Fidelity Freedom Index Income Fund - Investor Class · NASDAQ:FIKFX
Fidelity Freedom Index Income Fund - Investor Class — Fidelity Investments — Conference Presentation
115 slides from Fidelity Freedom Index Income Fund - Investor Class's conference presentation
Slide 1: Introduction to Options
A Fidelity Investments Webinar Introduction to Options BROKERAGE: OPTIONS
Slide 2: Options Trading Webinar Series
Introduction to Options Get to know the basics of options investing; learn key terms and concepts essential for any new options trader. Buying Options Understand what to expect when buying options; learn the difference between calls and puts. Options Selling Options Trading Understand what to expect
Slide 3: Agenda
BROKERAGE: OPTIONS What are Options? Strategies for Anatomy of an Trading Options Options Symbol Exercise and Assignment Agenda 3
Slide 4: What are Options?
What are Options?
Slide 5: What are Options?
BROKERAGE: OPTIONS What are Options? An option is a contract that gives buyers rights and sellers obligations. Buyer Rights: Seller Obligations: Can choose to buy or sell 100 shares Obligated to sell or buy 100 shares (typically) of the underlying security (typically) of the underlying security up a
Slide 6: Why Trade Options?
BROKERAGE: OPTIONS Why Trade Options? Risk Management Yield Enhancement Leverage • Individual security • Helps improve • Less money out and potential returns on individual of pocket portfolio protection securities • More choices • Less money out • Helps improve overall of pocket portfolio returns 6
Slide 7: Stock vs. Options
BROKERAGE: OPTIONS Stock vs. Options Stock Options • Substantial risk of capital • Leverage with risk limited to (stock could go to zero) VS premium paid • Lower break-even • Higher or lower break-even • Voting rights • Limited life, decaying asset • Potential dividends • No voting rights or dividen
Slide 8: Option Buyer or Option Seller
BROKERAGE: OPTIONS Option Buyer or Option Seller With options, you can be either a buyer or seller Option Buyer Option Seller • Pay a premium/price • Receive a premium/price • Has the right to Exercise • Has an obligation to buy or sell 100 and buy or sell 100 shares shares of the underlying securit
Slide 9: Types of Options
BROKERAGE: OPTIONS Types of Options Long Call Long Put Allows the option holder (buyer) to buy Allows the option holder to sell 100 100 shares (typically) at the strike price shares (typically) at the strike price up up to the defined expiration date. to the defined expiration date. Said to be LONG
Slide 10: What Happens When a Stock Splits?
BROKERAGE: OPTIONS What Happens When a Stock Splits? Example You own one contract for XYZ stock with a strike price of $75, Options can be the company announces a 3 for 2 stock split. adjusted in a number How is the option contract adjusted? of ways to account for corporate events. Old option contra
Slide 11: Risk of Buying Options
BROKERAGE: OPTIONS Risk of Buying Options What’s the trade-off? Time Leverage Options have a finite Leverage goes both ways; expiration date. They will it can hurt as much as it either expire worthless or be can help. turned into long or short shares of the underlying security. 11 NOTE: Call buyers
Slide 12: Anatomy of an Options Symbol
= Anatomy of an Options Symbol p Fidelity.
Slide 13: Example: Anatomy of an Options Symbol
BROKERAGE: OPTIONS Example: Anatomy of an Options Symbol Plain English Symbol: SPY Jan 21, 2022 Call 208 SPY220121C208 The symbol of Year of the Month of the Day of the C for a Call, The Strike Price the underlying expiration expiration expiration or P for a Put Holder (buyer) of this call has the r
Slide 14: Premium Components
BROKERAGE: OPTIONS Premium Components Premium = Intrinsic Value + Extrinsic Value An option contract that has intrinsic value is “in the money.” An option contract that has no intrinsic value is “out of the money 14
Slide 15: Exercise and Assignment
Exercise and Assignment
Slide 16: What is Exercise?
BROKERAGE: OPTIONS Exercise and Assignment What is Exercise? Remember Exercising a call is when the option holder opts to Long options are exercised, buy the underlying security at the strike price. while short options are assigned. Exercising a put is when the option holder opts to sell the underly
Slide 17: What is Assignment?
