4th edition of the Options
Trading Simulation
Welcome Address

Presented by Alain Miquelon

President and CEO
Montréal Exchange

1

4th edition of the Options
Trading Simulation
Mandatory Components

Presented by Stéphanie Alison Berthiaume

Marketing Manager – Corporate Communications
TMX Group | Montréal Exchange

2

May the best teams win!
• The 3 teams that will have respected the mandatory components while accumulating the best return after 9 trading weeks will receive prizes.
• A certificate of participation will recognize the best performing team per university as well as the 50 best teams in the
Canadian ranking.

3

Mandatory Components

4

Trading Simulator (1/2)

5

Trading Simulator (2/2)
• Team account activation in the simulator
• Virtual porfolio of $100,000 with real-time quotes
• Reference tools
– Quick guide
– Video tutorials
Look into your spams if needed
Add contest.m-x.grid.inovestor.com to your favourites

6

Simulation Key Dates
• The Simulation starts on Monday, February 3rd, at
9:30 a.m. (EST).
• Each team must trade a minimum of 5 Canadian options classes chosen from 30 of the most active securities on the market.
• The surprise trading strategy will be unveiled by email on Thursday, February 13th at 4:00 p.m. (EST).
• The Simulation ends on Friday, April 4th, at 4:00 p.m.
(EDT).
7

Mandatory Strategies
Each team must execute 4 predefined options strategies:

•
–
–
–
–

•
•

long put secured put long straddle bull call spread

Each strategy must have a minimum notional value of
$5,000 or 10 options contracts.
Mandatory strategies must be traded in a single transaction, and not by legs.
Refer to strategy sheets at www.m-x.ca/sim

8

Resources
Click the Like button on the
Montréal Exchange
Facebook page

Write to contestadmin@m-x.ca if you have questions
Talk with the student ambassador for the Montréal
Exchange at your university

9

Options Trading Simulation
Mandatory Strategies
Presented by:
Dimitrios Zervogiannis
Business Development Manager,
Equity Derivatives, Financial Markets

10

4 Mandatory Strategies!
• Long put
• Secured put
• Long straddle
• Bull call spread

11

Strategy Overview
For each strategy, we will take a look at:
• The set up
• Risk and reward
• Why use this strategy?
• What type of stock to use this strategy on

12

1. Long Put
• Set up: simply buy a put
• Risk: premium of the put
• Reward: strike price minus premium paid
•

Why long a put?

•

What Type of Stock?

You’re bearish on the underlying and are anticipating a fall You’re looking for an alternative to shorting a stock
You want to take advantage of leverage
A stock that may be negatively impacted by news and current events
A stock that may have a pull back
A stock that is overvalued and that will lose value before expiration of the put

13

2. Secured Put
• Set up: short a put; hold cash required to purchase stock
• Risk: limited to fall in stock price
• Reward: limited to premium received
Dec 2013
ABC is trading at
$18.00
5 months later…
ABC trading above $18
5 months later…
ABC trading below $18

14

• Hold $18,000.00 cash (no shares)
• Sell 10, 3 month $18.00 puts on ABC
• Collect $0.70 or $700.00 (premium)
•The put will expire
•No shares are ever transacted
•There is a net profit of .70 or $700.00
•The put will be assigned at $18.00
•1000 shares are now in the account
•You still get to keep the $0.70 premium
•You own the shares of ABC at a cost base of $17.30

• Why short a put?
To offset the cost of the underlying Buy shares below market price

• What type of Stock?
A stock you are slightly bullish on and want to own
A stock that may have a small
pullback