Key Takeaways with Craig
Due to off-site schedules today, we’ll be dedicating today’s edition of InFocus on a useful tool called The Strategy Simulator, which helps you determine what trading strategy might be the most effective in certain, hypothetical market conditions. This tool was designed to help learn how an options strategy will perform based on different underlying price scenarios.
Here is an overview of the functionalities of the Strategy Simulator:
By selecting one of the five random underlying scenarios as seen at the top of the tool, you can test a position’s performance to visualize how the position reacts to different price movements.
Additionally, profit and loss are calculated and charted for you on the right. By adding multiple position scenarios with the same contract expiration, you can visualize how different positions would perform in comparison to each other. Additional functionality allows you to apply “what if” scenarios to visualize how the position reacts to changes in volatility and the effect of time decay.
The Strategy Simulator can be a valuable tool to view how different trading strategies will react to various market conditions.
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