BROKERAGE: OPTIONS Exercise and Assignment What is Assignment? Remember Assignment of a call is the option writer A short (sold) option can be fulfilling their obligation to sell the shares at assigned at any time! Even if the strike price. it has no intrinsic value. Assignment of a put is the optio
Slide 18: Exercise of a Long Call: American Style Example
BROKERAGE: OPTIONS Exercise of a Long Call American Style: Example 1 Remember An option holder who exercised a long XYZ American Style can be call at 146 would purchase 100 shares of XYZ exercised at any time. at $146 per share, or 100 x $146 = $14,600. If 10 of those contracts were exercised, the c
Slide 19: Assignment: American Style Example
BROKERAGE: OPTIONS Exercise and Assignment American Style: Example 2 Remember Using the same example, what would American Style can be Assignment look like? exercised at any time. The seller, assigned on one call, would be required to deliver 100 shares of XYZ, and would receive $146 per share, or 1
Slide 20: American Style Example 3
BROKERAGE: OPTIONS Exercise and Assignment American Style: Example 3 Remember But what if the seller didn’t already own the shares? American Style can be exercised at any time. The seller would have to buy them at whatever price they were trading post-assignment, which could be higher than $146 per
Slide 21: Exercise of a Put: American Style Example
BROKERAGE: OPTIONS Exercise and Assignment American Style: Example 4 Remember This time, substitute an XYZ 146 put American Style can be for the call. Now what would Exercise exercised at any time. of the put look like? A holder who exercised a long XYZ put would sell 100 shares of XYZ for $146 per
Slide 22: Assignment of a Put: American Style Example
BROKERAGE: OPTIONS Exercise and Assignment American Style: Example 5 Remember Using the same example, what would American Style can be Assignment look like? exercised at any time. A writer assigned on the one put would be required to buy 100 shares of XYZ at $146 per share, or 100 x $146 = $14,600.
Slide 23: European Style Example
BROKERAGE: OPTIONS Exercise and Assignment European Style: Example Remember You are Long (Own) 1 SPX call with a strike European can only be of 2440. exercised at expiration. If your one SPX call were exercised They’re based on an index because SPX closed at 2441 on expiration, (which cannot be deli
Slide 24: Strategies for Trading Options
Strategies for Trading Options
Slide 25: Review: Strategies for Trading Options
BROKERAGE: OPTIONS Review: Strategies for Trading Options Which strategies Long Call Long Put are bullish and which are bearish? Short Call Short Put 25
Slide 26: Options Trading Webinar Series
Introduction to Options Get to know the basics of options investing; learn key terms and concepts essential for any new options trader. Buying Options Understand what to expect when buying options; learn the difference between calls and puts. Options Selling Options Trading Understand what to expect
Slide 27: Visit the Fidelity Learning Center
Visit the Fidelity Learning Center Learn more about options Read: Access the Options Strategy Guide Watch: Check out videos that cover options basics Attend: Register for monthly webinars 27
Slide 28: Glossary
BROKERAGE: OPTIONS Glossary Option Like stocks, options are financial securities that you can buy or sell. Options give buyers rights, and sellers an obligation to buy or sell the underlying stocks and other underlying investments. There are two kinds of options: calls and puts. Call The buyer of ca
Slide 29: Glossary
BROKERAGE: OPTIONS Glossary Premium The current market price of an option contract. The option buyer pays the premium and the option seller receives the premium. European Style An option that can only be exercised/assigned at expiration. American Style An option that can only be exercised/assigned a
Slide 30: Thank You
Thank Please join us for our upcoming webinars You For more information, please visit Fidelity.com > News & Research > Options Questions? Contact a Fidelity representative at 877-907-4429 30
Slide 31: Important Information
BROKERAGE: OPTIONS Important Information Options trading entails significant risk and is not appropriate for all investors. Certain complex options strategies carry a dditional risk. Before trading options, please read Characteristics and Risks of Standardized Options, and call 800 -544- 5115 to be
Slide 32: Buying Options
A Fidelity Investments Webinar Buying Options BROKERAGE: OPTIONS
Slide 33: Options Trading Webinar Series
Introduction to Options Get to know the basics of options trading; learn key terms and concepts essential for any new options trader. Buying Options Understand what to expect when buying options; learn the difference between calls and puts. Options Selling Options Trading Understand what to expect w
Slide 34: Agenda
BROKERAGE: OPTIONS Review Options Basics Execute a Trade Buy a Call Buy a Protective Put Buy a Put Agenda 34
Slide 35: Review Options Basics
ail Review Options Basics
Slide 36: Review: Anatomy of an Options Symbol
BROKERAGE: OPTIONS Review: Anatomy of an Options Symbol Example: Plain English Symbol: SPY Jan 21, 2022 Call 208 SPY220121C208 The symbol of Year of the Month of the Day of the C for a Call, The Strike Price the underlying expiration expiration expiration or P for a Put Holder (buyer) of this call h
Slide 37: Review: Premium Components
BROKERAGE: OPTIONS Review: Premium Components Premium = Intrinsic Value + Extrinsic Value An options contract that has intrinsic value is “in the money” An options contract that has no intrinsic value is “out of the money” 37
Slide 38: Review: Bullish or Bearish?
