place his available cash level below the minimum requirement, control is passed to 1806.
For a call, delta 1328 is obtained from the Black Scholes model. If a trade is composed of two options or an equity and an option, only the first row of the trade will have a bullet. The price of options is computed using a theoretical value of an option. Note that the present invention is not limited to the animated characters listed above. The options simulation engine of claim 1, wherein said options market simulator further comprises a floor broker, wherein said floor broker shows up occasionally with an options deal at a price below market value, wherein a player must determine whether the options deal is a good deal or a bad deal. Accordingly, such computer programs represent controllers of the computer system 2000. The present invention relates generally to the field of information processing.
Portfolio information screen 216 is updated dynamically, so that a player can watch their portfolio move as the price of the underlying stock moves. Game days is the elapsed time since the beginning of the game in days. Control then passes to step 1808. Note that there is no trading over the weekend. The options game of the present invention includes an options tutorial section and an options history section to bring the novice up to speed in the trading of options. Returning to decision step 1822 in FIG. Ubs Financial Services, Inc. Removable storage unit 2018, represents a floppy disk, magnetic tape, optical disk, etc. Thus, start week button 422 is only enabled for single player games.
The present invention is not limited to a player selecting three companies. The player will receive a confirmation dialog box. The company names selected by a player are placed in a hat. First game meter field 208 will be described below with reference to FIG. If a player then buys or sells stock or options, the player must be charged an appropriate amount of money for the transaction. If the linear news string has played out, control then passes to step 1518. The contract obligates the seller to meet the delivery terms if the buyer exercises the contract right.
Events 1436, 1438, 1432 and 1434 represent fifth level events for the company. The computer system 2000 includes one or more processors, such as processor 2003. What is further needed is an options game that simulates real world options trading in the marketplace. For example, if the terms are at market the trade is executed when placed. The trade is therefore placed at the present option or stock price. The stock market is generally flat so far in 2016, but has seen quite a bit of volatility. Options expire, so the duration of trades is finite whether they are weekly or monthly cycles. What has taken place for stocks going into and immediately after elections? The Brexit vote surprised markets and sent volatility soaring as uncertainty increased.
Now, investors might expect more uncertainty as we dive into quarterly earnings and the upcoming presidential election. Note the sharp drop the day after earnings were announced. This helps us participate and still sleep at night. Might the banking sector stocks suffer? These factors can reduce the closing price on a credit vertical. To summarize: Earnings season and the upcoming elections will most likely move markets and increase volatility. Could defense stocks rise if Trump gets elected? If Clinton wins, could pharmaceutical stocks suffer?
You can see in figure 1 that IV rose ahead of the earnings announcement at the end of June and fell quickly after the release later in the month. What sectors might be affected by each candidate? Might tech stocks rally if business investment is encouraged by Clinton? For example, if you were bullish on NKE going into the earnings event, a possible trade would have been a short put vertical. This allows traders to have a specific time frame in which to place trades. Using options for speculation, hedging, or portfolio protection may be beneficial as potential opportunities and risks arise. FIGURE 2: NKE SHORT PUT VERTICAL RISK AND REWARD PROFILE.
And higher volatility can provide opportunities, but it can also hurt a portfolio that is not properly protected. IV tends to drop quickly after an earnings announcement. This sample short put vertical was constructed using the 52. Would energy stocks catch a bid? Knowing this, and if you believe that IV will drop, you may want to consider option strategies in which you are a net seller. For more information about TradeWise, please see ADV 2 on www. TradeWise is a professional advisory service that specializes in educating investors on how to employ option strategies in current market conditions. IMPLIED VOLATILITY BEFORE AND AFTER EARNINGS. If Trump wins, could it spur economic growth?
These strategies include short verticals and short iron condors as examples. IV drops by a lot as option premiums decline quickly. Although many investors have strongly held personal beliefs when it comes to politics, traders focus on the impact of the elections on the market and portfolios. This analysis is crucial because it can help traders select option strategies. The market absorbed the downturn quickly, however, and moved forward as risks from the vote decreased. What will each candidate bring to the table that may negatively or positively affect a portfolio and the markets? At TradeWise, we initiate and manage these types of strategies for our clients while providing education and trade management skills. If you would like to learn more about the versatility of options, visit our website at tradewise.
For the most part, bear markets have historically occurred during the first or second years of presidential terms.
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