Bern University of Applied Sciences
Business

Option Strategies – A practical Guideline for
Retail Investors

Bachelor Thesis

Submitted within the study program

Bachelor of Science in
Business Administration

By

XXX

For the module

Bachelor Thesis (BTHE)

Instructor

XXX

Co-Supervisor

XXX

Submission date

Friday, 16 May 2014

“Option strategies – A practical Guideline for Retail Investors”

Acknowledgment
The development of this paper has been observed and accompanied by instructor Professor XXX and co-instructor Professor XXX of the XXX. Both of the tutors shall be thanked gratefully at this point. Furthermore I would like to acknowledge the interviewees for their advices and information, who made it possible to complete this bachelor thesis.

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“Option strategies – A practical Guideline for Retail Investors”

Management Summary
This bachelor thesis examines option strategies and what costs and fees an individual investor will be confronted with when trading such instruments in Switzerland. In theory, option strategies are an interesting and multifunctional instrument for every market direction. However, in practice, there are several difficulties which retail investors have to overcome. For example, they have only limited available assets for trading and thus the margin of the broker and the transaction costs significantly influence the potential profit (economies of scale). There are also legal restrictions like naked short selling which essentially complicate trading option strategies efficiently.
The methodology of this paper is mainly based on literary research from the Anglo-Saxon and German language area as well as interviews with experts in the banking industry. In this thesis, the twelve biggest retail banks in Switzerland are analysed in relation to costs and trading possibilities as well as 45 option strategies for six market expectations.
The results are especially interesting because they initially show that by taking the transaction costs of the predefined financial institutions, the average option strategy with an initial investment of CHF 6’000 costs CHF 236.11. Instead EUREX options, investors have the possibility to trade warrants, which lower the total average trading costs per strategy to
CHF 168.33 (-29%). The most advantageous trading platform is Swissquote (Ø CHF
22.44) and Saxo Bank (Ø CHF 91.06), where they charge fees on a per-contract basis.
The other banks are clearly offering less attractive conditions and only nine platforms are providing EUREX options to their clients.
There are also differences in fixed costs, starting from no fees like PostFinance and Saxo
Bank, and ending with Zürcher Kantonalbank (CHF206.40) and Credit Suisse (CHF
448.80). By taking into account the total costs, the range of all banks lies between CHF
28.92 and CHF 458.50 (+1’585%). Therefore the average break-even point lies between
0.5% and 7.6% for EUREX options, respectively 0.7% and 4.7% for warrants. As a result, retail investors are able to trade option strategies with a relatively small investment. It is important to note that the bid-ask spread, the opportunity costs and the risk premium are not included.
The outcomes of this thesis are particularly remarkable because they show that investing in option strategies for a retail investor is not directly connected with high trading fees.
Therefore, besides certain limitations, option strategies are an interesting and efficient way of maximizing the performance of the investor’s portfolio – even in downside market trends. 3

“Option strategies – A practical Guideline for Retail Investors”

Table of Contents
1.

Introduction ............................................................................................................. 9
1.1. Problem Statement ................................................................................................ 9
1.2. Objectives ............................................................................................................ 10
1.3. Methodology ........................................................................................................ 10
1.4. Challenges for a Retail Investor ........................................................................... 11

2.

Option Strategy – a short Introduction ................................................................ 12

3.

Definition ................................................................................................................ 14
3.1. Retail Investor ...................................................................................................... 14
3.2. Regulatory Limitations ......................................................................................... 16

4.

Trading Platforms .................................................................................................. 18
4.1.1.

Pre-conditions............................................................................................................ 18

4.2. Universal Banks ................................................................................................... 20
4.2.1.

UBS ........................................................................................................................... 20

4.2.2.

Credit Suisse Group .................................................................................................. 20

4.3. Cantonal banks .................................................................................................... 21
4.3.1.

Zürcher Kantonalbank ZKB ....................................................................................... 21

4.3.2.

Berner Kantonalbank BEKB ...................................................................................... 22

4.3.3.

Banque Cantonale Vaudoise BCV ............................................................................ 23

4.4. Online Banks ....................................................................................................... 24
4.4.1.

Saxo Bank (Switzerland) Ltd. .................................................................................... 24

4.4.2.

Swissquote Bank S.A. ............................................................................................... 24

4.4.3.

Cash zweiplus ........................................................................................................... 25

4.5. Other Banks......................................................................................................... 26
4.5.1.

Migros Bank AG ........................................................................................................ 26

4.5.2.

Bank Coop AG........................................................................................................... 26

4.5.3.

PostFinance AG ........................................................................................................ 27

4.5.4.

Raiffeisen................................................................................................................... 28

4.6. Stock Exchange and Taxes ................................................................................. 29
5.

Conclusion I ........................................................................................................... 29
5.1. Pre-assumptions .................................................................................................. 29
5.2. Conclusion of Trading Platforms .......................................................................... 30
5.2.1.

Transaction Cost ....................................................................................................... 30

5.2.2.

Fixed Costs ................................................................................................................ 31

5.2.3.

Interest Margin........................................................................................................... 32

5.2.4.

EUREX Options vs. Warrants ................................................................................... 32

5.2.5.

Trading Possibilities .................................................................................................. 33

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“Option strategies – A practical Guideline for Retail Investors”

5.3. Evaluation with EUREX Options .......................................................................... 34
5.4. Evaluation with Warrants ..................................................................................... 35
6.

Option Strategies................................................................................................... 36
6.1. Neutral Strategies ................................................................................................ 37
6.2. Volatile Strategies ................................................................................................ 42
6.3. Moderately Bullish Strategies............................................................................... 46
6.4. Sustained Bullish Strategies ................................................................................ 49
6.5. Moderately Bearish Strategies ............................................................................. 52
6.6. Sustained Bearish Strategies ............................................................................... 54

7.

Conclusion II .......................................................................................................... 56
7.1. Conclusion of Option Strategies ........................................................................... 56
7.1.1.
7.1.2.

Volatile Strategies ..................................................................................................... 57

7.1.3.

Moderately Bullish Strategies .................................................................................... 58

7.1.4.

Sustained Bullish Strategies...................................................................................... 58

7.1.5.

Moderately Bearish Strategies .................................................................................. 59

7.1.6.

8.

Neutral Strategies ...................................................................................................... 56

Sustained Bearish Strategies .................................................................................... 59

Final Conclusion.................................................................................................... 60
8.1. Trading Platform .................................................................................................. 60
8.2. Option Strategies ................................................................................................. 61
8.3. Break-Even Point ................................................................................................. 62
8.4. Evaluation Matrix ................................................................................................. 63
8.4.1.
8.4.1.

Warrants .................................................................................................................... 64

8.4.2.

9.

EUREX Options ......................................................................................................... 63

Break-Even Point ...................................................................................................... 65

Disclaimer .............................................................................................................. 66

10. Declaration ............................................................................................................. 66
11. Bibliography........................................................................................................... 67
11.1.

List of Illustrations .......................................................................................... 67

11.2.

Literature ....................................................................................................... 68

11.3.

Interviews ...................................................................................................... 68

11.4.

Online Sources .............................................................................................. 69

11.5.