BROKERAGE: OPTIONS Review: Bullish or Bearish? Long Call Long Put Short Call Short Put 38
Slide 39: Buy a Call
Buy a Call
Slide 40: Buy a Call
BROKERAGE: OPTIONS Buy a Call Situation Market Forecast Action XYZ is trading at Bullish on Buy one XYZ APR $42 a share the stock, but 42.50 call for $2.10 want limited (pay $210) downside risk 40
Slide 41: Buy a Call: Profit and Loss Table
BROKERAGE: OPTIONS Buy a Call: Profit and Loss Table Buy One XYZ APR 42.50 Call @ 2.10 PRICE AT EXP OPTION COST VALUE AT EXP PROFIT/(LOSS) 50 2.10 7.50 5.40 45 2.10 2.50 0.40 44.60 2.10 2.10 0 (Breakeven) 42.50 2.10 0 (2.10) 40 2.10 0 (2.10) 37.50 2.10 0 (2.10) Company trading symbols are provided a
Slide 42: Buy a Call: Profit and Loss Diagram
BROKERAGE: OPTIONS Buy a Call: Profit and Loss Diagram +5 Buy One XYZ APR 42.50 0 Call @ 2.10 40 42.50 45 47.50 –5 Company trading symbols are provided as examples and for illustrative purposes only and should not be considered an offer to sell, a solicitation of an offer to buy, or a recommendation
Slide 43: Buying a Stock vs. Buying a Call
BROKERAGE: OPTIONS Buying a Stock vs. Buying a Call Buying a stock Buying a call • Substantial risk of capital VS • Leverage with risk limited (stock could go to zero) to premium paid • Lower break-even point • Higher break-even point • Limited life, value generally decreases with time 43 NOTE: Call
Slide 44: Buy a Put
©), Buy a Put
Slide 45: The Put Buyer
BROKERAGE: OPTIONS The Put Buyer The Put Buyer Risk/Reward Profile • Has the right to sell the underlying • Risk limited to option premium stock at an agreed-upon price (the paid plus commission strike) until the expiration date • Substantial profit potential until • For this right, the put buyer pa
Slide 46: Buy a Put
BROKERAGE: OPTIONS Buy a Put Situation Market Forecast Action XYZ is trading at Bearish on Buy one XYZ APR $42.50 a share the stock, 42.50 put for $2.30 but want (pay $230) limited risk Company trading symbols are provided as examples and for illustrative purposes only and should not be considered a
Slide 47: Buy a Put: Profit and Loss Table
BROKERAGE: OPTIONS Buy a Put: Profit and Loss Table Buy One XYZ APR 42.50 Put @ 2.30 PRICE AT EXP OPTION COST VALUE AT EXP PROFIT/(LOSS) 50 2.30 0 (2.30) 45 2.30 0 (2.30) 42.50 2.30 0 (2.30) 40.20 2.30 2.30 0 (Breakeven) 40 2.30 2.50 0.20 37.50 2.30 5 2.70 Company trading symbols are provided as exa
Slide 48: Buy a Put: Profit and Loss Diagram
BROKERAGE: OPTIONS Buy a Put: Profit and Loss Diagram +5 Buy One XYZ APR 42.50 0 Put @ 2.30 40 42.50 45 –5 Company trading symbols are provided as examples and for illustrative purposes only and should not be considered an offer to sell, a solicitation of an offer to buy, or a recommendation for the
Slide 49: Summary of Buying Options
BROKERAGE: OPTIONS Summary of Buying Options Buying Calls Buying Puts • Right to buy • Right to sell • Long market exposure with • Short market exposure with risk limited to premium paid risk limited to premium paid for options plus commissions for options plus commissions • Can potentially be used
Slide 50: Buy a Protective Put
Buy a Protective Put
Slide 51: Protective Put Strategy
BROKERAGE: OPTIONS • To limit downside risk potential on a stock you own, buy a put option on the stock. • The put owner will then have the right to sell the stock at an agreed-upon price (the strike price) Protective Put until the expiration date. Strategy • There is a second reason to buy a put –
Slide 52: Protective Put Risk/Reward Profile
BROKERAGE: OPTIONS • Risk is limited to the option premium paid and out-of-the-money amount at the time of trade (if any) • Can provide limited protection against losses if Protective Put the stock goes below the strike price Risk/Reward • We do not have to exercise the put, since we Profile are the
Slide 53: Protective Put Strategy
