Evaluation of some options trading strategies

Abstract

The highly competitive financial market in the nineties beckons more innovative instruments. Market players have recognised the emergence of options as an attractive alternative to more conservative instruments. The purpose of this report is to introduce options as a highly leveraged and low-risk form of investment. A discussion of options strategies useful in both bullish and bearish market conditions will be carried out. The advantages and disadvantages of options will be further evidenced in our case study in which we compare net returns using options and stocks. We hope this report provides the readers an introduction to simple options trading, thus, allowing more avenues for trading in the market.