Legislative Texts ............................................................................................ 77

12. Appendix ................................................................................................................ 78

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“Option strategies – A practical Guideline for Retail Investors”

List of Abbreviations
BCV............................................ Banque Cantonal Vaudoise
BE .............................................. Break-even point
BEKB ......................................... Berner Kantonalbank
CFD............................................ Contract For Difference
ERX............................................ EUREX Options
FINMA ........................................ Swiss Financial Market Supervisory Authority
LEAPS ....................................... Long-Term Equity Anticipation Securities
LIBOR ........................................ London Interbank Offered Rate
OTC ........................................... Over-the-Counter
ROI............................................. Return on Investment
SFBC ......................................... Swiss Federal Banking Commission
SNB............................................ Swiss National Bank
VAT ............................................ Value Added Tax
WRT ........................................... Warrants
ZKB ............................................ Zürcher Kantonalbank

List of Figures
Figure 1: How short selling works .................................................................................... 17
Figure 2: Symbol icon ...................................................................................................... 36
Figure 3: Long Condor Spread .......................................................................................... 1
Figure 4: Long Butterfly Spread ......................................................................................... 1
Figure 5: Short Straddle .................................................................................................... 1
Figure 6: Short Strangle .................................................................................................... 1
Figure 7: Short Gut Spread ............................................................................................... 1
Figure 8: Long Iron Butterfly Spread .................................................................................. 1
Figure 9: Long Box Spread ................................................................................................ 1
Figure 10: Long Call Ladder Spread .................................................................................. 1
Figure 11: Ratio Call Write ................................................................................................ 1
Figure 12: Ratio Put Write ................................................................................................. 1
Figure 13: Double Butterfly Spread ................................................................................... 1
Figure 14: Variable Ratio Write........................................................................................ 41
Figure 15: Long Straddle ................................................................................................... 1
Figure 16: Long Strangle ................................................................................................... 1
Figure 17: Long Gut Spread .............................................................................................. 1

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“Option strategies – A practical Guideline for Retail Investors”

Figure 18: Call Ratio Back Spread .................................................................................... 1
Figure 19: Strap................................................................................................................. 1
Figure 20: Strip .................................................................................................................. 1
Figure 21: Short Condor Spread........................................................................................ 1
Figure 22: Short Butterfly Spread ...................................................................................... 1
Figure 23: Short Call Ladder Spread ................................................................................. 1
Figure 24: Collar ................................................................................................................ 1
Figure 25: Long Call Spread .............................................................................................. 1
Figure 26: Short Ratio Call Spread .................................................................................... 1
Figure 27: Uncovered Put.................................................................................................. 1
Figure 28: Covered Combination ....................................................................................... 1
Figure 29: Zero-Cost Collar ............................................................................................... 1
Figure 30: Covered Short Call ........................................................................................... 1
Figure 31: Cash-Secured Put ............................................................................................ 1
Figure 32: Protective Put ................................................................................................... 1
Figure 33: Long Call .......................................................................................................... 1
Figure 34: Synthetic Long Stock ........................................................................................ 1
Figure 35: Bull Spread Spread .......................................................................................... 1
Figure 36: Cash-Secured Call ........................................................................................... 1
Figure 37: Call Back Spread ............................................................................................ 51
Figure 38: Long Combo Spread ........................................................................................ 1
Figure 39: Short Call Spread ............................................................................................. 1
Figure 40: Uncovered Call ................................................................................................. 1
Figure 41: Short Ratio Put Spread ..................................................................................... 1
Figure 42: Covered Short Put ............................................................................................ 1
Figure 43: Bear Spread Spread ......................................................................................... 1
Figure 44: Long Put ........................................................................................................... 1
Figure 45: Synthetic Short Stock ....................................................................................... 1
Figure 46: Short Combo Spread ........................................................................................ 1
Figure 47: Put Back Spread .............................................................................................. 1

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“Option strategies – A practical Guideline for Retail Investors”

List of Tables
Table 1: Conditions of UBS ............................................................................................. 20
Table 2: Conditions of Credit Suisse................................................................................ 21
Table 3: Conditions of Zürcher Kantonalbank .................................................................. 22
Table 4: Conditions of Berner Kantonalbank ................................................................... 22
Table 5: Conditions of Banque Cantonale Vaudoise ........................................................ 23
Table 6: Conditions of Saxo Bank (Switzerland) Ltd. ....................................................... 24
Table 7: Conditions of Swissquote .................................................................................. 25
Table 8: Conditions of Cash zweiplus .............................................................................. 25
Table 9: Conditions of Migros Bank AG ........................................................................... 26
Table 10: Conditions of Bank Coop AG ........................................................................... 27
Table 11: Conditions of PostFinance AG ......................................................................... 27
Table 12: Conditions of Raiffeisen ................................................................................... 28
Table 13: Conclusion of Trading Platforms - EUREX Options vs. Warrants ..................... 33
Table 14: Neutral Strategies ............................................................................................ 37
Table 15: Volatile Strategies ............................................................................................ 42
Table 16: Moderately Bullish Strategies .......................................................................... 46
Table 17: Sustained Bullish Strategies ............................................................................ 49
Table 18: Moderately Bearish Strategies ......................................................................... 52
Table 19: Sustained Bearish Strategies........................................................................... 54
Table 20: Evaluation Option Strategies - Neutral Strategies ............................................ 56
Table 21: Evaluation Option Strategies - Volatile Strategies ............................................ 57
Table 22: Evaluation Option Strategies - Moderately Bullish Strategies........................... 58
Table 23: Evaluation Option Strategies - Sustained Bullish Strategies ............................ 58
Table 24: Evaluation Option Strategies - Moderately Bearish Strategies ......................... 59
Table 25: Evaluation Option Strategies - Sustained Bearish Strategies ........................... 59

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“Option strategies – A practical Guideline for Retail Investors”

1. Introduction
Nowadays, investors have won a deeper interest in trading financial instruments – not only institutional clients but also wealthy private clients. Due to the leverage of derivatives, investors are able to make huge amounts of profit with small investments in a short period of time; in contrast, there is also the risk of losing the whole amount. For solving this critical problem, option strategies are constructed to overcome those difficulties as they minimize risks and maximize profits in a certain market expectation.

With increasing possibilities for trading financial derivatives such as options and warrants by the internet (which have lower transaction costs), retail investors are also keen to invest in such strategies. But still, the limitations for individual investors are substantial, especially when it comes to questions about costs, technically feasibility and knowledge about handling option strategies effectively. A retail investor has to overcome those hurdles when he would like to be a successful option strategy-trader.

1.1. Problem Statement
As we know, theories are rarely the same as in practice, but at least there are similarities or high positive correlation between them. In the area of options and especially option strategies, the theories have some limitations and we are knowingly ignoring some aspects in this area. In theory, when dealing with option strategies, we do not take into account transaction costs like brokerage fee, stamp duty or any other fees like safekeeping account-fees. Moreover, there are certain limitations of the instruments, which are not allowed to be used for a retail investor. In addition, the possibility of short selling stocks shares and the spread of the broker (margin of the bank) have an important influence on option strategies and their performance (profit or loss).
Furthermore, the theory doesn’t take into consideration that retail investors rarely have the possibility to use the risk-free interest rate properly and that they have to pay interest for a margin account. Last but not least, retail clients do not often have the necessary knowledge about option strategies and how to use them effectively. In other words, the financial institutions do not provide small investors with the important information and platforms to trade option strategies, because of too high costs and a too low profitability.
Therefore, option strategies are a relatively unknown field for retail investors in Switzerland.

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“Option strategies – A practical Guideline for Retail Investors”

1.2. Objectives
Main objective of this bachelor thesis is to analyze which option strategies, we know in theory, are the most efficient for retail investors. This includes a theoretical description of each option strategy and in general options as a financial instrument. Moreover, I will define in more detail what a retail investor is and what costs he will face when dealing such instruments. In addition, this bachelor thesis will not only provides the reader with an analyze of the costs for an option strategy, but it will also show which trading platform is the best in relation to costs and trading possibilities for a retail investor.

In the end, the reader should be able to decide clearly which option strategy is the best for a certain expectation (bullish, bearish, etc.) relative to transaction costs. Furthermore, as a result from my analysis, I will clearly evaluate the different trading platform in comparison to costs and fees for a Swiss retail investor.

The final outcome from this Bachelor thesis will be a broad and detailed Matrix-summary with the most important Swiss retail banks and option strategies, where the investor can easily find the most efficient strategy and trading platform in terms of costs and fees.