BROKERAGE: OPTIONS Protective Put Strategy Situation Market Forecast Action Long 100 shares Bullish on the stock, Buy one QRS APR 90 of QRS stock but want limited put for $0.95 (pay $95) at $92 downside risk Company trading symbols are provided as examples and for illustrative purposes only and shou
Slide 54: Protective Put: Profit and Loss Table
BROKERAGE: OPTIONS Protective Put: Profit and Loss Table Long 100 QRS @ 92 Buy one QRS APR 90 Put @ 0.95 PRICE AT EXP STOCK P/(L) PUT P/(L) TOTAL P/(L) 100 8.00 (0.95) 7.05 95 3.00 (0.95) 2.05 92.95 0.95 (0.95) 0 (Breakeven) 90 (2.00) (0.95) (2.95) 85 (7.00) 4.05 (2.95) 80 (12.00) 9.05 (2.95) Compan
Slide 55: Protective Put: Profit and Loss Diagram
BROKERAGE: OPTIONS Protective Put: Profit and Loss Diagram +5 Long QRS @ 92 Long 100 QRS @ 92, 0 Buy One APR 90 85 90 95 100 Put @ 0.95 –5 Breakeven at expiration: Initial stock price + option premium 92 + 0.95 = 92.95 Company trading symbols are provided as examples and for illustrative purposes on
Slide 56: Execute a Trade
© Execute a Trade
Slide 57: Before You Place a Trade, Consider…
BROKERAGE: OPTIONS Before You Place a Trade, Consider… 1 2 3 Buying one call is Consider how Be aware of position the equivalent of much risk you size to manage buying 100 shares are comfortable your risk of stock taking on 57
Slide 58: Place a Trade on Fidelity.com
BROKERAGE: OPTIONS Place a Trade on Fidelity.com News & Research > Options > Option Chain Start a trade from the Option Chain • Easily see all the available options • Fully customizable to meet your needs 58 The screenshot is for illustrative purposes only.
Slide 59: Place a Trade on Fidelity.com
BROKERAGE: OPTIONS Place a Trade on Fidelity.com News & Research > Options > Option Chain • Easy access to your balances and positions • Quickly adjust to contract specifications 59 The screenshot is for illustrative purposes only.
Slide 60: Now What?
BROKERAGE: OPTIONS Now What? LONG OPTIONS SHORT OPTIONS Sell it Buy it back Fulfill obligation Exercise it when assigned Let it expire Let it expire 60
Slide 61: Options Trading Webinar Series
Introduction to Options Get to know the basics of options trading; learn key terms and concepts essential for any new options trader. Buying Options Understand what to expect when buying options; learn the difference between calls and puts. Options Selling Options Trading Understand what to expect w
Slide 62: Visit the Fidelity Learning Center
Visit the Fidelity Learning Center Learn more about options Read: Access the Options Strategy Guide Watch: Check out videos that cover options basics Attend: Register for monthly webinars 62
Slide 63: Glossary
BROKERAGE: OPTIONS Glossary Breakeven The underlying stock price at which an options strategy (or combined stock and options strategy) has a zero loss and zero gain. Long Call With a long call option, the buyer has the right to buy shares of the underlying security at a specific price for a specifie
Slide 64: Thank You
Thank Please join us for our upcoming webinars You For more information, please visit Fidelity.com > News & Research > Options Questions? Contact a Fidelity representative at 877-907-4429 64
Slide 65: Important Information
BROKERAGE: OPTIONS Important Information Options trading entails significant risk and is not appropriate for all investors. Certain complex options strategies carry a dditional risk. Before trading options, contact Fidelity Investments by calling 800-544-5115 to receive a copy of Characteristics and
Slide 66: Selling Options
A Fidelity Investments Webinar Selling Options BROKERAGE: OPTIONS
Slide 67: Options Trading Webinar Series
Introduction to Options Get to know the basics of options trading; learn key terms and concepts essential for any new options trader. Buying Options Understand what to expect when buying options; learn the difference between calls and puts. Options Selling Options Trading Understand what to expect w
Slide 68: Agenda
BROKERAGE: OPTIONS Sell Covered Calls Sell Cash- Execute a Trade Secured Puts Agenda 68
Slide 69: Sell Covered Calls
iJ EA Sell Covered Calls (p Fidelity.
