Unlock the Secrets of Trading Stock Options in NZ with Tiger Trade!

Trading stock options is a great way to diversify your investment portfolio and potentially earn profits in the stock market. With the help of Tiger Trade, investors in New Zealand can easily access options trading and take advantage of price movements in various markets. In this article, we will discuss the basics of trading stock options in NZ with Tiger Trade, including account setup, placing trades, and managing risk.

-Highlight #1: Learn the basics of options trading with Tiger Trade’s comprehensive education resources, including webinars and tutorials.

-Highlight #2: Take advantage of Tiger Trade’s intuitive trading platform, which offers real-time market data, advanced charting tools, and customizable trading strategies.

-Highlight #3: Get started with options trading in NZ with a low account minimum and competitive pricing, including low commissions and no hidden fees.

Hi how’s it going everyone my name is hank and welcome back to the channel in this video we’ll be taking a look at the basics of option trading and we’re going to look at what is an option when it comes to trading why you would want to use options

Instead of just buying shares and where to go to if you want to buy and sell options so what exactly are options now options are contracts that allow the option holder to buy or sell a security at a certain price within a specific time period now the security maybe a company share

An etf an index or commodity like gold or oil but in order to do that the option buyer has to pay a price to the option seller called a premium now the option buyer then has the right but not the obligation to buy or sell the particular security at that price

Now if the share price does not go the way that the option buyer want they can let the option expire but in that case they will lose the premium now this might quickly sound a bit confusing so analogy that some people use for describing options

Is like when you put in a down payment when you want to buy a house so when you are buying a house are you first putting a down payment of maybe around 20 and then you can purchase the house at an agreed price if you change your mind and don’t want

To buy the house anymore before the house settlement date you lose your down payment option allows you to buy or sell at a particular price called the strike price by paying a premium there are two main types of options which includes the core option and the put option in general when you

Buy a call option you want the price to go up now when you buy a put option you want the price to go down think of it as if you are calling someone you raise your hand so your hand goes up so you want the price to go

Up so when you have a call option you want the price to go up as well on the other hand if you are putting something down you are lowering your hand you want the price to go down so when you have a put option you want the price to go down there are

Three main parts to each option contract the strike price the expiry date and the premium which is also the cost now each option contract allows you to control 100 shares so a core option allows the buyer the right to buy 100 shares at a particular strike price at a specific date

But why would you want to use options why not just buy shares on its own now the reason is that options provide leverage as mentioned before each option contract allows you to control 100 shares so any games are amplified at the risk of paying a premium

Let’s take a look at an actual example on the computer the first example that we’re going to look at is the example of buying shares so let’s say you have 1 000 available in your account so let’s say hypothetically apple shares cost 100 per share so you bought 10 apple shares at 100

Each and after a certain period of time the apple share increased by 10 to 110 dollars so this gives your portfolio uh eleven hundred dollars worth in total the gain can be calculated by subtracting eleven hundred dollars from the initial one thousand dollars account which gives you a gain of one hundred dollars

If we divide the one hundred dollars by the initial amount that we started with we end up with a 10 percent gain so this is the first example if you buy shares the second example that we’re going to look at is if you decide to buy core options instead

So we start off with the same 1 000 initial starting amount let’s say we’re buying apple cars with a strike price of one hundred dollars at five dollars for a premium because with each contract you are controlling 100 shares so we need to multiply the five dollars by 100

Which means that each contract will cost five hundred dollars so with our one thousand dollar starting uh amount we can buy two contracts let’s say the apple share price increased by 10 percent to 110 dollars so the total value that you would get back after selling the call option would be 110

Minus a hundred dollars multiplied by the 200 shares which you can control with your contract will gives you a total of two thousand dollars the gain will be two thousand dollars minus the initial one thousand dollars that you started off with which is equal to one thousand dollars

If we divide one thousand by the uh one thousand dollars that you start with you end up with a hundred percent gain this is significantly more than a ten percent return that you would get from simply just buying shares itself now let’s look at this uh in terms of a graph

This is a very important graph that shows you the profit and losses if you buy a call option at the strike price of one hundred dollars so our strike price is one hundred dollars and our break-even point is the uh strike price plus the premium that we paid for the call option

So we don’t exactly break even when we reach the strike price because we’re paying a premium now if the price of the share goes above this break-even point we will be in the profit however if the price does not go above the 105 dollar break-even point we will be at a loss

If we don’t reach the strike price before the end of our expiry date we will lose all of our premium so in this situation you will try to sell your core option before it reaches its expiry date so you can recoup some of the losses the benefits of buying a call option

Is that your profits are theoretically unlimited depending on how high the stock price goes and you are capping your losses because you can never lose more than your premium next up we’re going to take a look at port options so for buying a port option it works exactly the opposite way

