Option Payoffs Module
Welcome to the Option Payoff module from FTS. This module will let you learn about option trading strategies. These strategies provide the important building blocks for more complex risk management exercises as well as problems that need to engineer trading strategies around a view.
module lets learn about option trading strategies "by doing."
Later you will be able to apply strategies learnt in this module to real world
problems in a more powerful risk management module.
Initial lessons start with the four common classes of strategies:
comprehensive lesson is provided that applies the option trading strategies using
this module. Click on:
Elements of the Module Screen
the module to the left you can see two primary screens. The top part is
the display screen and the bottom part is the input screen.
input part has fixed data and preprogrammed option trading strategies. In
addition, you are able to build upon this to engineer more complex strategies
using this default data.
can change the scale in the display screen at any time. To do so, click
beside an existing number on the axis, use backspace to delete, and then enter
your new scaling number.
First, in the data section click on an option price to select an option type/strike price.
Second, by clicking on the buttons beside the
name/strike of the option selected. The top <<, >> buttons
control integers and the smaller <, > control the first decimal place of
you can select to display results in either Payoff Diagram form or Profit
Diagram form. The Payoff diagram plots the terminal payoff of the current
option's position against the range of possible underlying asset prices.
Profit Diagram plots terminal payoff minus the original cost of the option's
position. That is, it depicts accounting profit.
Restart and Clear buttons are self explanatory.
Clear the drop down menu provides a list of standard option trading
strategies. These will plot automatically once selected. As a
result, you can use this to learn the basic strategy set.
Using Your Own Data
You can paste data from the Options menu. The data must be copied from an Excel worksheet. An example worksheet is at this link
Simply copy the three columns: call price, strike price, and put price, and paste the data.
Financial Trading System,
OS Financial Trading System