Slide 70: What Is a Covered Call?
BROKERAGE: OPTIONS What Is a • The covered call seller (writer/shorter) has the obligation to sell stock (if assigned) at an Covered Call? agreed-upon price (the strike) up to and until the expiration date. Buy stock and sell calls on a share-for- • In exchange, the covered call seller receives shar
Slide 71: Why Sell Covered Calls?
BROKERAGE: OPTIONS Why Sell • Increase income by the amount of the premium received minus Covered Calls? commissions. Sell a covered call if • Slightly reduce stock price risk you are neutral to (by the amount of the premium moderately bullish received minus commission). on the stock 71
Slide 72: Covered Call Strategy
BROKERAGE: OPTIONS Covered Call Strategy Situation Market Forecast Action Long 100 shares Neutral to Sell one QRS APR 95 of QRS stock moderately bullish call for $1 at $92 on the stock Company trading symbols are provided as examples and for illustrative purposes only and should not be considered an
Slide 73: Covered Call: Profit and Loss Table
BROKERAGE: OPTIONS Covered Call: Profit and Loss Table Long 100 QRS @ 92 Sell one QRS APR 95 Call @ 1.00 PRICE AT EXP STOCK P/(L) CALL P/(L) TOTAL P/(L) 100 8.00 (4.00) 4.00 95 3.00 1.00 4.00 91 (1.00) 1.00 0 (Breakeven) 90 (2.00) 1.00 (1.00) 85 (7.00) 1.00 (6.00) 80 (12.00) 1.00 (11.00) Company tra
Slide 74: Covered Call: Profit and Loss Diagram
BROKERAGE: OPTIONS Covered Call: Profit and Loss Diagram +5 Long QRS @ 92 Long QRS @ 92, Sell One 95 Call 0 @ 1.00 90 95 100 105 Break even at expiration: Initial stock price – option premium –5 92 – 1 = 91 Company trading symbols are provided as examples and for illustrative purposes only and shoul
Slide 75: Strategy Management: Now What?
BROKERAGE: OPTIONS Strategy Management Now What? 1 2 3 Buy to Let It Roll Close Expire 75
Slide 76: Sell Cash-Secured Puts
oo Sell Cash- Js Secured Puts p Fidelity.
Slide 77: What Is a Cash-Secured Put?
BROKERAGE: OPTIONS What Is a Cash- • The cash-secured put seller has an obligation to buy stock at strike until expiration. Secured Put? • The profit potential limited to the Selling a put and premium received. simultaneously setting • There is substantial downside risk. aside cash to fulfill the •
Slide 78: Why Sell Cash-Secured Puts?
BROKERAGE: OPTIONS Why Sell Cash-Secured Puts? 1 2 3 Target a Earn Earn buying interest income price on cash 78
Slide 79: Cash-Secured Put Strategy
BROKERAGE: OPTIONS Cash-Secured Put Strategy Situation Market Forecast Action Have $9,000 cash Neutral to slightly Sell one QRS 90 put for in account and bullish on the stock $1 (receive $100) QRS stock trading at $92 Would like to buy Deposit $9,000 to stock if the price cover the obligation dips l
Slide 80: Cash-Secured Puts: Profit and Loss Table
BROKERAGE: OPTIONS Cash-Secured Puts: Profit and Loss Table Sell 1 QRS APR 90 Put @ 1.00 STOCK PX AT EXP PREMIUM RECEIVED PUT VALUE AT EXP PROFIT/(LOSS) 100 1.00 0 1.00 95 1.00 0 1.00 90 1.00 0 1.00 89 1.00 (1.00) 0 (Breakeven) 85 1.00 (5.00) (4.00) 80 1.00 (10.00) (9.00) Company trading symbols are
Slide 81: Cash-Secured Puts: Profit and Loss Diagram
BROKERAGE: OPTIONS Cash-Secured Puts: Profit and Loss Diagram +5 Long QRS @ 92 Long QRS @ 92, Sell 90 Put @ 0 1.00 85 90 95 100 –5 Company trading symbols are provided as examples and for illustrative purposes only and should not be considered an offer to sell, a solicitation of an offer to buy, or
Slide 82: Strategy Management: Now What?
