Equity Options: Accounting, Strategies & Options Operations

In this article, we will talk about the Equity Options Accounting, Equity Options Trading Strategies and , Equity Options Operations for Settlement and clearing. This article will give you a clear picture of what one should be aware of from such a course on equity options and how they should approach this topic of Equity Options.

A Fundamental beginning on Options :

  - Puts and Calls :The two basic kinds of Plain Vanilla Options

  - Covered and Naked Options: The difference between the covered options (protected or risk managed Options) and Naken Options (unprotected or unmanaged)

  - Risk Profiles of various options traders and what positions should one take as per the risk profile

Valuation and Pricing of Options :
  - The concept of "In the Money Options" and "Out of the Money Options" depends on the udnerlying's price with respect to the option strike price

  - Time Value of Options, time Decay in options and why short sellers have an edge over the option buyers

  - The Greeks - concept and calculation of Greeks in Options - Where they come from , what is their significance - The delta, gamma, theta, rho, vega

Options Accounting and Reporting Mechanism:

  - Assets/Liabilities: The concept of Asset v/s liability in options

  - Cost Basis of options trading and positions

  - Statement Layout and formatting

Options Trading & Hedging Strategies: Options are way risky than the money involved in it. It is possible that you get into a position worth 100, but you might end up paying a million, so hedging and risk management is very important for option traders.

  - Covered Calls: The concept and how to configure a covered call

  - Collars

  - Spreads

Volatility Strategies for trading options: How to benefit from volatility trading in options trading. We have two popular combinations as follows

  - Straddles

  - Strangles

Sideway Strategies for trading options:

  - Butterfly

  - Condor

Operations and Settlement Processing:

  - Segregation of Underlying Shares for options trading

  - Exercise and Expiration for options