What Are Your Old Stocks Worth? (3)

Other points to look into are if the certificate has any tax stamps on it?


Imprinted or attached?


If the stamps are valuable or unusual?


Are there any cancellation markings that make the scrip valuable or unusual if they detract or add to its history and looks?


Was the item issued or unissued?


Was the certificate a prototype of the printers marked with the word specimen?


Usually issued certificates are more valuable and desirable?


Who printed the certificate was it some well known printer?


What was the engraving used by hand, wood engraving, steel engraving?


Lithograph preprinted form?


What was the quality of the paper used was it of high or low quality has it held up over time?


Does it have a watermark to prevent counterfeiting?


These questions need to asked before valuing the scrip and should indeed be looked into by all buyers.

What Are Your Old Stocks Worth? (2)

While dot com companies and scandals have made the scrips popular, it is the historical significance that draws most investors to this hobby.


Some other scripophily enthusiasts prefer the beauty of old stocks and bonds that were printed in various colors with fancy artwork and ornate engraving.


The historical significance of the certificates is determined by which company the certificate represents, what product did it manufacture?


Was it the first car, automobile, aero plane etc. how successful was the company?


Was it a fraud by any means?


In which era i.e. war, depression, revolution etc was the scrip issued.


Did anyone famous sign the certificate?


Signatures of important people also add to the value of the certificates.


If the certificate happens to be issued to any famous person or company then it carries more value.


What sort of company it was issued for, doe the industry still exist, and has the industry changed a lot over the years also matter a lot.


For how much was the scrip issued the larger the value the higher the value.


Who were the bankers associated with the issue who worked on the fund raising efforts was it someone famous or a famous bank?


Is the bank still in existence?

What Are Your Old Stocks Worth?

The word scripophily has its origins in Greek and English.


The word scrip means an ownership right and philos in Greek means to love.


The collectors of old scrips are called Scripophilists or Scripophiliacs.


Today there are thousands of collectors’ worldwide who are in search of valuable rare and popular stocks and bonds.


The field of scripophily has gained importance and recognition as a hobby since 1970.



Scripophily is new field for collectors.


It has been defined as the study and collection of stocks and bonds.


It is actually the specialized field of numismatics.


People are attracted to it because of the beauty of the old bonds and shares being collected as well as the historical context of each document.


Some of the stock certificates are beautifully engraved.


Occasionally it is possible to come across an old stock document that is still carrying its value as a stock in a successor company.


Purchasing these old scrips is considered by many as a safe investment.


Over the last few years the hobby has exploded in popularity.

Bracketed Orders in Stock Trading (4)

As with any type of order, you must become educated in order to determine what orders are right for your risk tolerance.

Due to the fact that the bracketed order is mostly successful, this is actually a low risk order even though some detrimental risks are involved.

Seeking the professional advice of you stockbroker definitely has the possibility of earning you, the investor, an ensured, set profit.

But, for some reason, if the company in which you purchase stocks from is forced into bankruptcy, not only do you lose your initial investment, you also lose your hoped for profit in which you set.

Again, it is highly recommended to shop around for a stockbroker in whom you feel will genuinely put your needs ahead of his or her desire to make a profit.

Bracketed Orders in Stock Trading (3)

For example, you decide to buy 1500 shares from Company N, a new and upcoming business, at $625 each, for a total investment of $937,500.


You decided to purchase such a large amount of shares after consulting with your stockbroker because your broker was confident that Company N would be able to expand into a big business in which would create massive profits for your stock trading investment.



You placed a limit on your profit at $5 million, however, you did not place a limit on your losses because your stockbroker was so sure of Company N's success.



However, after only 3 months, Company N was forced to claim bankruptcy, where Company N is seeking a court order to discharge all of their incurred debt.



Obviously, you can kiss your $5 million profit good-bye along with your initial $937,500 investment.


Unfortunately, as an investor, you were willing to take a risk based on the expertise of your stockbroker, however, with this risk; you lost a large lump sum of money.

Bracketed Orders in Stock Trading (2)

The main advantage of bracketed orders is that you, the investor, determine how much you will earn or lose when getting involved in stock trading.



If you have a total investment amount of $150,000 and you determine that you do not want to lose more that 20%, then your total losses should not be set below $30,000.



However, if you invest $150,000 into the stock market and you would like to earn a 15% profit, then you should set your profit margin to equal $172,500.