1.3. Methodology
For my bachelor thesis I will use several approaches to get the necessary information, statements and data. The following paragraph will give a short summary, but it does not represent a complete methodology.
The methodology of this paper is mainly based on literary research. Therefore I will consider as the basis of my thesis books, theories, online articles and intellectuals of the Anglo-Saxon and German language area. The fields of research are concentrated around the broad subject of option strategies and in general about options and other financial instruments. To get a deeper understanding of the whole subject, it is indispensable to use the internet, especially trading platforms, forums, online interviews with experts and articles out of professional journals. An important source will have the option strategyplatforms for investors, where they get a comprehensive and detailed understanding of such investment opportunities.
Furthermore, as an additional source of information, I will have several interviews with experts from the banking industry, especially from the retail business as well as from the trading area.
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“Option strategies – A practical Guideline for Retail Investors”

From those conversations, I am able to fill gaps which provide me with a broader overview about the subject. The experts have a wide range of knowledge about options and how they can be used in the daily business. Because of their experience in this field, they will have all the necessary background they needed to answer my questions. The questions will be mainly about options strategies, their transaction costs and the possibility of using other financial derivatives, but also partly about the legal environment for trading stocks and other securities in Switzerland.

1.4. Challenges for a Retail Investor
In theory, when talking about financial instruments and possibilities, the term “investor” is often used inappropriately. By definition an investor is “is a person or organization that buys stocks or shares, or pays money into a bank in order to receive a profit.” 1 Therefore it is neither defined the possibilities and limitations of trading nor the amount for investing.
In reality, a retail investor is confronted with several challenges he has to overcome to trade option strategies successfully. First of all, such an investor has only limited assets on the bank account for his disposal and thus the economies of scale are much smaller compared to institutional or professional investors. Those have in general a broader knowledge about the security market as well as a higher available amount of cash for trading. Especially when we are talking about transaction costs like fees for account management, brokerage fee or deposit fees, the small investor is getting discriminated by the institutional investor. In addition, the theory does not take into account the spreads (intermediate charges of the trading platform) between ask and bid prices of options and other financial instruments. Such spread are decreasing the potential profit or increasing the potential loss of the investment.
According to Daniel Ballarin, Associate Director and Training Manager at Swissquote
Bank S.A., these costs are in general between three to seven percentages, depending on trading volumes, market expectation and margin requirements of the counterparty. 2

Generally, the theory is fading out legal restriction when dealing with options and option strategies liked naked short selling. To this point I will go into more detail later on (see chapter 3.2 Regulatory Limitations).

1

Reverso (2014).

2

All material in this section is derived from Interview Ballarin (2014).

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“Option strategies – A practical Guideline for Retail Investors”

Last of all, small investors have only limited knowledge about financial instruments because of their educational background, their daily interests and their financial situation.
This will have a negative impact on the performance of an individual investor when dealing with questions about how to use options and other financial derivatives effectively. In practice, banking institutions are providing useful information and data about the market as well as analysis and researches of investment ideas to their clients. Such a service is viewed in general as a premium service to clients, where the bank earns a certain spread
(profitability). For a retail client with a limited amount on the bank account, such services is often limited or not offered.

2. Option Strategy – a short Introduction
Before diving into the world of option strategy for retail investors, it is important to provide clear definitions of the terms most used in my bachelor thesis – option strategy and retail investor. To start, I would like to explain briefly options, especially what option strategies are in theory and how an investor can use them effectively. An option by definition is a “[…] financial contract that derives their value from an underlying reference asset” 3. Basically there are two types of options – a call option, which gives the holder of the option the right to buy the underlying asset by a specific time in the future for a fixed price. On the other side, a put option gives the holder the right to sell the underlying by a certain date for a certain price. 4 The buyer of a call option believes in an increasing underlying price whereas on the other hand, the holder of a put option is betting on a falling price of the underlying.
There are always two sides for every trade of option contracts. On one side, there is the buyer (investor) who has bought the option contract (long position), whereas on the other side, there is the seller (short position), who has written the option and who will receive the option price (credit) for selling the rights.

Another way to distinguish options can be done by looking at the time of exercise the rights. An American option can be exercise at any time prior to their time to maturity (expiration date), while European options can only be exercised on the expiration date. 5

3

Banks/Siegel (2007, p. 3).

4

Hull (2009, p. 179).

5

All material in this section is derived from Hull (2009, p. 773).

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“Option strategies – A practical Guideline for Retail Investors”

Let’s turn on to the option strategy. An option strategy also called option based investment strategy is a way of buying and selling simultaneously one or more option with different option variables. It can also include an underlying, which could be a stock, a commodity or a pair of currencies (forex). 6 This combined strategy is considered by the trader as a single position. Option strategies are also defined as spread trading, which involves taking two or more positions at the same time. An option may be traded against the underlying, two or more different options can be traded against each other or they can be combined together with different strike level or maturity dates. 7

Moreover the time effect and the holding period of an option strategy are important factors. According to Bouzoubaa/Osseiran (2010, p. 39ff), the effect of the time decay for an option strategy always depends on what position the investor has. For example, if he is short and has sold options, a decreasing time to maturity makes the options cheaper and therefore the investor can profit.

In contrary, an investor who has bought an option is in a detrimental position, because the time value, also called extrinsic value, will decrease when time runs out. In general we can say, that the time value of an option will lose 67% of its value in the last month till expiration whereas only 33% in the time before. 8
The exact holding period for options in an option strategy is highly dependent on what positions the investor is holding in the market and thus hard to define on an exact number.
Nevertheless he should not hold an option strategy with options with lower time to maturity than 1/3 of the whole time frame. Lastly, the appropriate time period for a certain option strategy is something between one and three months (rather one and two months), depending of the underlying, the construction of the strategy, the volatility and the market expectation of the investor. 9

There are several advantages when trading option strategies. First of all, an investor has the possibility to vary all different instruments to one single investment strategy and therefore he can adapt the strategy to his unique expectation- and risk-profile. Moreover, generally speaking, the investor knows from the beginning on what will be the maximum reward- and loss-potential and so he is able to calculate the worst- and best-case scenarios.

6

Rhoads (2011, p. 8).

7

Cohen (2005, p. 21).

8

All material in this section is derived from Jensen (2009, p. 132f).

9

All material in this section is derived from Cohen (2005, p. 34).

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“Option strategies – A practical Guideline for Retail Investors”

An additional advantage is the profit opportunity when the market is in a sideway moving trend. In other words, the underlying is not upwards nor downwards moving with low volatility during the lifetime of the option strategy. In such a scenario, a normal investor would have a low return on income (ROI) when investing in stocks or fixed income-products. The solution therefore is to invest in option strategies, whereas he is able to maximize his profit in the short-term in every market forecast.

In contrary, there are also a few drawbacks, which an investor has to overcome. Firstly, those option strategies are hard to understand in relation to their Greeks, especially for a retail investor, who doesn’t have the necessary information and data. Secondly, as previously mentioned, an option strategy is often resulted in higher transaction costs when buying and selling options, stocks, warrants and other financial instruments. This refers mainly to economies of scale, where a retail investor is getting discriminate against an institutional investor. As a result, the break-even point (how much the investment has to perform to be equal off) is clearly higher for a retail investor. Last but not least, option strategies have the disadvantage that they are traded rarely and mostly from experts and professionals in the market. So there is a lack of knowledge as well as experiences when dealing with these investments.

3. Definition
3.1. Retail Investor
In this chapter I will define the term “retail investor” also called small or individual investor, especially when it comes to questions about quantity (numbers of trades per period and the trading volume) and quality (experiences and knowledge of the investor). This part will be important in relation to transaction costs (economies of scale) and trading possibilities.
Moneyland 10, the leading financial comparison service in Switzerland, has published a comprehensive report 11 about the Swiss trading market. In their analysis, they are using three different trading profiles. First of all, profile No. 1 is a trader, who trades only by a few occasions and has assets in his portfolio of CHF 56’000.

10

Moneyland (2014a).

11

Moneyland (2014b).

