OPTION TRADING STRATEGIES

Option Trading Strategies

Name of Writer

Name of Institution

Table of Contents

Q1. (i). Financial Sector Performance in London Stock Exchange3

Q1. (ii). Barclays PLC6

HSBC PLC7

Q2. Options Pricing & Volatility8

Introduction8

Option Volatility9

Importance of Option Volatility9

Black Scholes Model10

The Binomial Pricing Model11

The VIX Index12

Conclusion13

References14

Option Trading Strategies

Q1. (i). Financial Sector Performance in London Stock Exchange

Finding practical ways of calculating the performance of financial companies perfectly is complicated. That is a problem for all statisticians involved in calculating performance of financial sector specifically in the United Kingdom. Financial sector's performance information in the United Kingdom is collected according to worldwide best practice, but care is often needed when decoding them.

Policymakers need to understand the level to which reports of financial sector performance may be subject to concern. First, they may want to evaluate the participation made by loan companies to overall sector's activities, especially at the same time period when there is an extreme controversy about the need for change of financing. Second, information concern could also lead to further problems for calculating GDP itself, particularly in financial systems with huge economical issues. Third, if the effect on GDP were huge enough, it could make concern in calculating the size of the performance gap, or the potential rate of development of an economic climate.

The UK's financial sector is growing at its quickest rate since before the financial crisis, a new sector-wide study indicates. More than a third of UK financial institutions enhanced their rates over the last three months compared with just 9% who saw rates fall. That shows the most powerful development in the financial sector since May 2007. Overall productivity of the financial sector also enhanced for the fifth quarter in a row. Several major UK financial institutions have revealed big improvements in earnings so far this year. HSBC saw its profit for the first half of the year double to £7bn, while Barclays saw its earnings for the first six months increase 44% to nearly £4bn.

The restoration of the UK financial sector is ongoing, a study has recommended, with positive outlook enhancing and companies dealing with new groups. Optimism in the sector increased for once in a year. An individual study of UK finance heads recommended that concerns of a UK economic downturn or a dollar break-up have reduced. But while assurance is up among UK corporate, huge businesses still stay careful about increasing their spending, accountancy practice group Deloitte said. Last week, the Organization for Economic Co-operation and Development (OECD) expected that the UK economic climate would get tighter in the first quarter of 2012, getting it back into economic downturn. But many other experts are forecasting economic development in the first quarter (BBC, 2012).

The CBI/PwC study said there had been a surprising increase in jobs in financial sector. A total of 19% of companies employed new people in the first three months of the year, the study said (BBC, 2012).

"Financial solutions revenue rates and income are going to increase this quarter, putting the sector's restoration on a stronger ground," said Ian McCafferty, the ...