The easiest and most cost-effective avenue to trade the Dow Jones Industrial Average DJIA is through an exchange traded fund ETF See: Strategies to trade the Dow Jones Industrial Average. One of the oldest ETFs is the SPDR Dow Jones Industrial Average ETF Trust DIA , which tracks the DJIA and seeks to provide investment results that correspond to the price and yield performance of the index.

If you have limited capital but want to trade the index, options on the " Diamonds " — the colloquial term for the DJIA ETF — might be a good way to go, assuming you know the risks involved in option trading. We demonstrate how to buy options on the DJIA in the following sections. For the purposes of this exercise, we focus on the September options — which expire on September 18, — on the Diamonds.

For tips on how to select the right option, see Pick the right options to trade in six steps. Specifically, we focus on the following option strategies:. Note that these examples do not take into account trading commissions, which can significantly add to the cost of a trade.

You would buy or initiate a long position on a call if you were bullish on the underlying security. You would initiate a long put position if you were bearish on the underlying security.

In this instance, you are looking for the Dow to decline to at least 17, by option expiry, which represents a 3. If you sell them at this price, you would break even, with the only cost incurred being the commissions paid to open and close the option position.

Dow Crash Protection: Here's How to Buy It -- The Motley Fool

The bull call spread is a vertical spread strategy that involves initiating a long position on a call option and a simultaneous short position on a call option with the same expiration but a higher strike price. The objective of this strategy is to capitalize on a bullish view on the underlying security, but at a lower cost than an outright long call position. This is achieved through the premium received on the short call position.

Note that you pay the ask price when you buy or go long on an option, and receive the bid price when you sell or go short on an option. The bull call spread can significantly reduce the cost of an option position, but it also caps the potential reward.

The bear put spread is a vertical spread strategy that involves initiating a long position on a put option and a simultaneous short position on a put option with the same expiration but a lower strike price.

The rationale for using a bear put spread is to initiate a bearish position at a lower cost, in exchange for a lower potential gain. Buying options on the Dow Jones is a good alternative to trading the ETF because of the substantially lower capital requirements for trading options, as long as one is familiar with the risks involved. Dictionary Term Of The Day. A measure of what it costs an investment company to operate a mutual fund.

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Sophisticated content for financial advisors around investment strategies, industry trends, and advisor education. How To Buy Options On the Dow Jones By Elvis Picardo, CFA May 31, — Types of Option Strategies For the purposes of this exercise, we focus on the September options — which expire on September 18, — on the Diamonds.

Specifically, we focus on the following option strategies: Long Call Long Put Long Bull Call Spread Long Bear Put Spread Note that these examples do not take into account trading commissions, which can significantly add to the cost of a trade.

Long Call on the DIA Strategy: Long Call on the DJIA ETF DIA Rationale: Bullish on the underlying index the DJIA Option selected: Unlimited You would buy or initiate a long position on a call if you were bullish on the underlying security. Long Put on the DIA Strategy: Long Put on the DJIA ETF DIA Rationale: Bearish on the underlying index the DJIA Option selected: Long Bull Call Spread on the DIA Strategy: Long Bull Call Spread on the DJIA ETF DIA Rationale: Bullish on the Dow Jones, but want to reduce premium paid Options selected: Long Bear Put Spread on the DIA Strategy: Long Bear Put Spread on the DJIA ETF DIA Rationale: Bearish on the Dow Jones, but want to reduce premium paid Options selected: The Bottom Line Buying options on the Dow Jones is a good alternative to trading the ETF because of the substantially lower capital requirements for trading options, as long as one is familiar with the risks involved.

These five strategies are used by traders to capitalize on stocks or securities that exhibit high volatility. Investing in Google GOOG generally requires you to pay the price of the share multiplied by the number of shares bought. An alternative using lesser capital involves using options.

Knowing which option spread strategy to use in different market conditions can significantly improve your odds of success in options trading. The adage "know thyself"--and thy risk tolerance, thy underlying, and thy markets--applies to options trading if you want it to do it profitably. We'll show you how to ace the largest and most difficult section of this exam.

Options offer alternative strategies for investors to profit from trading underlying securities, provided the beginner understands the pros and cons. Learn how to buy calls and then sell or exercise them to earn a profit. A bull call spread is an option strategy that involves the purchase of a call option, and the simultaneous sale of another option on the same underlying asset with the same expiration date A bear call spread is an option strategy that involves the sale of a call option, and the simultaneous purchase of a call option on the same underlying asset with the same expiration date but Learn about option strategies investors can use to take a position in the utility sector, including covered calls and option Find out more about option spread strategies, and how to set the strike prices for bull call spreads and bull put spreads Learn about stock index options, including differences between single stock options and index options, and understand different Learn about debit and credit option spread strategies, how these strategies are used, and the differences between debit spreads Learn about the difficulty of trading both call and put options.

SPDR Dow Jones Industrial Average ETF (DIA) Option Chain - Stock Puts & Calls - sanapidyqel.web.fc2.com

Explore how put options earn profits with underlying assets No thanks, I prefer not making money. Content Library Articles Terms Videos Guides Slideshows FAQs Calculators Chart Advisor Stock Analysis Stock Simulator FXtrader Exam Prep Quizzer Net Worth Calculator.

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