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“Option strategies – A practical Guideline for Retail Investors”

The second trader, profile No. 2, is one who trades only seldom and has assets on his safekeeping account of CHF 20’000, whereas the profile No. 3 is an investor who trades regularly and has assets for his investments of about CHF 76’000. Therefore in my point of view, I would define an individual investor like the trading profile No. 1 with assets on the bank account of CHF 56’000.

To use a second source for defining in more detail, I interviewed another expert from the trading industry – Mr. Daniel Ballarin from Swissquote. According to him, a retail investor doesn’t have a clear definition in theory. Rather it is depended on the numbers of trades during a fixed period as well as the trading volume. In this sense, a wealthy private client is considered as a retail investor if he doesn’t trade frequently. On the other hand, a client with only 50’000 Swiss franc on his account, but with a high number of trades, can be regarded as a “VIP-client” or Premium client. Unfortunately he is not permitted to define the clear term of a retail investor for Swissquote due to their business secret. 12 Nevertheless, in their annual report 2013 13 and their presentation of the results for the business year
2013 14, they published several interesting and informative statistics. Those numbers are particularly interesting because Swissquote is a typically retail bank, where most customers are using this platform for trading financial instruments.

Initially, the average client at Swissquote has assets on his account of CHF 46’603, which includes the deposit and safekeeping account. Moreover the average retail client has five different asset categories in his portfolio. He invested 43% (CHF 20’039) in shares, 20%
(CHF 9’320) in funds, 8% (CHF 3’728) in bonds, 2% (CHF 932) in options and other speculative derivatives and a total of 27% (CHF 12’582) as a deposit on the account. Further to this, Swissquote has over 163’000 trading accounts with assets of total CHF 9.1 billion, which results in average assets per trading client account of CHF 55’700.

This number is in comparison with results from the last few years clearly higher (historical average CHF ≈45’000). The report also stated that the average transaction per client in
2013 was 12.5. 15

12

All material from this section is derived from Interview Ballarin (2014).

13

Swissquote (2013a).

14

Swissquote (2013b).

15

All material from this section is derived from Swissquote (2013b, p. 7f).

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“Option strategies – A practical Guideline for Retail Investors”

Finally I will define the term retail investor by considering the numbers previously stated from Swissquote and Moneyland as well as the discussions held with Daniel Ballarin and
Thomas Liechti16. In this bachelor thesis, a typical retail investor has CHF 40’000 on his whole bank account whereof CHF 25’000 (≈ the proportion of shares, derivatives and half of funds) are available assets for option strategies and other investments on the capital market and CHF 15’000 (≈ the proportion of cash, fixed income and half of the funds) is regarded as a cash deposit on the account.

3.2. Regulatory Limitations
First of all, we have to be aware that there are two similar terms, which are very different in theory and practice. Therefore we will separate the terms “Short selling” or “Shorting” and “Naked short selling” or “Naked shorting”. The first term means by definition the sale of securities like shares or bonds “that is not owned by the seller” 17 and that they have to get borrowed from another person. In other words a short seller has to borrow the shares from a lender and has to pay for this transaction a fee. 18
In contrast to short selling, naked short selling means that the seller does not first borrow the securities or ensures that the securities can get borrowed. He rather takes the obligation to buy back the securities in the future and thus closing his “naked” position. Naked means in this sense, that he does not own the securities.

With the strategy of short selling and naked short selling the investor is speculating of falling stock prices so he can sell it high at the right moment and buy back on lower prices later on. The difference between the two prices is his profit. Short selling can also be used for hedge a position in the market of decreasing market prices.

In general, such transactions increase the pressure for a downturn of the stock market and reinforce the negative market trend. 19 Therefore, regulators started to set up certain limitations when it comes to naked short selling and so countries like France, Italy or
Spain ban it to ease market pressure.

16

Interview Liechti (2014).

17

Investopedia (2014).

18

All material in this section is derived from Securitieslendingtimes (2014).

19

Neate et al. (2011).

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“Option strategies – A practical Guideline for Retail Investors”

Figure 1: How short selling works 20

Naked short selling

Short selling

Source: Diffen (2014).

Now let’s turn to Switzerland and how the SIX Exchange and the Swiss regulators are handling naked short selling and short selling. In general naked short selling, as I described above is not permitted and the Swiss Federal Banking Commission will prosecute any abusive behaviours. This emphasises the SFBC on September 19th 2008 in their media release. 21 Further to this, financial institutions are responsible when selling securities on behalf for clients that they are able to deliver the securities on the settlement date. 22

According to Dr. Alain Bichsel, Head Media Relation of the SIX Swiss Exchange group, short selling is permitted as long as the seller is able to deliver the securities within the deadline set for this. 23 In addition to this, the rule book of the SIX Swiss Exchange Ltd. 24 and the Trading-Directive No. 3 clearly state that “[…] short selling of securities traded on
SIX Swiss Exchange is permitted” as long as the short party “can settle the short sale at the latest upon execution of the trade […]”. 25

20

Diffen (2014).

21

SFBC (2008).

22

SIX Swiss Exchange (2013a).

23

All material from this section is derived from Interview Bichsel (2014).

24

SIX Swiss Exchange (2013b).

25

Directive 3: Trading, Para. VI, Art. 19, No. 2.

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“Option strategies – A practical Guideline for Retail Investors”

As we will see later on, only a limited number of Swiss banks are offering short selling to their clients as a business, mostly wealthy private and institutional clients. In this case, they lend the securities from one client, who is long in the underlying and pass on the securities to a third party, who will then have a short position in his portfolio.
There is only one exception namely the Saxo Bank, where customers can trade CFD’s
(Contract for Difference), which will be explained later on. 26

To sum up, naked short selling is not allowed by law whereas short selling in general is permitted, as long as the short selling party is able to deliver the securities upon a certain period of time.

4. Trading Platforms
After clearly defining the term retail investor and what difficulties he has to overcome for trading option strategies, I will now analyze the trading platforms in Switzerland in relation to costs and possibilities for trading options and other financial instruments.

In Switzerland, there are currently over 290 financial institutions and approximately 180 banks are offering products and services to retail clients. 27 For this bachelor thesis, I will put the focus on the twelve biggest banks in the retail banking market and so covering the main players.

4.1.1. Pre-conditions
Before analyzing the different platforms for trading options, warrants and shares, it is indispensable to make some pre-conditions:
1. We only take into account stocks, options, warrants and other financial instruments, which are actively traded on the SIX Swiss Exchange and EUREX Exchange.
2. For minimizing the transaction costs, I will only consider the fees and costs related to online banking. The transaction costs emerging when trading by phone or directly with the relationship manager are much higher than by the internet.

26

Saxo Bank (2013).

27

SwissBanking (2014).

18

“Option strategies – A practical Guideline for Retail Investors”

3. Naked short selling, as mention above, is not permitted and short selling is only possible when the investor is able borrow the shorted securities.
4. Value Added Tax (VAT): All costs are without VAT and will be added at the end in the evaluation part.
5. The analysis is always related to a one year-period and has to be adapted to the lifetime of an option strategy. This will be primarily relevant for the indirect costs like the safekeeping account fee.
6. Due to lowering the complexity for the analysis, the possibility of lower debit interest rate in form of a Lombard loan for financing certain option strategies will be ignored. Moreover, in practice most financial institutions have a minimum amount for a Lombard loan between CHF 20’000 and CHF 50’000. Therefore by considering the collateral rate of 60% for Blue-chip stocks and 0% for options, a retail investor needs more than CHF40’000, which would excess his maximum deposits he has on the bank account. 28
7. Information collected end of March 2014.

28

SIX Securities Services (2013).

19

“Option strategies – A practical Guideline for Retail Investors”

4.2. Universal Banks
4.2.1. UBS
UBS employs over 62’000 worldwide (about 22’000 in Switzerland) and has CHF 2’230 billion assets under management. 29 In Switzerland, it is the biggest bank in relation to capitalisation, numbers of clients and employees. UBS has over 300 branches in every canton and every third household and about 40% of Swiss companies have an account at
UBS. 30
Table 1: Conditions of UBS 31

Trading Fees and other related Costs
Basic fee / Safekeeping account fee

0.30% p.a.
•

EUREX Options*: 1.20% or minimum 180 CHF

Brokerage fees

•

Stocks and Warrants traded on SIX Swiss Exchange:
0.9% or minimum CHF 40

Account management

Private current account: CHF 5 per month

Interest rate on credit balances

0.025% p.a.

