Essential Option Strategies. J. J. Kinahan
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Название: Essential Option Strategies
Автор: J. J. Kinahan
Издательство: John Wiley & Sons Limited
Жанр: Зарубежная образовательная литература
isbn: 9781119291510
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• Open: The first price of the trading day.
• Last: The most recent price.
• High: The highest price of the trading day.
• Low: The lowest price of the day.
• Close: The final price of the trading day. It will be the same as the last price at the end of the trading day.
Wow, a lot has changed since that time! Many websites readily offer free delayed intraday prices. Brokerage firms typically offer free real-time quotes to their customers as well. Offerings might include a symbol quote box where you can type in a ticker symbol or tables that include lists of multiple symbols along with relevant information, including last, high, and low prices.
Figure 1.1 is a snapshot of what I watch on the thinkorswim platform each day. It includes indexes like the Dow Jones Industrial Average, the S&P 500, and the NASDAQ Composite, as well as some widely held names like Apple (AAPL), Netflix (NFLX), and General Electric (GE). I also watch some of the action in the futures markets, especially the S&P 500 Futures (/ES), and the US 30 year Treasury Bond Futures (ZB), as well as the Euro/US dollar (EUR/USD) currency pair.
Figure 1.1 My Watch List
I can also see the price quote for any stock by using the Quick Quote tool. First, identify the ticker symbol of the company you're researching. It's simply an abbreviation to uniquely identify a publicly traded instrument like a stock, index, or fund. For example, the ticker for General Electric is straightforward. It's GE. However, sometimes the ticker is less intuitive and requires a symbol lookup. This is easy to do using most brokerage platforms.
After the ticker symbol is identified, enter it into the Quick Quote box (Figure 1.2) to see the latest stock prices and the change for the day. In this case, the stock is Microsoft, and the ticker is MSFT. The stock is up $0.55 for the day and last traded at $54.48 per share.
Figure 1.2 Quick Quotes
The default setting for Quick Quotes on the thinkorswim platform also includes two other important pieces of information – the bid price and the ask price. The bid price is currently the best bid price by a buyer. If an investor wants to sell in the current market, he can expect to receive $54.47 per share. On the other hand, a buyer pays the asking price or $54.48 per share.
Bid and ask reflects the current quotes to buy or sell a stock, option, or futures contract. The bid reflects a willingness to buy, and therefore a seller can expect to receive the bid price at the time of sale. The ask, or offering price, is a level that a seller or sellers are willing to receive for the security. A buyer typically pays the asking price.
Bids and asks are constantly changing, and there is no guarantee that you can buy or sell at the quoted prices. In addition, less actively traded names can see fairly large differences between bids and asks, which is also called the bid-ask spread. In later chapters we explore the mechanics of order entry and explore bids, asks, and bid-ask spreads in more detail. For now, the point to take away is that the last price is not necessarily an indication of the current market price to buy or sell. Bids and asks provide the latest market prices available to sellers and buyers.
Charts
A stock chart is simply a graph that shows price changes over time. In this book, I use two types. The first is a chart that shows the price of the underlying instrument, like stock, future, or index, over a period of time. The second is a payoff chart, or risk graph, and shows the potential risks and rewards of an options strategy. It is covered in more detail in later chapters. For now, let's discuss the basics of stock charting.
The simplest chart type is a line chart. For instance, it's easy to plot a line chart in a spreadsheet using data like date and price. Figure 1.3 shows a daily chart of hypothetical oil prices over twelve months. The line connects the twelve points where price and date intersect on the graph. It starts at $50 per barrel in January and ends at $53 in December.
Figure 1.3 Line Chart of Monthly Oil Prices
Traders plot charts for instruments like stocks, interest rates, or commodities to see trends over time. Obviously, few create the charts by hand or in spreadsheets. Charts are readily available on financial websites like StockCharts.com or Google Finance and also through online brokerage firms.
A second, more widely used chart is the open-high-low-close, or OHLC, chart. While the line chart is plotted using just the closing price, an OHLC chart includes bars that contain four pieces of price information.
Figure 1.4 shows an individual bar of an open-high-low-close chart. The small horizontal lines are the opening and closing prices. In this example, the stock opened at one price and closed at a lower price. The length of the vertical line represents the trading range of the day, because the top of the bar is the highest price and the bottom is the lowest.
Figure 1.4 OHLC Bar
Like the price chart, the horizontal axis (or bottom) of the OHLC chart represents time, such as days, weeks, or months. The vertical axis (or side) indicates price per unit, such as shares or contracts. Figure 1.5 shows an OHLC chart for a three-month period ended 11/30/2015. The time frame is plotted across the horizontal axis, and the change in price is depicted along the vertical axis.
Figure 1.5 Daily Chart of S&P 500 Index (8/31/2015–11/30/2015)
Notice that the OHLC bars are not all the same length. Longer ones suggest greater distances between highs and lows, and therefore increasing volatility in the security. Shorter ones suggest narrow trading, smaller daily moves, and periods of lower volatility or narrow trading ranges.
The time frame of an OHLC chart can be changed to weekly or monthly. If so, each bar represents the change over one week or one month. Short-term traders sometimes watch intraday bar charts at five-, ten-, or fifteen-minute intervals. Most of the examples throughout this book use daily OHLC charts.
More advanced charting tools are covered in Appendix B. If you have no previous experience with charting, take some time to learn how to identify areas of support and resistance with indicators like trend lines and moving averages. In addition, because the focus of later chapters is on options strategies, volatility studies are also useful. Those are covered in Appendix B as well.
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