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Complexities of Options


									                                             Presented by Daniel Toriola

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                                                    Complexities of Options
                                                       By san jose options

    Let’s discuss the complexities of options and how they differ from trading stocks. First of all stocks
are simply one-dimensional trading vehicles…the dimension of “price movement.” For example, one
can go long a stock if he/she is forecasting a rise in the price of the underlying asset. The stock trader
doesn’t need to worry about time or changes in volatility affecting the outcome of his trade. The stock
trader only needs to focus on the asset’s price movements. Options, however, involve these other two
dimensions just mentioned plus the dimension of price as well. So options are actually
three-dimensional trading vehicles based on price, time and volatility. To compare stock and options
in a practical sense, let’s consider this scenario:
A stock takes a full year to move up 10%. The stock trader who bought and held on to his stock has
just made 10%. However, the option trader might have made nothing at all or even lost money if he
just bought an option. The reason the option buyer may have lost money is because of Time Decay.
His option just lost a whole year of Time Premium. Also, since the volatility of the underlying asset
probably went down, this can also cause the call option to lose value. This is why we need to be
correctly educated in order to trade options. Simply buying calls and puts makes option trading very
difficult because of the elements of time and volatility. Remember, options are three-dimensional
vehicles, and if we don’t understand how to manage these complex assets, we shouldn’t trade them.
Options are somewhat similar to stocks, but since there are three dimensions to them, we can’t just
learn how to graph a price chart and trade them. Trading options isn’t so simple.
So we can conclude that when trading options we are trading two other dimensions besides the price
movement. We are also trading time and the 3rd element known as volatility. So when we construct an
option spread, we must always keep these 3 dimensions in mind to create an option trade that will
benefit in all 3 directions at once. Trading options can be somewhat complex, but in a nutshell we
have to forecast time, price, and volatility and construct each trade accordingly. By combining different
options at different strikes, different months, etc, we can create situations that benefit in all three
dimensions simultaneously. It’s actually quite interesting to be an options trader.
Anyway, part of becoming a successful options trader is to understand the option Greeks. We must
understand how to use the option Greeks to adjust an option spread and how to construct option
spreads so they benefit from time, from volatility and also from the changes in price.
For example, let’s say our forecast is for the market to go up. The first thing we have to understand is
when the market goes up, the normal direction of volatility will be down (that’s not always the case, but
it usually is the case!). So our scenario is the price is going up and the volatility is going down.
What kind of trade can we construct that would benefit from this scenario?

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                                                                                                                    Page 1
                                                Presented by Daniel Toriola

Of course, if you are just trading a stock, you can just buy the stock and if it goes up, you make money.
Now, if you’re trading options, you’ll want to construct a trade that is bullish, takes advantage of time
passing, and also benefits from a decline in volatility. An example that might work is a Bull-Put Credit
spread. This option spread will benefit from a rise in price as well as a drop in volatility. It also benefits
from time passing by. This is just one example of trading the three dimensions of options.

For more information about getting educated on option trading please visit our website at A great way to learn the craft of option trading is through a personal mentoring
program such as ours.

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                                              Presented by Daniel Toriola

                                       Accomplishing Home Improvement Projects
                                                              By Tyra Smith

Deciding how to best accomplish one’s home repairs takes an awful lot of thought and consideration
before jumping into a project. Most projects are better accomplished through careful planning and
designing because of the complexities that often arise in the middle of a project. Realizing how to best
accomplish a task before you begin allows you to account for unexpected errors or problems before
they present themselves.

 Home improvement projects can be complex and confusing for many homeowners who are not as well
versed in the handyman field as other individuals. The complexity of the project can be so much at
times that even getting started can seem like a challenge. Some home improvement projects may
seem simple enough, but when one begins, the many different elements of the project will surface and
unskilled homeowners may feel overwhelmed. Some good planning may help to alleviate any problems
that may arise throughout the course of the project. Decide what supplies you will need, predict how
long each step will take and decide on the best order in which to do the steps. Also, there are usually a
few different options you have in completing projects, or steps to a project, and determining what
option you will choose before beginning may help you sort out the rest of the project. Certain methods
may not mesh well with one another and avoiding this is a good idea.

 There is always the option of calling a professional to help you with your home improvement projects
too. Professional contractors are obviously going to be quite experienced in making home repairs.
They possess the skill and expertise that allows them to complete a project in good time and in good
fashion. Experience in home repairs is a desirable trait for anybody performing them to have.
Professionals are going to be extremely experienced for the most part, as it is their job and they
perform the tasks daily. Having somebody that knows what they are doing so they can perform well
and accomplish the job the right way will pay off in the long run, and of course in the short run. If you
do not realize the complexities and the amount of hard work that needs to go into a home improvement
project, it is best to do a little research so you understand before deciding whether or not to call a

 Home improvement is often a hassle for those willing to take on the project themselves. It turns into a
huge headache and an endless trip to the hardware store if one does not put in a proper amount of
planning. Considering all the tools, supplies and the amount of time you will need to tackle the project
will help it to go smoothly. If you do not feel up to the task, and many people do not as they do not
have the appropriate experience, training or skill, it is probably best to call a contractor to do the work
for you.

Visit for more information on home improvement
projects and for more information on College Works Painting in
your area.

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                                              Presented by Daniel Toriola

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