Interest rate on debit balances

Overdrafts on account: 12.5% p.a.

Short selling of shares

Not possible

*No online trading available – EUREX options are only tradable by phone with the client relationship manager.

4.2.2. Credit Suisse Group
At Credit Suisse there are working currently 47’400 employees all over the world. In Switzerland, out of 19’000 employees, approximate 2’100 employees have direct contact with customers, either by phone, physically at their 229 branches or by mail. There are over
100’000 companies and about two million private people, who have an account at Credit
Suisse. 32

29

The Wall Street Journal (2013).

30

All material in this section is derived from UBS (2014a).

31

UBS (2011), UBS (2014b), UBS (2014c).

32

Credit Suisse (2014a).

20

“Option strategies – A practical Guideline for Retail Investors”

Table 2: Conditions of Credit Suisse 33

Trading Fees and other related Costs
Basic fee / Safekeeping account fee

0.3% p.a. or minimum CHF 5 per position and per month
•

EUREX Options: 0.94% or minimum CHF 55

Brokerage fees

•

Stocks and Warrants traded on SIX Swiss Exchange:
0.79% or minimum CHF 55

Account management

Private account: CHF 5 per month

Interest rate on credit balances

0.025% p.a.

Interest rate on debit balances

Overdrafts on account: 12.5% p.a.

Short selling of shares

Not possible*

*Naked short selling is not allowed for retail clients, but there is the possibility for wealthy private clients and institutional investors to short selling stocks.

4.3. Cantonal banks
4.3.1. Zürcher Kantonalbank ZKB
As the biggest cantonal bank, the Zürcher Kantonalbank has a leading position in the banking business in Switzerland, especially in the canton of Zurich as well as in the neighbour cantons. 34 Since the founding year 1870, ZKB is offering a wide range of services and products to their clients. In the year 2013, the bank has over CHF 191 billion assets under management. 35

33

Credit Suisse (2013), Credit Suisse (2014b), Credit Suisse (2014c).

34

Züricher Kantonal Bank (2014a).

35

Zürcher Kantonal Bank (2014b).

21

“Option strategies – A practical Guideline for Retail Investors”

Table 3: Conditions of Zürcher Kantonalbank 36

Trading Fees and other related Costs
Basic fee / Safekeeping account fee

0.25% p.a. or minimum CHF 2.50 per position and per month
•
•

Brokerage fees

•

EUREX Options: CHF 60 and 0.5% of the transaction volume
Stocks traded on SIX Swiss Exchange: 0.5% or minimum
CHF 50
Warrants traded on SIX Swiss Exchange: 0.5% or minimum CHF 60

Account management

Private account: CHF 12 p.a.

Interest rate on credit balances

0.05% p.a.

Interest rate on debit balances

Overdrafts on account: 12.5% p.a.

Short selling of shares

Not possible

4.3.2. Berner Kantonalbank BEKB
Berner Kantonalbank has over 500’000 clients and 75 branches in the canton of Bern and
Solothurn. As a classic retail bank, they are offering mainly products for payments, savings, investing, pensions, mortgages and private banking. 37 The trading platform of BEKB is Money-Net, where shares, bonds, funds and warrants are traded. EUREX-options in contrary are traded at the BEKB directly.
Table 4: Conditions of Berner Kantonalbank 38

Trading Fees and other related Costs
Basic fee / Safekeeping account fee

0.017% or minimum CHF 50 p.a.
•
•

Brokerage fees

EUREX Options*: 1.0% + CHF 60 or minimum CHF 80
Stocks and Warrants traded on SIX Swiss
Trading volume:
CHF 1001 – 5000 : CHF 25
CHF 5001 – 10’000 : CHF 35

Account management

Private current account: CHF 30 p.a.

Interest rate on credit balances

0.10% p.a.

36

Zürcher Kantonalbank (2013a), Zürcher Kantonalbank (2013b), Zürcher Kantonalbank (2014c).

37

Berner Kantonalbank (2014a).

38

Berner Kantonalbank (2014b), Berner Kantonalbank (2014c, p. 2ff), Berner Kantonalbank
(2014d, p. 4ff), Money-Net (2014).

22

“Option strategies – A practical Guideline for Retail Investors”

Overdrafts on account: 9.0% p.a.
Interest rate on debit balances

Besides the EUREX-rates for the margin account, there is an additional blocking amount of CHF 5’000.

Short selling of shares

Not possible

*No online trading available – only tradable by phone with the trading desk of BEKB.

4.3.3. Banque Cantonale Vaudoise BCV
Banque Cantonal Vaudoise is the second-largest cantonal bank in Switzerland and one of the top full-service banks. BCV has 70 branches in the canton of Vaud and more than
2000 employees. 39 All trades are executed over Trade Direct (former E-sider), the external trading platform of BCV.
Table 5: Conditions of Banque Cantonale Vaudoise 40

Trading Fees and other related Costs
Basic fee / Safekeeping account fee

0.025% or minimum CHF 10 per quarter
•

EUREX Options: Not offered

•

Stocks and Warrants traded on SIX Swiss
Trading volume:
CHF 751 – 2’000 : CHF 17.90
CHF 2’001 – 10’000 : CHF 29.90
Separate execution fee (exchange fee): 0.06‰ or minimum
CHF 2.00

Brokerage fees
•

Account management

Private account: No fees

Interest rate on credit balances

0.01% p.a.

Interest rate on debit balances

Overdrafts on account: 11.0% p.a.

Short selling of shares

Not possible

39

Banque Cantonal Vaudoise (2014a).

40

Banque Cantonale Vaudoise (2014b), TradeDirect (2014).

23

“Option strategies – A practical Guideline for Retail Investors”

4.4. Online Banks
4.4.1. Saxo Bank (Switzerland) Ltd.
Saxo Bank, the Danish mother company, is a world leading international investment banking group and specialises in online trading of any securities, mainly derivatives and currencies. Saxo Bank (Switzerland) Ltd. was founded in the year 1992 and with its attractive conditions and trading possibilities makes it a key player in online trading in Switzerland. 41
At Saxo Bank, clients are able to trade CFD (Contract For Difference), which is a special derivative and has the same characteristics as short selling.
Table 6: Conditions of Saxo Bank (Switzerland) Ltd. 42

Trading Fees and other related Costs
Basic fee / Safekeeping account fee

No fees
•

Brokerage fees

EUREX Options: CHF 8 per contract

•

Stocks traded on SIX Swiss Exchange: 0.10% or minimum
CHF 18
Warrants: Not offered

•
Account management

Private account: No fees

Interest rate on credit balances

0.00% p.a.

Interest rate on debit balances

Overdrafts on account: 8.02% p.a. (Libor 3M + 8.0%)

Short selling of shares

Not possible, but CFD-contracts are tradable:
0.10% or minimum fee CHF 18

4.4.2. Swissquote Bank S.A.
Swissquote, domiciled in Gland VD, is the leading bank when it comes to online banking, especially to online trading of stocks, bonds, forex and derivatives. 43 The bank has over
201’000 clients with CHF 10.1 billion assets under custody and was founded in the year
1990 by Marc Bürki and Paolo Buzzi. 44

41

Saxo Bank (2014a).

42

Saxo Bank (2014b).

43

Swissquote (2012a).

44

Swissquote (2012b).

