《外汇交易实战图表与交易心理》 作 者：(新加坡)许强 (美国)Gary Weiss

Still, the question remains as to whether by trading options as opposed to the outright underlying vehicle; there is an advantage to be gained in one*s trading approach in general. The answer, of course, is that in most cases, it is somewhat dependent upon circumstances. For example, as noted above, options have a wide range of pricing characteristics that are in addition to those of tHe underlying trade vehicle. Tliis usually represents an opportunity for evaluating many different elements of price simultaneously and making a more inclusive judgment about absolute price levels in general. In certain instances, one might argue that an option price is cheap or expensive depending on one or more of its component parts, and thereby represents either a selling or buying opportunity, independent of the actual price direction of the underlying vehicle. More importantly however, there is also an argument to be made that these same component parts of an option price, are actually related to market sentiment about the future direction for the price of the underlying in absolute terms.

The most common version of this type of thinking is through the use of a contrary indicator (or something which indicates one thing but actually represents the opposite) , and relates to the Volatility component of the option. Here, Volatility is examined within the context of its normalized range for a period of time, and points are indicated as being significant when they fall at extreme levels within this range. In basic terms, the theory assumes Volatility to have a finite outer wall of extremes, wherein volatility will eventually retrace back to its normal mid range. This inflection point is thought then, to represent the turn of the trend for a particular price move, at a given point in time. To illustrate this point, assume that Volatility for the past three months in Dollar/Yen was trading somewhere between 8.5% and 10.5% (these, again being values

that could be plugged into any option pricing model to derive price) . At the moment, the currency has come off recent Dollar lows, Yen highs at close to 100, and is now at 105 with volatility being quoted at 9.75%. Here, certain conclusions may be drawn. Firstly, the dollar bounce has led to a slightly higher price for Volatility within its normalized range, but it is not yet at an extreme and that this movement higher, or its bounce off of recent lows, can probably continue for a period of time. If, however, by virtue of any event, prices kept going up, and started to move more quickly in that direction one could look at the quoted Volatility at that time and assess whether this higher trend may have changed, or even pushed the Volatility measurement to an extreme number. Lets assume, in this regard, that DollarA^en suddenly spiked up to 108.00, with concurrent volatility quoted at 10.75%. In this situation, the ideal trade would be to get out of dollar longs and look for an imminent reversal from the current price level, because the run up in price has caused Volatility to trade at an extreme. Clearly this is only a hypothetical example, but the general thought process is the same for most applications. While not something to be used to the exclusion of other indicators, the change in Volatility as a pricing indicator can be an effective tool for predicting a trend change or reversal.

One of the other more obvious advantages, usually associated with options is the idea that an option carries with it a limited and knowable risk (this, of course, being limited to the idea of being a long, or a buyer of options as opposed to shorting, which itself is somewhat outside the scope of this discussion) .While an essential component of options in general, it is also important to understand that this limited risk component comes at a price. Specifically, options require a payment, or premium to be paid upfront at the inception of the position. Also, unlike an outright position in the underlying, options exist for only a certain defined period of time. All of which needs to be evaluated against the idea of simply taking a position in the outright underlying in the first place. In many circumstances, this tradeoff is not particularly reasonable. More to the point, an outright position in the underlying can actually give one the same degree of price certainty if stop loss orders are used, and there is no time decay (the limited period until the expiration of an option) or upfront premium to be paid at the inception of the position. Which leads to the conclusion that option trading on its own is not necessarily a replacement for having an outright position but rather, may be an alternative dependent upon circumstances.

There is however a compromise in the debate as to whether options or outright positions are the more effective trading tool, and that is to combine them both. As opposed to the singular usage of either, the combination of options and outright positions creates an added trading benefit that can be referred to as a portfolio effect. What this means is that each position has an implication on its own, in terms of price, and also an implication on the associated position that it is held a gainst, within the same portfolio. For example, take an option for one month in Dollar/Yen that allows the buyer to buy dollars at the current spot rate (assumed) of 105.50 upon expiration, or what is commonly referred to as a Dollar call. Using these assumptions the strategy of being either long or short the outright underlying position during this one month period now reflects different and expanded opportunities. In the context of being long, the option will serve to significantly increase the impact of the position as the market goes higher. Thus creating the effect of positive leverage, which can be demonstrated at various levels. For instance at 106.00 the long outright will have gained .50 points, and the option being “in the money” at this point or, positive from an intrinsic value standpoint, also would have gained by .50 points, thereby creating the effect of having doubled the exposure to the upside positive. Should the market trade lower, this leveraging effect disappears but does not exaggerate or add to the negative position in the same manner. Meaning that the loss on the portfolio at levels under 105.50, would only reflect the negative value of the outright long position, not the additional option. In the case of a short position in the outright ( again assuming the price to be 105.50) , the upside risk of the market going higher is effectively eliminated by virtue of having the call be exercisable at 105.50, while the full downside gain possibility exists unencumbered. This generalized type of strategy can also be employed using a put option, or, an option that allows the holder to go short at a certain level, for a certain period of time. These two generalized trading ideas are both versions of a strategy usually associated with equity options as trading either “long or short against the box” , and clearly have almost limitless possible combinations of outcome. However, it is important to keep in mind that as with all varieties of options that overlay outstanding positions, it is the combination of cost (option premium) ,strike price (the level where the option will be active or not) and time value (the length of time for the option to remain active or outstanding) , that will dictate the true measure of success within any theoretical portfolio.