6102641302 I 6102641682 I 6102641740 I 6202641384

SET50 Index Option

Source:

FN411 Term Project

Source:
 Introduction 2
Overview of Today‘s Presentation

Fundamental
Macroeconomics view
● Top down approach by
driving key factors

● Valuate intrinsic value Thai market

Technical SET50

● Chart patterns Picking derivatives

● Technical indicators

Source: Team analysis

Overview Trading Strategies Actual Returns Discussion

 Macro Analysis 3
The change in interest rate policy slightly affects Thai stock market

Macro view: FED Effect on Thai market

….Since stocks in SET Index has a strong fundamental

> Only slight effect on the

Thai stock market

> Outperform during

FED increased interest rate to slow down inflation rate periods of high bond yields

● Cost of borrowing increases

● Revenue of each firm decreases

● Stock value declines

Source: Forbes

Overview Trading Strategies Actual Returns Discussion

 Technical Analysis (Sung) 4
SET50 INDEX 30-minute timeframe

Source: Trading view, team analysis

Overview Trading Strategies Actual Returns Discussion

 Forming the strategies

Source:
 Introduction 6
Our group’s logical estimation on forming strategies

13 - 27 March 2022

Sideways market

28 Mar - 1 April 2022

Reverse Straddle Bull Put spread

+
Reverse Strangle Bear Call spread

Source: Team analysis

Overview Trading Strategies Actual Returns Discussion

 Introduction
Our group’s logical estimation on forming strategies

13 - 27 March 2022

Sideways market

28 Mar - 1 April 2022

Reverse Straddle Bull Put spread

+
Reverse Strangle Bear Call spread

Source: Team analysis

Overview Trading Strategies Actual Returns Discussion

 First strategy: Reverse strangle 8

Graph and Payoff Table

Definition

Short call with a higher strike price and

Short put with a lower strike price

Maximum profit : total premiums received - commissions

Maximum loss : Limitless

Investor’s expectation

Neutral market outlook and expects little volatility in

the underlying asset price in the near term

Source: Investopedia, theoptionsguide

Overview Trading Strategies Actual Returns Discussion

 Second strategy: Bull put spread and Bear call spread 9

Maximum profit: Net premium received - commissions

Definition
Maximum loss: Strike prices - the net credit received

Bull put spread: Buy 1 put and Sell another put

option with a strike price that is higher than the one
they purchased Graph and Payoff Table

Bear call spread: Sell 1 call and Buy another call

option with the same expiration date but a higher strike
price

Investor’s expectation
Neutral market outlook and expects little volatility
in the underlying asset price in the near term
while mitigates the inherent risk from trading

Source: Investopedia, theoptionsguide, fidelity

Overview Trading Strategies Actual Returns Discussion

 How to Find the Right Strike Prices ? 10
Rationale

Mar 27 : Ending SET50 index price = 1,008.81

What to Consider ?

Profit

1. When contracts are OTM

2. The maximum gains are premiums
STV = 0.7%
Risk tolerance: The Trade-off

Thus, the safety strike prices are :

Call option : Put option :

K >= 1,050 K <= 975

Higher risk (ITM),
higher return
(premium)

Source:

Overview Trading Strategies Actual Returns Discussion

 Finding the Right Strike Prices 11
Adapt to the Strategies
Call option : K >= 1,050 Put option : K <= 975
Mar 27 : Ending SET50 index price = 1,008.81

Reverse Strangle Bull put spread & Bear call spread

short P(K1) + short C(K2) long P(K1) + short P(K2) + short C(K3) + long C(K4)

BE : St = 1,050.3 BE : St = 1,026.2
St = 949.7 St = 973.8

Maximum profit : 0.3 (at premium) Maximum profit : 1.2 (at premium)

Maximum loss : limitless Maximum loss : -23.8

Source:

Overview Trading Strategies Actual Returns Discussion

 Expected Return 12
Calculate expected return based on scenario analysis

First strategy: Reverse Scenarios Prob. Profit/Loss Expected return

strangle
X<950 2.50% -4.7 -0.12

950<X<1050 95.00% 0.3 0.29

X>1050 2.50% -4.7 -0.12
100.00% 0.05

Second strategy: Bull put Scenarios Prob. Profit/Loss Expected return

spread and Bear call spread
X<950 0.50% -23.8 -0.119
950<X<975 2.00% -13.8 -0.276
975<X<1025 95% 1.2 1.14
1025<X<1050 2.00% -13.8 -0.276
X>1050 0.50% -23.8 -0.119
100.00% 0.35

Source:

Overview Trading Strategies Actual Returns Discussion

 Actual returns

Source:
 Actual Returns 14
Rationale
➤ Contract multiplier = THB 200 / point

➤ Brokerage fee = negotiable & depends on

- number of contracts : contract 1 - 25 charged at
At THB 72
Atthe ClosingDate
the Closing Date
- sending style : Self-order sending

● Closing SET50 index price : 1,022.83 points ➤ TFEX fee = trading fee + clearing fee (THB 2.8 +
● Return from strategy 1 : 0.3 points THB 1.2 = THB 4)
● Return from strategy 2 : 1.2 points
Assuming having 1 contract per side *

Premium Paid/Received Commission & Fees Charged

number of contracts * premium * 200 number of contracts * brokerage fee * TFEX fee * VAT

= 81.32
Source: brokerage fee : www.fnsyrus.com , exchnage fee : www.TFEX.com

Overview Trading Strategies Actual Returns Discussion

 Actual Returns 15
Rationale

Payoff : 0.3 points / 60 Baht

Actual return : - THB 102.64

Payoff : 1.2 points / 200 Bht

Actual return : - THB 85.28

Notice
The strategy that bears more risk receives
lower loss because of the higher premium
received (gain) supporting the fees
Source:

Overview Trading Strategies Actual Returns Discussion

 Discussion

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 HOW TO IMPROVE
Offsetting position
Time to maturity
Trading commission and fees

Source:
 Implementing offsetting position 18
Offsetting position enable our group to have more available options

Why
Why is is Offsetting
Offsetting Strategy
Strategy Betterbetter
? ?

➤ Ability to take contracts with longer time left before maturity “ The Longer the TV, The Higher IV,
➤ Greater premium fluctuation (IV)
➤ Greater chance to take profit
The More Chance We can Take the Profit ”

Offsetting VS Waiting-to-Maturity For offsetting premium, we should consider

1. IV - running high movement of premium

● Offsetting : consider only premium deriving from
Intr. value 2. SET50 index price movement - for intrinsic
value (strike price is constant)
● Waiting-to-maturity : directly consider Intr. value
+ premium for gain/loss 3. Time value

Source: Investopedia

Overview Trading Strategies Actual Returns Discussion

 Strike prices for offsetting strategy 19
Premium is the major consideration for picking strike price

To pick the strike prices for offsetting strategy, consider :

Major consideration

Major determinant for IV

Whether to count (St - K) / (K - St), it depends on St >= K for call option
St <= K for put option

Source: Investopedia

Overview Trading Strategies Actual Returns Discussion

 Time to maturity & Trading fees 20
Time until expiration has a direct impact on the value of an option contract

> Direct impact to the value of an option contract

> When there is less time until expiration,

the time premium and the value of an option contract decrease

KEY TAKEAWAY
Choose the option that is far from maturity to have an
opportunity to gain more premium and offset the loss

Trading commission and fees

● Be more aggressive in choosing option to gain more profit that can offset the fee

● More available choices from longer maturity → Choose less out-the-money option to gain more
premium

Source: Team Analysis

Overview Trading Strategies Actual Returns Discussion

 Thank You

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