24

“Option strategies – A practical Guideline for Retail Investors”

Table 7: Conditions of Swissquote 45

Trading Fees and other related Costs
Basic fee / Safekeeping account fee

0.025% or minimum CHF 15 per quarter
•

EUREX Options: CHF 1.50 per contract

•

Stocks and Warrants traded on SIX Swiss Exchange: transaction volume:
CHF 501 – 2’0000  CHF 20
CHF 2’001 – 10’000  CHF 35
Separate fee per transaction of CHF 0.85

Brokerage fees

•
Account management

Private current account: no fees

Interest rate on credit balances

0.10% p.a.

Interest rate on debit balances

Overdrafts on account: 4.25% p.a.

Short selling of shares

Not possible

4.4.3. Cash zweiplus
As a relatively young joint-Venture of the bank zweiplus and Cash, publisher of financial and economic information, the Bank Cash zweiplus is an online bank focused on retail banking 46. They are mainly offering products and services for payments, saving and investing. 47
Table 8: Conditions of Cash zweiplus 48
Trading Fees and other related Costs
Basic fee / Safekeeping account fee

CHF 20 per quarter
•

EUREX Options: Not offered

Brokerage fees

•

Stocks and Warrants traded on SIX Swiss Exchange:
CHF 29

Account management

Current account: No fees if deposit is higher than CHF 10’000, otherwise CHF 5 per month

Interest rate on credit balances

0.125% p.a.

Interest rate on debit balances

Overdrafts on account: 6.75% p.a.

Short selling of shares

Not possible

45

Swissquote (2014).

46

Bank zweiplus (2014a).

47

Cash (2014a).

48

Cash (2014b), Cash (2013).

25

“Option strategies – A practical Guideline for Retail Investors”

4.5. Other Banks
4.5.1. Migros Bank AG
Gottlieb Duttweiler founded Migros Bank AG in 1958 with the aim of providing a premium service for attractive conditions. 49 Nowadays, this bank is one of the top ten retail banks in
Switzerland and has over 800’000 clients. 50
Table 9: Conditions of Migros Bank AG 51
Trading Fees and other related Costs
Basic fee / Safekeeping account fee

0.19% or minimum fee CHF 30 p.a.
•

EUREX Options: CHF 200 per trade

Brokerage fees

•

Stocks and Warrants traded on SIX Swiss Exchange:
CHF 40

Account management

Private account: No fees

Interest rate on credit balances

0.1% p.a.

Interest rate on debit balances

Overdrafts on account: 8.0% p.a.

Short selling of shares

Not possible

4.5.2. Bank Coop AG
Bank Coop was founded in the year 1927 under the name of “Bank der Genossenschaften und Gewerkschaften” (English: bank of associations and labor unions). 52 2001, the cantonal bank of Basel (BKB) took over the controlling shareholding of Bank Coop. By end of the first semester 2013, the bank managed CHF 18.32 billion client assets and is represented with 32 branches all over Switzerland. 53

49

Migros Bank (2014a).

50

Migros Bank (2014b).

51

Migros Bank (2014c), Migros Bank (2014d).

52

Bank Coop (2014a).

53

Bank Coop (2014b).

26

“Option strategies – A practical Guideline for Retail Investors”

Table 10: Conditions of Bank Coop AG 54
Trading Fees and other related Costs
Basic fee / Safekeeping account fee

CHF 10 per position or minimum CHF 60 p.a.
•

EUREX Options: 1.75% or minimum CHF 140 + CHF 0.15 per contract
Stocks and Warrants traded on SIX Swiss Exchange:
0.726% or minimum CHF 40, respectively CHF 58 for
Warrants

Brokerage fees

•

Account management

Private account: No fees if total deposits are more than CHF
25’000, otherwise CHF 5 per month

Interest rate on credit balances

0.05% p.a.

Interest rate on debit balances

Overdrafts on account: 11.50% p.a.

Short selling of shares

Not possible

4.5.3. PostFinance AG
Founded over 100 years ago as the financial service unit of the Federal Mail Service
(Swiss Post), PostFinance’s main duty was and still is conducting the national and international payments. Since then, the bank gained in the year 2013 the license for banking and is now the fifth largest retail financial institution in Switzerland. 55 From autumn 2015,
Swissquote will operate as the trading platform for PostFinance and handling all trading orders placed by the customers of PostFinance. 56
Table 11: Conditions of PostFinance AG 57
Trading Fees and other related Costs
Basic fee / Safekeeping account fee

No fees
•

EUREX Options: Not offered

•

Stocks and Warrants traded on SIX Swiss Exchange:
Trading volume:
CHF 0 – 5’000  CHF 25
CHF 5’001 – 10’000  CHF 35

•

Additional fee: 0.006% of the trading volume or minimum
CHF 2

Brokerage fees

54

Bank Coop (2014c), Bank Coop (2013a, p. 1f), Bank Coop (2013b, p. 1).

55

PostFinance (2014a).

56

Swiss Post Ltd (2014).

57

PostFianance (2014b), PostFinance (2014c), PostFinance (2014d).

27

“Option strategies – A practical Guideline for Retail Investors”

Account management

Current account: No fee if deposit is higher than CHF 7’500, otherwise CHF 5 per month

Interest rate on credit balances

0.05% p.a.

Interest rate on debit balances

Overdrafts on account: 9.50% p.a.

Short selling of shares

Not possible

4.5.4. Raiffeisen
With a market share of 19% in the saving and investment business and 1032 branches,
Raiffeisen is one of the biggest Swiss banks for retail clients. Over 10’500 employees are responsible for 3.7 million of client accounts with a total deposits of CHF 138 billion. Raiffeisen is a cooperative bank with 1.8 million cooperative members. 58

In the analysis bellow I will consider the terms and conditions from the Raiffeisen group, which are rather a recommendation and thus not binding. Therefore the terms and conditions of each Raiffeisen branch may vary.
Table 12: Conditions of Raiffeisen 59
Trading Fees and other related Costs
Basic fee / Safekeeping account fee

0.20% or minimum CHF 5 per position p.a.

Brokerage fees

•
•

EUREX Options*: 0.75% + CHF 150
Stocks and Warrants traded on SIX Swiss Exchange:
0.66% or minimum fee of CHF 40

Account management

Private account: No fees if deposit is higher than CHF 5’000 otherwise CHF 30 p.a.

Interest rate on credit balances

0.05% p.a.

Interest rate on debit balances

Overdrafts on account: 10.00% p.a.

Short selling of shares

Not possible

*No online trading available – only tradable by phone with the client relationship manager

58

Raiffeisen (2014a).

59

Raiffeisen (2014b, p. 1), Raiffeisen (2014c), Raiffeisen (2014d, p. 1).

28

“Option strategies – A practical Guideline for Retail Investors”

4.6. Stock Exchange and Taxes
The federal security transfer tax is a stamp duty and is charged by the government for trading certain securities. For Swiss securities, the stamp duty is 1.5‰ (0.15%) from the total trading volume. This tax is only being charged when trading stocks, bonds and other securities and is not applicable when trading financial derivatives like options and warrants. 60 Further to this, the stock exchange is also charging a small fee 61, which includes the reporting, trading and participant fee as well as the royalty for the Swiss Financial
Market Supervisory Authority (FINMA). In general this fee represents only a fraction amount of the stamp duty, and thus it will be ignored for this analysis.

Lastly, in Switzerland the basic fees for the safekeeping account as well as for the account management are liable to VAT of 8.00%. In practice the VAT is already included in the fee for account management, whereas this tax has to be added to the basic fee of the safekeeping account (excluded). In contrary, all other transaction costs like brokerage fees or fees for account management are exempt from this tax. 62

5. Conclusion I
5.1. Pre-assumptions
After defining in chapter 3.1 the term retail investor more accurately, I can now determine the exact portfolio size and transactions in more detail. The average small investor in this thesis has CHF 25’000 on his safekeeping account and CHF 15’000 cash on his deposit account. Due to lowering the unsystematic risk, he will diversify his portfolio by investing into several asset-categories. 63 Therefore he invests maximal CHF 6’000 per strategy or about one seventh of the whole amount on his bank account. On the basis of the numbers from the documents of Swissquote 64, the average trading client of the bank is executing
12.5 transactions per year. Thus by taking into account the average transactions per option strategy of about ≈ 3 65, I assume that the typical retail investor will invest in four to five option strategies per year.

