Trading Life…on Your Trading Edge

Wai-Yee Chen on what she has learnt from trading options, and her current trading strategy.

Some people use options for gearing or trading; I use options for enhanced returns and protection, as part of an overall share investment strategy. This is sensible, but I have not always been so. My options strategies are shaped by past experiences, two of which left indelible marks.

CSL Limited is a major listed healthcare company currently trading at around $32 a share. In December 2001 it was trading at $17, before it fell over a one-and-a-half year period to an abysmal share price of $4 (a 75 per cent plunge!).

No investor would like to be in the position of holding such a losing share. How much worse for an options trader who had shorted or wrote naked puts (an obligation to buy shares at a strike price which is now 75 per cent higher than the market price) and geared many times over with just sufficient cash to cover margin requirements…read more

 

Some people use options for gearing or trading; I use options for enhanced returns and protection, as part of an overall share portfolio strategy. This is sensible, but I have not always been so.

Read the full article…YTE Trading Life

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