Hi. May i know any one option strategy which can allow investor to benefit (gain positive profit) from the falling prices of its underlying stock?

Buy put options

Learn black scholes calculation

Buy Put options
Sell Call options

Or a combination of the above

When Implied Volatility is Low:

1) buy puts
2) bear vertical spreads: buy ATM call/sell ITM call or buy ATM put/sell OTM put
3) buy ITM call calendar spreads or buy OTM put calendar spreads


When Implied Volatility is Moderate:

Borrow shares and sell short the underlying


When Implied Volatility is High:

1) sell calls
2) bear vertical spreads: buy OTM call/sell ATM call or buy ITM put/sell ATM put
3) sell OTM call calendar spreads or sell ITM put calendar spreads

Is there Options trading for Malaysian equities?

Newbie to Options? Good learning spot:
https://www.tastytrade.com/tt/learn

Malaysia? "Buy side Call options" only - AKA Warrants only,
unlike
the full Buy/Sell Call/Put options for US markets + AU market (from what i read only, never traded)

Noob Question:

Selling Puts & Calls (using my broker) requires a huge margin limit. Any way to sell options without having the margin to afford 100 shares of the underlying stock?

Example, to sell 1 put option of FB, i need 100*$140 of capital.
Any way around this?

Selling naked (i.e. Without holding the underlying stock) carries fairly high risk, that's why it needs a lot of margin - I'm not aware of any brokers that allow you to sell without a large margin requirement.

is protective put a better choice?

if long straddle and put option is not allowed, what other options can i use?

Sell spreads aka verticals

Using your same example on FB:
Sell Put $140 1 contract
Buy Put $130 1 contract
= Margin required $10 spread *100

OR
Sell Put $140 1 contract
Buy Put $135 1 contract
= Margin required $5 spread *100

option is the hardest financial instrument to master and it's not really worth it unless you're trading a huge volume

nothing worthwhile is easy to master or even master-able.

anyhow, funny... huge volume in Options may get U killed - leveraged instruments.
"trade small, trade often" + portfolio approach.
use the statistics + macro, for higher probability of profit

If you can understand the Greeks (Delta, Theta, Gamma, Implied Volatility etc.), mastering options is no problem. Also, because some brokers charge commission high enough that one needs a huge spread or volume to breakeven, even profit.

Also I would not really spend on higher trading volume or you would just turn the options market into a casino. While I have seen people winning huge, there are also traders in options, spend all, lose all. But with the proper risk analysis, research, options should not really be a problem to master. Takes practice for months, even years to master it but not a problem.

I would like to ask a question as I am relatively new to Options. I have an idea but I am not sure if this will work.

Let's put it this way.
current price of the underlying stock is ~$100

Buy Call at $100
Buy Put at $100

At the end of the timeframe or in the middle of it, the price must have moved considerably away from the $100 (in any direction), hence making us profits.

My question is, is this feasible?

hehe - think cost of time decay or Theta

When U BUY an option, U are buying the TIME + CONTRACTUAL RIGHT (extrinsic value)
As the time of the contract passes, what do U think will happen to the cost or premium of the option, assuming the underlying doesn't move?

ALSO - when U Buy an option AND don't have the $ to exercise the option (which is usually the case -100 units of FB, imagine) - how to make $?
U turn around & sell your option right?
By the time U sell your option, the contract DTE (Days to Expiry) is shorter than when U bought right?
So.. the value of the option, again assuming all else being the same like no movement in underlying, U can sell for higher or lower premium than your BUY cost?

If U can answer the above clearly, U will have answered your own Q whether feasible or not

Sorry ar - i usually ask Qs for clarity or leading one to find one's own answer coz i ain't no sifu, still big L (learner) plate

This post has been edited by wongmunkeong: Apr 12 2017, 10:29 PM

Thanks.

Regarding the bolded part. Doesn't the intrinsic value only lost when we have not purchased it. Once it is purchased it's not relevant anymore. Am I right?

In my case, I will buy at the beginning of the week/month and sell them when a profit in achieved (when the market has moves either way profitably).

er.. i'm lost.

i stated extrinsic value, U state intrinsic
i stated Theta or time decay effect on options' premium, U stated.. nothing

perhaps totally different wavelength - can't help U gain clarity