60

All material in this section is derived from Eidgenössische Steuerverwaltung ESTV (2011).

61

SIX Swiss Exchange (2014).

62

Federal Act on Value Added Tax, Para. 21, Art. 19 lit. e).

63

Evans/Archer (1968, p. 761).

64

Swissquote (2013b, p. 7f)

65

Chapter 8.4 “Evaluation Matrix”.

29

“Option strategies – A practical Guideline for Retail Investors”

Moreover to diversify the portfolio, the retail investor is also invested in six other investments like bonds or stocks. Those securities are in his safekeeping account and as a result, the fixed costs have to be divided by 10, which is an approximation for allocating a fraction of the fixed costs to every investment he has (including the different instruments for option strategies). The quotient of this calculation has to be added to the transaction costs for every option strategy for comparing the different trading platform effectively.

In addition, for some option strategies like Long Butterfly Spread or Strap and Strip, we use for constructing two or more equal options. For the calculations I only consider those transactions as one, because it is one trade with double or threefold option contracts. The reason for this is that banks are considering such transactions only as one and thus they charge the trading fee only once. The exception is Swissquote, Saxo Bank and Bank Coop, where they charge a fee based on numbers of contracts. As we will see, such costs are only a smaller fraction of the whole transaction fee. Last but not least, according to
Daniel Ballarin, the average price for one EUREX-contract may vary but for this analysis I will fix the price at CHF 3.00 and thus the investor will buy about five option contracts (total CHF 1’500). 66

These mentioned assumptions are mainly due to minimizing the complexity as well as increasing the logical understanding of the analysis.

5.2. Conclusion of Trading Platforms
In conclusion, I can assess that there are significant differences between the twelve trading platforms, which I will divide into four parts. The detailed summaries of the trading platforms are in the chapters 5.3 and 5.4 as well as in the chapter 8.4 Evaluation Matrix.
5.2.1. Transaction Cost
The most attractive trading platform for retail investor is Swissquote, where the average option strategy costs CHF 22.44 (without fixed costs) followed by Saxo Bank with CHF
91.06 (+406%). Both banks have attractive conditions for trading option strategies for individual investors because they are offering brokerage fee, which is based on a percontract-basis. As a result, the brokerage fee is minimal when trading only several contracts instead investing a bigger amount of money.

66

Interview Ballarin (2014).

30

“Option strategies – A practical Guideline for Retail Investors”

With such a pricing, retail investors can highly benefit because there is no minimum fee.
After those two platforms, Credit Suisse with CHF 132.11 (+589%) is on the third rank, followed by Zürcher Kantonalbank (CHF 159.20; +709%), Berner Kantonalbank (CHF
171.88; +766%), Bank Coop (CHF 321.11; +1’431%), Raiffeisen (CHF 366.88; +1’635%),
Migros Bank (CHF 408.74; +1’821%) and UBS (CHF 453.39; +2’020%). PostFinance,
Cash zweiplus and Banque Cantonal Vaudoise are on the last rank and not numerical rated because they are not offering EUREX options and thus, option strategies cannot be constructed at those platforms.

When taking into account the total transaction costs and including the fixed costs, the rank is still the same. The average transaction cost of the nine banks, where EUREX options are offered, is CHF 236.11 and when including fixed costs CHF 246.49.

5.2.2. Fixed Costs
Fixed costs, which are the basic fee for the safekeeping account and the management fee for the deposit account, are not related directly to transaction costs. Nevertheless they have to take into consideration when investing into securities because they negatively influence the net performance of a portfolio.

In my analysis, these costs are not directly evaluated because they are less weighted in relation to the direct transaction costs. However, there are significant differences, which affect the profit of a retail investor. Only two banks do not charge any fees for the safekeeping account – Saxo Bank and PostFinance. Therefore it is the most attractive possibility to keep the securities in the portfolio at those two trading platforms. On the third rank, there is Banque Cantonal Vaudoise with total indirect costs of CHF 43.20, followed by Migros Bank (CHF 51.30), Raiffeisen (CHF 54.00), Swissquote (CHF 64.80), Bank
Coop (CHF 66.10), Berner Kantonalbank (CHF 84.00), Cash zweiplus (CHF 86.40), UBS
(CHF 141.00), Zürcher Kantonalbank (CHF 206.40) and Credit Suisse (CHF 448.80).

This numbers are illustrating how significant the differences between the banks are and therefore such indirect costs are affecting the performance of option strategies or any other investments highly.

31

“Option strategies – A practical Guideline for Retail Investors”

5.2.3. Interest Margin
The interest margin, which is the difference between the interest on the debit and credit account, shows how much spread takes the bank. The smaller this rate is, the smaller the margin of the bank and thus, the less costly it is for a retail investor to borrow money or more attractive to deposit money on the account.

The best conditions are offering Swissquote with a spread of 4.15%, Cash zweiplus and
Migros Bank with 6.625% respectively 7.90%. On the other side, the universal banks and two cantonal banks have a spread which is higher than 12%.
5.2.4. EUREX Options vs. Warrants
As we saw in the previous analysis (Chapter 5.2.1 Transaction Cost), the differences in the total transaction costs are massive when trading option strategies. As an investor, there is also the possibility to trade warrants. A warrant is issued by a financial institution and entitles the buyer of the derivative with the same rights as a EUREX option, but the investor can only be on the buying-side and not selling them. 67

Due to the reason that warrants are standardized and have a higher margin for the issuing bank, the conditions for trading such products are in general much more attractive for investors, especially when it comes to brokerage fee. Warrants are also traded on the SIX
Swiss Exchange and therefore banks are using the same tools for trading warrants as for stocks and bonds, which leads to economies of scale. Therefore in Chapter 5.4 Evaluation with Warrants, my analysis is mainly based on warrants, where this instrument is possible for constructing option strategies (only for the long-side of options). As a result only nine strategies are solely tradable with warrants and 36 strategies are still involving shorting options and thus, the investor has still to trade EUREX options.

Trading warrants is less expensive and it is not required to set up a margin account. For that reason the average net transaction costs are CHF 169.66 (excl. PostFinance, Cash zweiplus and Banque Cantonal Vaudoise) and in average about 29% (-CHF 66.12) cheaper than only with EUREX options. By using warrants instead of EUREX options, a retail investor is able to diminish the transaction costs and increase the possible maximal profit of his strategy.

67

All material in this section is derived from Oxford Dictionaries (2014).

32

“Option strategies – A practical Guideline for Retail Investors”

Table 13: Conclusion of Trading Platforms - EUREX Options vs. Warrants

Ø Transaction Costs w/ EUREX Options and Warrants
Ø Transaction Cost of Option Strategies
EUREX Options

Warrants

Change in %

1. Swissquote

22.44

35.74

+ 59%

2. Saxo Bank

91.06

92.60

2%

3. Credit Suisse

132.11

110.00

-17%

4. Berner Kantonalbank

171.88

117.23

-32%

5. Zürcher Kantonalbank

159.20

151.01

-5%

6. Bank Coop

321.11

230.66

-28%

7. Raiffeisen

366.88

234.35

-36%

8. UBS

408.74

255.72

-37%

9. Migros Bank

453.39

278.41

-39%

10. PostFinance

X

45.22*

X

11. Cash zweiplus

X

48.33*

X

12. Banque Cantonal Vaudoise

X

33.39*

X

Ø Transaction Costs in CHF

236.31

169.66 / 137.82*

-29% /
-42%*

*Only the average transaction costs of nine out of 45 strategies.
5.2.5. Trading Possibilities
Every trading platform has their own trading policies on what products and services they want to offer to their clients. For retail investor, only Saxo Bank is offering all products and services, which are necessary to trade all option strategies. With their own CFD-products, clients are able to selling the underlying security without owning it and thus shorting the stock naked. All other banks do not offer short selling of stocks to retail clients. It remains to mention that Saxo Bank do not offer warrants, which is not a clear disadvantages, because customers still have the possibility to buy and sell EUREX options.
Moreover, as already mentioned, PostFinance, Cash zweiplus and Banque Cantonal
Vaudoise are not offering EUREX options and therefore there are only nine option strategies, which can be constructed on their platform.

