Vertical Spread- Part 2

The remaining two spread are explained below.

• Bull Put Spread:
• Buying one Put option and selling another of higher strike price.
• It's a credit spread.
• Moderately Bullish Strategy.
• Maximum Profit : Net Premium received
• Maximum Loss: Difference between two strike price (-) Net received
• Breakeven Point: higher strike price (-) Net credit received
• Profit: when closing of underlying stock is out-of-the-money.

Example:

Apple 495/500 Spread

Buy 1 lot Apple Mar 495 Put @ $17

Sell 1 lot Apple Mar 500 Put @ $19

-----------------------------------------------

Net Credit: $2 (19-17)

Maximum Profit: $2 ie 200 (2*100)

Maximum loss: $3 ie 300 (3*100)

Breakeven Point: $498 (500-2)

• Bear Put Spread:
• Buying one Put option and selling another of lower strike price.
• It's a debit spread.
• Moderately Bearish Strategy.
• Maximum Profit : Difference between two strike price (-) Net debit
• Maximum Loss: Net Premium paid
• Breakeven Point: higher strike price (-) Net debit
• Profit: when closing of underlying stock partially is in-the-money.

Example:

Apple 4505/500 Spread

Buy 1 lot Apple Mar 505 Put @ $22

Sell 1 lot Apple Mar 500 Put @ $19

-----------------------------------------------

Net Debit: $3 (22-19)

Maximum Profit: $2 ie 200 (2*100)

Maximum loss: $3 ie 300 (3*100)

Breakeven Point: $502 (505-3)

Vertical Spread- Part1

Spread is a strategy that involves buying one option either call or put and selling another, which results in both long and short option contracts. Vertical Spreads are made up of 

• all calls or all puts of same underlying stock
• of same expiry month but different strike price 
• with one long position and other short position
• of 1:1 ratio.

Vertical spreads can be debit spread or credit spread. When the premium received is less than premium paid, is called debit spread & vice versa in credit spread.

There are four types of Vertical Spread.

1. Bull Call Spread
2. Bear Call Spread
3. Bull Put Spread
4. Bear Put Spread

• Bull Call Spread:
• Buying one call option and selling another of higher strike price.
• It's a debit spread.
• Moderately Bullish Strategy.
• Maximum Profit : Difference between two strike price (-) Net debit.
• Maximum Loss: Net Premium paid
• Breakeven Point: Lower strike price (+) Net debit
• Profit: when closing of underlying stock is in-the-money.

Example:

Apple 470/475 Spread

Buy 1 lot Apple Feb 470 Call @ $10

Sell 1 lot Apple Feb 475 Call @ $ 6

-----------------------------------------------

Net Debit: $4 (10-6)

Maximum Profit: $1 ie 100 (1*100)

Maximum loss: $4 ie 400 (4*100)

Breakeven Point: $474 (470+4)

• Bear Call Spread:
• Buying one call option and selling another of lower strike price.
• It's a credit spread.
• Moderately Bearish Strategy.
• Maximum Profit : Net Premium received
• Maximum Loss: Difference between two strike price (-) Net Credit
• Breakeven Point: Lower strike price (+) Net Credit
• Profit: when closing of underlying stock is Partially out-of-the--money.

Example:

Apple 475/470 Spread

Buy 1 lot Apple Feb 475 Call @ $ 6

Sell 1 lot Apple Feb 470 Call @ $ 10

-----------------------------------------------

Net Credit : $4 (10-6)

Maximum Profit: $4 ie 400 (1*100)

Maximum loss: $1 ie 100 (1*100)

Breakeven Point: $474 (470+4)

In the next blog we will see Bull Put Spread and Bear Put Spread.

World Bank

World Bank is an international financial institution which provides loans to developing countries for capital programmes such as investment in education, infrastructure, financial and private sector administration, agriculture, natural resource management etc. The World Bank, established in 1944, headquarter in Washington DC. The bank has more than 10,000 employees in 100 offices worldwide. 

