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Options Trading: A Holiday Poem

By  Dec 23, 2010

Topics: Finance & Investing

In your excitement at spotting brightly-colored wrapped presents and anticipation of Santa’s mysterious appearance (some term it a midnight break-in), please do not forget to keep perspective on the season and the risks involved in trading options …

Yule is here, excitement higher

Options, though, will still expire.

Underlying prices change

As the strike exceeds the range.

Ring in the holiday but recall

Extrinsic value changes all,

Options come in pretty bows

Not exclusively so at close.

Mind positions, don’t forget

Yield in not for certain, yet;

Money value changes fast,

In the money at the last.

Not so short at expiration,

Deal your risk anticipation:

Volatile the prices be

Implied by volatility;

Option risks have little reason

Like the weather, rules the season.

If you must these risks adhere,

Now you know, less risk next year.

 

Michael C. Thomsett is an investing and options author and has also written for FT Press’ Agile Investor series, which can be viewed on FTPress.com. Thomsett’s latest FT Press book is Trading with Candlesticks.