As when you buy a call option let’s say you have the same 1000 starting portfolio let’s say we’re buying a facebook put option with the strike price at three hundred dollars with a ten dollars premium so each contract allows you can to control 100 shares so each contract in this situation will

Be worth one thousand dollars so you have 1 000 starting and it’s enough to buy one contract and let’s say our hypothetical example that facebook stock decreased to 280 the total value of your portfolio after selling the port option would be a 300 minus 280 times the hundred shares that you

Control which be a total of two thousand dollars now you’re gaining this situation would be two thousand dollars minus the one thousand dollars that you started off with which is equal to one thousand dollars and this gives you also a hundred percent gain if we take a look at the graph of

Buying a put option it’s the reverse of buying a call option so when you buy a put option for example facebook at a strike price of 300 dollars in our situation we have a strike price of and then we have a breakeven point which is the strike price minus the cost of the

Premium uh which is 290 if the share price goes below the break-even you will be in profit however if the share price stays above the breakeven point you’ll be at a loss now when buying import option both your profits and losses are capped so your profit is capped

Because the share price does cannot go uh below zero but the good thing is that your can also never lose more than uh the premium that you paid for buying the put option the best thing is that you don’t have to worry about drawing these graphs for buying calls or port options

Because the brokerage app will do the graph for you so where do you go if you want to purchase options now one of the easiest ways to purchase options is with this video sponsor tiger brokers now with tiger brokers you can trade in markets from five different countries

Including us and australia now use my link in the description below where you can sign up and receive some free credits let’s take a look at an example of buying a call option on the tiger broker app on the phone here in the tiger broker app let’s say we want to buy

Call options for apple so we can go to the stock itself and then we look up the option menu near the top so there are three buttons towards the top here which you have all call and put options so let’s say i want to buy call options for apple i select call

So the next thing that you want to look at is the expiry date so you can scroll through the different expiry date now one thing to note is that the date format goes by year month and then date last so for example this particular expiry date will be uh

The year 2021 and it’s april and it’s 23rd so just keep in mind of that so we can scroll down the list to find the uh strike price that we want and the premium that it costs for that particular strike price so let’s say i think apple’s stock price is going to go

Up and i want to buy a call option for apple at 130 dollars so i can go to the 130 apple core option and here if we scroll down we can see more information on the price of this call option so if i want to buy the option i can

Click buy towards the bottom and then i have to select the quantity that i want which is close to the middle part so i can buy one two two lots of option so each lot of option allows you to control 100 shares so the total cost would be 148 dollars

Now we can also expand this to see the break even chart so in order for our trade to break even our break-even point is 131 dollars 31.48 and that includes the premium that we’re paying to buy the option uh we can see our max profit is theoretically unlimited and our max loss

Is 148 dollars and then we could uh place our buy order for this particular option if you want to purchase a port option it’s pretty much exactly the same process we go to the put option menu so let’s this case if we think that the apple shares is going to go

Down i can select a strike price of 120 and i’d say i want to buy a put option and then i enter the quantity of the pot option that i want to buy here i can also expand and see the chart and this tells me that my break-even point is 118.179

And my max profit is this amount which is uh determined and my max loss is 121 dollars now let’s look at some of the very very basics in options trading strategy so i won’t go into detail with any of these and this is just to help beginners get started now first of

All you want to determine whether you think the price of a particular stock or commodity will go up or down and this uh allows you to decide whether you would want to buy a call or a put option secondly you want to decide on the time period

Of uh the expiry date that you want to choose again there’s many different strategies to this and which will not be covered in this particular video thirdly we want to buy options with lower implied volatility so if we go back to our apple option chain we can see that we have our strike

Price for apple but if we scroll to the right and we keep going there will be a column that says iv ideally you want to look for options that has a low iv because the lower the iv the less cost in a premium that you would have to pay

If i go back and look at a company like gamestop and i’ll look at their option chain i can scroll across and see their implied volatility whereas with apple i have an implied volatility of around 30 percent a gamestop options have an implied volatility of over 300 percent

This means i need to pay a quite a large sum in terms of premium to buy gamestop options so as a general rule you want to buy options with low implied volatility and then sell when there is higher implied volatility and all volatility can be affected by many different things

Including earnings report general sentiments reddit and all sorts of other things last but not least do realize that option trading is risky and remember not to invest what you cannot afford to lose if you haven’t already you should check out my full breakdown of tiger brokers

And i will see you in the next video

Summary: The article provides a step-by-step guide on how to trade stock options in New Zealand with the help of Tiger Trade, an online trading platform. It discusses the basics of stock options trading, the advantages of using Tiger Trade, and the requirements for opening an account.

-Conclusions: 1) Trading stock options in NZ can be done with ease through Tiger Trade. 2) Using an online platform like Tiger Trade provides convenience and flexibility for traders. 3) To start trading, one must have a compatible device, a minimum deposit, and the necessary personal and financial information.

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