Robert B. Zeollick is the current President of World Bank. As per 2010 revised percentage United States has highest voting power of (15.85%) Japan (6.84%), China (4.42%), Germany (4.00%), United Kingdon (3.75%), France (3.75%), and India (2.91%)

The World Bank differs from World Bank Group. The World Bank comprises of two institutions:

• International Bank for Reconstruction & Development (IBRD): Established in 1944, aims to reduce poverty in middle income and creditworthy poorer countries by promoting sustainable development through loans, guarantees, risk management products and analytical and advisory services. This institution is owned and operated for its 187 member countries. 
• International Development Association (IDA): Established in 1960, aims to reduce poverty by providing interest free credits and grants for programs that boost economic growth, reduce inequalities and improve people's living conditions. Since inception, IDA credits and grants have totaled US$238 billion and approx. 50% share directed to Africa. Currently institution consists of 170 member countries.

The World Bank Group includes IBRD, IDA and three more institutions.

• International Financial Corporation (IFC)
• Multilateral Investment guarantee Agency (MIGA)
• International Centre for Settlement of Investment Disputes (ICSID)

Last year World Bank released, World Development Report 2012: Gender Equality and development book which shows that greater gender equality can enhance productivity, improve development outcomes for the next generation and make institutions more representative.

In 2010, bank launched new Open Data Website, which provides free access to a comprehensive set of data about the development in countries around the globe. The data is categorized by country, topic and indicator which can be use for analysis. 

Why Gold Could Lose its Grip on $1,600?

Richard Hastings, a macro strategist at Global Hunter Securities view on gold : "An extended selloff in stocks and a drop in the Swiss franc against the dollar are two signs that the rally in gold is likely to fade".

The Power of Less - Leo Babauta

The book " The Power of Less - the fine art of limiting yourself to the essentials...in business and in life" written by Leo Babauta. This is about streamline life by identifying the essential and eliminating the unnecessary. This book shows how to:

• Break any goal down into manageable tasks.
• Focus on only a few tasks at a time.
• Create new and productive habits.
• Increase efficiency

Here is what I learnt from this book.

There are some guiding  principles which helps us to  maximize productivity by simplifying life.

• Setting limitation: Limits helps
•  our life to become more manageable and less stressful.
• to focus on more important task.
• to be more productive and efficient.

• Choosing the essentials: Identify needs and eliminate the wants, which are non-essentials. Make a list and start eliminating according to needs such as what are
• Yearly Goals
• Life Commitments
• Work Project and tasks.

• Focus: Focusing on single task is more effective than multi-tasking. How to focus on the present is by
• taking deep breathe, stretch and taking breaks.
• Single tasking.
• doing exercise regularly.
• putting reminders.
• Always practicing.

• Creating habits: It makes long-lasting improvements.
• Choose an easy goal.
• Choose something measurable.
• Be consistent.
• Keep a positive attitude.

• Starting with small: main reasons are
• It narrows our focus
• keeps energy and enthusiasm going for longer.
• It's easier to handle.
• You ensure success
• Gradual change is longer-lasting.

The book is divided into two parts- part I includes principles and  part II is of practical examples (of his own). The book is written in very simple language and is very inspiring. The author Leo Babauta is famous blogger and his blog zenhabits.net  is also interesting. I would suggest everyone to read this book and implement to make life more better.

Tribes

The book "Tribes" is written by Seth Godin. He is the most popular business blogger in the world, his blogs are very much inspiring.  There are no chapters in this book and is full examples of tribe and leader.

"A tribe is any group of people, large or small, who are connected to one another"

Some of the interesting points explained in the book.

• You can't have a tribe without a leader - and you can't be a leader without tribe.
• Everyone is not just a marketer- everyone is now also a leader.
• Tribes are about faith- about belief in an idea and in a community.
• " Leadership is management"
• Leaders have followers. Managers have employees.
• Managers make widgets, Leaders make change.
• The Art of leadership is understanding what you can't compromise on.
• The Secret of leadership: Paint a picture of the future.  Go there.. people will follow.

Seth Godin has explained in below video why tribe is needed.



I would recommend this book to all. You can visit www.sethgodin.com to know more about him.

Recommendation - JA Solar Holdings (JASO)

Delivery Call: Buy JASO @ $6.55, Target $ 7.25 ( Short term investors can maintain the stoploss of $6.26)

The Group's principal activity is to develop, produce and market high-performance photovoltaic solar cells, which convert sunlight into electricity.The Group sells its products to customers' primarily in China and it has also sold its products to customers in Germany, Sweden, Spain, South Korea and the United States.

Below is the daily chart of JASO which shows:

• RSI is in oversold zone.
• MACD is below 0 level.
• Stochastics is neither overbought nor oversold.