Jeff Yass is a Bala Cynwyd-based billionaire who founded Susquehanna International Group. It’s a Wall Street firm with 2,000 employees worldwide.
His firm started off with startup capital he won from racetrack pots and poker tables in the 1970s and early 1980s. He applied his gambling instincts to options markets during the 1980s bull market, winning billions of dollars in annual profits.
Buying and selling options are an asset class that can boost your investment portfolio. However, it’s important to understand the basics before putting your money on the line.
Jeff Yass started trading options in the 1980s and founded Susquehanna International Group (SIG), one of the largest proprietary trading firms in the world. He is known for his success in trading, investment, and fund management.
His firm, which employs 2,000 people worldwide, recruits and trains traders using poker tournaments to sharpen decision-making skills. The company has produced several award-winning traders.
A long call is a bullish strategy that involves buying a call option on an underlying stock. The call option gives the buyer the right to buy 100 shares of the underlying stock at a certain price (the strike price) by a specific date, called expiration.
The long calls offer unlimited profit potential but have a limited time window of expiration. The trader will ideally sell the call at or before expiration to close it out for a profit.
The long puts are an options strategy that is speculative, but they can be a great way to take advantage of a stock decline. They can also help a trader avoid margin requirements and the unlimited risk involved in short selling.
Buying a long put gives you the right to sell shares of the underlying asset before the expiration date at a set price (strike price). The profit potential is unlimited, but you must be below the option’s break-even price at expiration to realize any gains.
The long put is a speculative strategy that benefits from rising volatility but is hurt by time decay, which causes the value of an option to decrease as expiration approaches. Nevertheless, this strategy is a good choice for many investors who are bearish on the stock and expect it to decline.
A short call is a bearish position that is based on a directional bias. When you sell a short call, you expect the market value of a security to drop below your strike price at expiration.
A short-call strategy is a risky proposition due to its unlimited loss potential. It’s best to use this strategy when you are very bearish on a stock.
The short put is a simple strategy that allows you to buy or sell stock at a specified price at a later date. This strategy can be profitable, but it also carries some risks that you should be aware of.
In general, a trader selling a short put believes that the stock will remain above its strike price at expiration. However, this is a risky strategy because the stock could fall below its strike price at expiration.
The price of the put option is affected by factors other than the underlying stock’s price, including time to expiration and expected volatility. As these factors change, the option’s price tends to decrease. This is called time decay and the price erosion typically accelerates as the expiration date approaches.
A married put is a type of option strategy in which an investor buys a put option and shares of the underlying stock at the same time. It is an insurance strategy that limits downside risk for the underlying stock and can be useful to investors who are bullish on a particular company but concerned about near-term volatility in the market.
The profit potential of a married put is similar to that of a long call, but it is limited by the cost or premium of the put option purchased. Generally, reaching breakeven for the strategy occurs when the underlying stock rises by the amount of the options premium paid.
The covered call is a trading strategy that helps you generate income from a stock that’s expected to increase in price. It’s a great strategy for beginner options traders who are looking to make additional income from their stock positions while also limiting their risks.
Covered calls are a common type of options trade. They work well in a market that is flat or mildly up-trending. If the underlying stock increases in value, the buyer of your call will exercise their right to purchase the stock at that higher price. Alternatively, you may decide to buy back your option before it expires.