liquidity at your fingertips the london stock exchange’s range of trading services give you access to some of europe’s most liquid securities markets. More business is transacted daily on our markets than any other competing execution venue and volumes often exceed one million trades per day across 25,000 separate securities. (more…)

Many deem options riskier than stocks. This fallacy stems from a lack of understanding of leverage. There are two basic definitions for leverage as it pertains to options. The first defines it as using the same amount of money to capture a larger position. This description lands many investors into hot water. Investing the same dollar amount in a stock and an option does not equate to the same risk. The second definition characterizes leverage as maintaining a position, (more…)

TradeStation Securities, Inc. seeks to serve institutional and active traders. Please be advised that active trading is generally not appropriate for someone of limited resources, limited investment or trading experience, or low risk tolerance, or who is not willing to risk at least $50,000 of capital. This book discusses in detail how TradeStation is designed to help you develop, test and implement trading strategies. (more…)

Penson Financial Services Canada Inc. is the carrying broker and JitneyTrade Inc. is acting as the introducing broker (hereinafter called “The Broker”). In consideration of The Broker opening one or more accounts (collectively the “Accounts”) for the customer executing this Agreement (the “Customer”), the Customer agrees to the following terms and conditions: 1. APPLICABLE BY -LAWS , CUSTOMS , ETC . All transactions executed for the Accounts shall be subject to the constitution, articles, by-laws, regulations, rules, rulings, policies, (more…)

Trading stock options is a much different game from trading the underlying stocks. When options are traded for appreciation, it is a game of leverage, with big risks and associated big returns. One of the attractions of trading options is that you do not need a large amount of starting capital. Itís also easy to play both sides of the market by purchasing call options for the upside and put options for the downside. (more…)

We investigate the contribution of option markets to price discovery, using a modification of Has- brouck’s (1995) “information share”approach. Based on five years of stock and options data for 60 firms, we estimate the option market’scontributionto price discovery to be about 17 percent on average. Option market price discovery is related to trading volume and spreads in both markets, and stock volatility. Price discovery across option strike prices is related to leverage, trading volume, and spreads. Our results are consistent with theoretical (more…)

Information in option volume about direction of future stock price movements (joint work with Jun Pan at MIT) Expiration date clustering of underlying stock prices at strike prices (joint work with Sophie Xiaoyan Ni and Neil Pearson at UIUC) Other research on behavioral finance, options, and volatility 3 Does Option Volume Contain Information about Future Stock Prices? Natural idea: Ñ “Fact and Fantasy (more…)

The development of exchange-traded option markets over the last few decades is stunning. By the end of 2008, the Chicago Board Options Exchange (CBOE) , the largest U.S. options exchange, had an annual trading volume of about 1.2 billion contracts, corresponding toa traded amount of US$970 billion.1 Option traders are supposedly informed and educated investors, but a large number of retail (more…)

Several studies have investigated the effect of trading activity on spread and stock return volatility.1 In general, the results of these studies indicate that there is a positive relationship between volume and variance of returns and a negative relationship between volume and bid-ask spread. Theoretical researchers have also developed strategic and competitive models of trading to explain the high volatility during (more…)

It should not be assumed that the methods, techniques, or indicators presented in this book will be profitable or that they will not result in losses. Past results are not necessarily indicative of future results. Examples in this book are for educational purposes only. This is not a solicitation of any order to buy or sell. “HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN INHERENT (more…)