With bracketed orders you, the investor, are in total control of your investment.



The two main disadvantages with bracketed orders you must place a limit on how much profit that you will make and you could possibly lose a large sum of money.



First of all, when an individual decides to invest in the stock market, he or she probably wants to make as much money as possible.



By setting a bracketed order on stocks that the investor purchases, the investor is placing a limit on how much profit is able to be earned.


Also, to be noticed, by placing a bracketed order on your stock you run the risk of losing money.

Bracketed Orders in Stock Trading

If you are planning to buy stocks as a long term investment you might want to consider placing a bracketed order on it.

A bracketed order goes one step further than a trailing stop order.

Remembering that a trailing stop order, you are in control of your investments because you are able to limit the amount of your losses by setting stop price.

With a bracketed order, you are able to not only set a limit on your losses, but you are able to set a limit on your profit, that when reached, your stock will be sold.

This type of order is best illustrated with an example.

Your broker places a bracketed order for 100 shares from Linens-n-Things, a department store, priced at $50 per stock, placing a sell limit order at $100 and a sell stop order at $45.

If the price per stock moves down to $45 or up to $100, the stock will be sold.

Therefore, the investor will either earn a $5,000 dollar profit, or take a $500 loss in profits.

Options Trading Mastery: Time Decay and Volatility Trading Opportunities (5)

Either way, the spread will have to be constructed with the at-the-money option being long if you feel volatility will increase or short if you feel volatility will decrease.


If you feel the stock would most likely fall, you will have to decide between buying a vertical put spread and selling a vertical call spread.


Again, either way, the spread will have to be constructed with the short option being the at-the-money.


As you can see, the vertical spread does not have to be used only in directional scenarios.


It is very versatile allowing the investor several choices among a diverse group of potential uses.


It also affords limited risk, albeit limited profit potential, to both the buyer and the seller.

Options Trading Mastery: Time Decay and Volatility Trading Opportunities (4)

So, if you think that implied volatility is likely to increase, you can set up a vertical spread by buying an at-the-money option and selling either the in-the-money or out-of-the-money option against it.


Conversely, if you feel implied volatility will decrease; you can set up a vertical spread by selling an at-the-money option and buy either an out-of-the-money or an in-the-money option against it.


As to how to set it up, you would follow the same guidelines as you would for setting up a vertical spread to take advantage of time decay.


Decide which direction you feel the stock would most likely move.


If you feel the stock would most likely rise, you will have to decide between buying a vertical call spread and selling a vertical put spread.

Options Trading Mastery: Time Decay and Volatility Trading Opportunities (3)

By selecting an at-the-money option to sell as part of a vertical spread, an investor can execute a time decay play with a hedged position.


Much in the same way that a vertical spread can be used as a time decay play, it can be used as a volatility play.


We stated earlier that an at-the-money option has more extrinsic value than any other option in its expiration month.


This is due to a number of contributing factors including time but it is in no small way due to volatility.


Volatility is a huge component of an option's extrinsic value.


An option's dollar sensitivity to movements in implied volatility is known as vega.


Obviously, an at-the-money option will have a higher vega (volatility sensitivity) then will an in-the-money or out-of-the-money option in the same month.


As volatility increases, the at-the-money option will increase in price to a greater degree than will an in-the-money or out-of-the-money option in the same month.


As volatility increases, the at-the-money option will increase in price to a greater degree then will an in-the-money or out-of-the-money option whose vega's will be less.


Conversely, the at-the-money option will lose value at a greater rate than an in-the-money or out-of-the-money option should implied volatility decrease.


The question now is how to use the vertical spread to take advantage of anticipated movements in implied volatility.


Remember, the vertical spread affords you the luxury of being hedged on either side of the trade - both as a buyer and a seller of the spread.

Options Trading Mastery: Time Decay and Volatility Trading Opportunities (2)

Creating the vertical spread by selling an at-the-money option and buying an out-of-the-money or in-the-money option as a hedge looks like a good idea, but now there are a couple choices.


Should you do the put spread or the call spread?


Should you buy it or sell it?


The decision of what to do from here should first be based on which way you think the stock will move.


Although you are playing for time decay and you are assuming an overall lack of movement, you can't expect the stock not to move at all.