BROKERAGE: OPTIONS Strategy Management Now What? 1 2 3 Buy to Let It Roll Close Expire 82
Slide 83: Summary of Selling Options
BROKERAGE: OPTIONS Summary of Selling Options Selling Covered Calls Selling Cash-Secured Puts • Obligation to sell stock at the strike price • Obligation to buy stock at the strike price up to and until expiration until expiration • Downside risk in the underlying security • Profit potential limited
Slide 84: Execute a Trade
© Execute a Trade
Slide 85: Before You Place a Trade, Consider…
BROKERAGE: OPTIONS Before You Place a Trade, Consider… 1 2 3 Buying or selling one Consider how Be aware of position call is the equivalent much risk you size to manage of trading 100 shares are comfortable your risk of stock taking on 85
Slide 86: Place a Trade on Fidelity.com
BROKERAGE: OPTIONS Place a Trade on Fidelity.com News & Research > Options > Option Chain Benefits of starting a trade from the Option Chain • Easily see all the available options • Fully customizable to meet your needs 86 The screenshot is for illustrative purposes only.
Slide 87: Place a Trade on Fidelity.com
BROKERAGE: OPTIONS Place a Trade on Fidelity.com News & Research > Options > Option Chain • Easy access to your balances and positions • Quickly make adjustments to contract specifications 87 The screenshot is for illustrative purposes only.
Slide 88: Now What?
BROKERAGE: OPTIONS Now What? LONG OPTIONS SHORT OPTIONS Sell it Buy it back Fulfill obligation Exercise it when assigned Let it expire Let it expire 88
Slide 89: Options Trading Webinar Series
Introduction to Options Get to know the basics of options trading; learn key terms and concepts essential for any new options trader. Buying Options Understand what to expect when buying options; learn the difference between calls and puts. Options Selling Options Trading Understand what to expect w
Slide 90: Visit the Fidelity Learning Center
Visit the Fidelity Learning Center Learn more about options Read: Access the Options Strategy Guide Watch: Check out videos that cover options basics Attend: Register for monthly webinars 90
Slide 91: Glossary
BROKERAGE: OPTIONS Glossary Covered Call A covered call is an options strategy designed to generate income on stocks you own—and don't expect to rise in price anytime soon. A covered call involves owning shares of the underlying stock and selling a call (which grants the buyer the right, but not the
Slide 92: Thank You
Thank Please join us for our upcoming webinars You For more information, please visit Fidelity.com > News & Research > Options Questions? Contact a Fidelity representative at 877-907-4429 92
Slide 93: Important Information
BROKERAGE: OPTIONS Important Information Options trading entails significant risk and is not appropriate for all investors. Certain complex options strategies carry a dditional risk. Before trading options, contact Fidelity Investments by calling 800-544-5115 to receive a copy of Characteristics and
Slide 94: Options Trade Management
A Fidelity Investments Webinar Options Trade Management BROKERAGE: OPTIONS
Slide 95: Options Trading Webinar Series
Introduction to Options Get to know the basics of options trading; learn key terms and concepts essential for any new options trader. Buying Options Understand what to expect when buying options; learn the difference between calls and puts. Options Selling Options Trading Understand what to expect w
Slide 96: Agenda
BROKERAGE: OPTIONS Manage Options Prior to Expiration Position Manage Options Management at Expiration Agenda 96
Slide 97: Manage Options Prior to Expiration
Manage Options Prior to Expiration
Slide 98: Manage Your Outlook
BROKERAGE: OPTIONS Manage Options Prior to Expiration Manage Your Outlook Trader’s View: • Do you still have the same outlook • Be honest with yourself when on the security? reevaluating an existing trade and manage accordingly. • Has that outlook changed? • Don’t fall into the trap of making • Were
Slide 99: What Factors Affect the Premium?
BROKERAGE: OPTIONS What Factors Affect the Premium? Money-ness of the Time to Expiration Expected Movement Option Being Sold (Expiration Selection) from the Underlying (Strike Selection) • Nearer term expirations (Implied Volatility) • Out-of-the-money offer the potential for • Higher implied option
Slide 100: Manage Options Prior to Expiration
BROKERAGE: OPTIONS Manage Options Prior to Expiration There are three ways to manage any strategy: 1 Leave the 2 Close 3 Adjust Strategy Alone the Strategy the Strategy Makes Sense When: Makes Sense When: Makes Sense When: You would put the same The strategy no longer The existing strategy can trade
Slide 101: Manage Long Positions Prior to Expiration: Early Exercise
BROKERAGE: OPTIONS Manage Long Positions Prior to Expiration Early Exercise Example You are long (own) one ABC Call expiring this Friday with Makes Sense When: a strike of 100. ABC is at 105. You cannot sell the option in the open market for at Your ABC contract is currently trading at 4.50 x 5.50 a
Slide 102: Manage Short Position Obligations: Early Assignment
BROKERAGE: OPTIONS Manage Short Position Obligations Early Example Assignment When the underlying pays a dividend, calls have a higher assignment risk. • The less time until expiration, the greater Why? The option may be at or slightly in the money the risk and only trading for $0.20 of time premium
Slide 103: What Is Rolling?
BROKERAGE: OPTIONS Manage Options Prior to Expiration What Is Rolling? Reasons Why You Might Want to Roll Rolling is placing one • Give your outlook more time to play out trade to simultaneously • Change strike price to lock in gains close out a current position and open up a • Lower potential of as
Slide 104: Rolling Out
BROKERAGE: OPTIONS Manage Prior to Expiration Rolling Out “Rolling out” is placing a trade to push the expiration to a date further out. An investor would consider rolling out a short option if their outlook has not changed and they want to take advantage of additional time. It’s important to realiz
Slide 105: Rolling Up/Down
BROKERAGE: OPTIONS Manage Options Prior to Expiration Rolling Up/Down “Rolling up/down” is placing a trade to either increase or decrease the strike price. An investor would consider rolling up a short option if their outlook has changed and they want to take advantage of additional stock price move
Slide 106: Manage Options at Expiration
Manage Options at Expiration
Slide 107: At expiration, there are three possibilities
BROKERAGE: OPTIONS Manage Options at Expiration At expiration, there are Remember three possibilities If your option is $0.01 in the money or more, it will 1 • Close the trade automatically be exercised. Only allow an option to be 2 • Exercise/Assignment auto-exercised if it is commensurate with the
Slide 108: How do you close a trade?
BROKERAGE: OPTIONS Manage Options at Expiration How do you close a trade? Remember • Long option holders simply Some option writers will let their “sell to close.” This sells your contracts simply expire worthless right to exercise the option. rather than closing out their contracts. • Short option
Slide 109: Position Management
Position Management
Slide 110: Position Management: Have a plan!
BROKERAGE: OPTIONS Position Management Have a plan! • Reduce concentrations in individual positions and sectors Minimize emotional decisions through • Keep it small and in proportion to your portfolio risk and position • Go into each trade knowing what you size management can and are willing to lose
Slide 111: Options Trading Webinar Series
Introduction to Options Get to know the basics of options trading; learn key terms and concepts essential for any new options trader. Buying Options Understand what to expect when buying options; learn the difference between calls and puts. Options Selling Options Trading Understand what to expect w
Slide 112: Visit the Fidelity Learning Center
Visit the Fidelity Learning Center Learn more about options Read: Access the Options Strategy Guide Watch: Check out videos that cover options basics Attend: Register for monthly webinars 112
Slide 113: Glossary
BROKERAGE: OPTIONS Glossary Rolling Up Rolling up an option involves buying to close an existing covered call and simultaneously selling another covered call on the same stock and with the same expiration date but with a higher strike price. Rolling Down Rolling down an option involves buying to clo
Slide 114: Thank You
Thank Please join us for our upcoming webinars You For more information, please visit Fidelity.com > News & Research > Options Questions? Contact a Fidelity representative at 877-907-4429 114
Slide 115: Important Information
BROKERAGE: OPTIONS Important Information Options trading entails significant risk and is not appropriate for all investors. Certain complex options strategies carry a dditional risk. Before trading options, contact Fidelity Investments by calling 800-544-5115 to receive a copy of Characteristics and