So even though you are playing time decay, you still want to form an opinion about in which direction the stock is most likely to move.


By doing this, you've now give yourself another way of making the trade profitable.


You are playing for a lack of movement but now you can still win if you pick the right direction.


This scenario presents you with two ways to win and only one to lose.


Now that you have picked which at-the-money strike you are going to sell and you've picked your anticipated stock position you still have a decision to make.


Do you do the call vertical spread or the put vertical spread?


Remember both the vertical call spread and a vertical put spread allow you to participate in either stock direction.


For the bulls, you can buy a vertical call spread or sell a vertical if you think that the stock will go up.


For the bears, you can buy a vertical put spread or sell a vertical call spread.


For each direction there are two choices to decide from. One is a purchase, one is a sale.


The best way to decide which to do, other than your own style or comfort ability is a simple risk/reward analysis.

Options Trading Mastery: Time Decay and Volatility Trading Opportunities

When vertical spreads are mentioned, they quite often come with monikers such as 'bull' and 'bear'.

This lends most to think of vertical spreads as directional plays which is true.

However, vertical spreads can be used to take advantage of two other potential trading opportunities - time decay and volatility movement.

If you are looking for a fully hedged way to take advantage of time decay, a vertical spread can be an excellent tool.

Knowing a little about them now, you will recall that a vertical spread has a limited profit potential but also a limited loss scenario for both the buyer and the seller.

So, how do we use this covered trade to take advantage of time decay

At-the-money options have more extrinsic value than their similar month in-the-money or out-of-the-money options.


Since it is an option's extrinsic value that decays away over time, you could set up a vertical spread by selling an at-the-money option and buying either the out-of-the-money option (creating a credit spread) or buying an in-the-money option (creating a debit spread).


If the stock holds tight to the out-of-the-money option, the option's extrinsic value will decay away at a faster rate than either the in-the-money option or the out-of-the-money option due to the fact that the at-the-money option has more total extrinsic value to decay in the same amount of time as the others.

Properly Calculating Accurate Volatility Levels (3)

In order to accurately calculate volatility levels for pricing and evaluating a time spread, the key is to get both months on an equal footing.

You need to have a base volatility that you can apply to both months.

For instance, say you are looking at the June / August 70 call spread.June's implied volatility is presently at 40 while August's implied volatility is at 36.

You can not calculate the spread's volatility using these two months as they are.

You must either bring June's implied volatility down to 36 or bring August's implied volatility up to 40.

You may wonder how you can do this.Actually, you have the tools right in front of you.

Use the June vega to decrease the June option's value to represent 36 volatility or use August's vega to increase the August option's value to represent 40 volatility.

Both ways work so it doesn't matter which way you choose.

Let's use some real numbers so that we may work through an example together.

Let's say the June 70 calls are trading for $2.00 and have a .05 vega at 40 volatility.

The August 70 calls are trading for $3.00 and have a .08 vega at 36 volatility.

Thus the Aug/June 70 call spread will be worth $1.00.

Properly Calculating Accurate Volatility Levels (2)

It is important to know how to calculate the actual and accurate volatility of the spread because the current volatility level of the spread is one of the best ways to determine whether the spread is expensive or cheap in relation to the average volatility of the stock.

There are several ways to calculate the average volatility of a stock.

There are also ways to determine the average difference between the volatility levels for each given expiration month.

Volatility cones and volatility tilts are very useful tools that aid in determining the mean, mode and standard deviations of a stock's implied volatility levels and the relationship between them.

The present volatility level of the spread can then be compared to those average values and a determination can then be made as to the worthiness of the spread.

If you now determine that the spread is trading at a high volatility, you can sell it.

If it is trading at a low volatility, you can buy it.

But first you must know the current trading volatility of the spread.

Properly Calculating Accurate Volatility Levels

Understanding and properly calculating accurate volatility levels is imperative for spread traders.



In order to get accurate volatility levels, you must first determine a base volatility for the two options involved in the spread.


Getting a base volatility must be done because different volatilities in different months can not, and do not, get weighted evenly mathematically.



Since they are weighted differently, you can not simply take the average of the two months and call that the volatility of the spread; it is more complicated than that.



The problem is related to calculating the spread's volatility with two options in different months.



Those different months are usually trading at different implied volatility assumptions.



You can not compare apples with oranges nor can you compare two options with different volatility assumptions.