33

“Option strategies – A practical Guideline for Retail Investors”

5.3. Evaluation with EUREX Options

UBS

0.00%

0.20%

0.30

0.19%

0.00%

0.00%

0.025%

0.00

0.00

5.00

2.50

0.00

0.85

0.40

0.00

0.00

0.00

0.00

0.00

Minimum Fee in CHF p.a.

60.00

0.00

0.00

0.00

50.00

60.00

0.00

0.00

30.00

0.00

80.00

40.00

% of Transaction

0.00%

0.00%

0.94%

0.5% + CHF

1.75%

0.75% +

1.20%

0.00%

X

X

X

minimum Fee in CHF

0.00

0.00

55.00

180.00

200.00

X

X

X

Fee per contract in CHF

Basic
Fee*

1

EUREX
Options*1

1.50

8.00

0.00

% of Transaction

0.00%

0.10%

Minimum Fee in CHF

20.00

Transaction

Raiffeisen

0.017%

Minimum Fee in CHF (per position and per month)

60.00

1.0% +
CHF 60.00

CHF 150.00

Cash

Bank

Credit

80.00

140.00 +

0.00

0

0.15

0.00

0.00

0.00

X

X

X

0.79%

0.50%

0.00%

0.726%

0.66%

0.90%

0.00%

0.00%

0.00%

0.00%

18.00

55.00

50.00

25.00

40.00

40.00

40.00

40.00

25.00

29.00

17.90

X

18.00

X

X

X

X

X

X

X

X

X

X

Separate Transaction Fee in CHF

0.85

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

2.00

X

0.00

Account Management Fee per month in CHF

0.00

0.00

5.00

1.00

2.50

0.00

0.00

0.00

0.00

0.00

0.00

0.00

4.15%

8.02%

12.475%

12.45%

8.90%

11.45%

9.95%

7.90%

7.90%

9.45%

6.625%

Total Ø

Bank Coop

0.25%

BCV

BEKB

0.30%

zweiplus

ZKB

0.00%

% of Transaction

Migros

Saxo Bank

0.03%

Terms and Conditions

Suisse

Swisquote

PostFinance

Table 1 : Evaluation with EUREX Options 68

10.90%

Stocks*1

Short selling in CHF

Interest Margin (Difference between credit and debit interest)
Federal Security Transfer Tax and VAT
Ø Option Strategy in CHF*

2

Fixed Costs in CHF*3
Total Ø Transaction Costs per Option Strategy in CHF

8.15%
22.44

91.06

132.11

159.20

171.88

321.11

366.88

408.74

453.39

X

X

X

236.11

6.48

0.00

44.88

20.64

8.40

6.61

5.40

14.10

5.13

0.00

8.64

4.32

10.38

28.92

91.06

176.99

179.84

180.28

327.72

372.28

422.84

458.52

(0.00)

(8.64)

(4.32)

246.49

*1 Either or – not possible that two or more fees are getting charged – only one fee per category.
*2 Including transaction costs of EUREX options and stocks, separate transaction fees, federal security transfer tax and VAT.
*3 Including fix costs like basic fee for the safekeeping account and the account management fee.

68

All material in this table is derived from chapter 8.4 “Evaluation Matrix”.

34

“Option strategies – A practical Guideline for Retail Investors”

5.4. Evaluation with Warrants

UBS

0.00%

0.20%

0.30%

0.19%

0.00%

0.00%

0.025%

0.00

0.00

0.00

2.50

5.00

0.85

0.40

0.00

0.00

0.00

0.00

0.00

Minimum Fee in CHF p.a.

60.00

0.00

50.00

0.00

0.00

60.00

0.00

0.00

30.00

0.00

80.00

40.00

% of Transaction

0.00%

0.00%

1.0% +

0.5% +

CHF 60.00

CHF 60.00

0.94%

1.75%

1.20%

0.00%

X

X

X

minimum Fee in CHF

0.00

0.00

80.00

55.00

140.00 +

150.00

180.00

200.00

X

X

X

Fee per contract in CHF

Basic Fee*1

EUREX Options*1

1.50

8.00

0

0.00

0.00

0.15

0.00

0.00

0.00

X

X

Stocks*1

X

% of Transaction

0.00%

0.10%

0.00%

0.50%

0.79%

0.726%

0.66%

0.90%

0.00%

0.00%

0.00%

0.00%

Minimum Fee in CHF

20.00

18.00

25.00

50.00

55.00

40.00

40.00

40.00

40.00

25.00

29.00

Warrants*1

17.90

%

0.00%

X

0.00%

0.50%

0.79%

0.726%

0.66%

0.90%

0.00%

0.00%

0.00%

0.00%

Minimum Fee in CHF

20.00

X

25.00

60.00

55.00

58.00

40.00

40.00

40.00

25.00

29.00

17.90

X

18.00

X

X

X

X

X

X

X

X

X

X

0.85

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

2.00

0.00

2.00

0.00

0.00

2.50

1.0

1.00

0.00

0.00

5.00

0.00

0.00

0.00

0.00

4.15%

8.02%

8.90%

12.45

12.475%

11.45%

9.95%

12.475%

7.90%

9.45%

6.625%

Transaction

Raiffeisen

0.30%

10.90%

Minimum Fee in CHF (per position and per month)

Short selling in CHF
Separate Transaction Fee in CHF
Account Management Fee per month in
CHF
Interest margin (Difference between credit and debit interest)

CHF

Cash

Bank

Credit

Federal Security Transfer Tax and VAT

0.75% +

Total Ø

Bank Coop

0.25%

BCV

ZKB

0.017%

zweiplus

BEKB

0.00%

% of Transaction

Migros

Saxo Bank

0.03%

Terms and Conditions

Suisse

Swisquote

PostFinance

Table 2: Evaluation with Warrants 69

8.15%

Ø Option Strategy in CHF*2

35.74

92.60

117.23

151.01

131.11

230.66

234.35

255.72

278.51

(45.22)

(48.33)

(33.39)

169.66

Fixed Costs in CHF*3

6.48

0.00

6.61

20.64

44.88

6.61

5.40

14.10

5.13

0.00

8.64

4.32

10.38

42.22

92.60

123.84

171.65

175.99

237.27

239.73

269.73

283.64

(45.22)

(56.97)

(37.71)

180.04

Total Ø Transaction Costs per Option
Strategy in CHF

*1 Either or – not possible that two or more fees are getting charged – only one fee per category.
*2 Including transaction costs of EUREX options and stocks, separate transaction fees, federal security transfer tax and VAT.
*3 Including fix costs like basic fee for the safekeeping account and the account management fee.

69

All material in this table is derived from chapter 8.4 “Evaluation Matrix”.

35

“Option strategies – A practical Guideline for Retail Investors”

6. Option Strategies
Now we turn on to option strategies. In the following chapter the reader will receive a short but comprehensive overview of over 45 strategies. Every strategy is unique in relation to the expectation, the set up or the risk profile. In general, some option strategies are technically feasible either with call or put options, but by reasons of simplicity I will discuss only call options in such a scenario.

Furthermore I will not examine calendar spread, because the spread is created with different time of maturity of the used options. The reason for this is that on one hand that for those strategies an investor needs a deeper knowledge about the set up and especially the Theta (time value of the option). On the other hand, in practice, it is hard to handle the different times to mature, especially when it comes to calculations and when to execute the rights.

In addition, in the following analysis I will merely consider American options instead of
European options, because American options are traded more often, especially on the
EUREX Exchange. Moreover, European options are only traded on the OTC market and therefore are related to higher transaction costs and not tradable by online banking. 70

Explanation for the tables:
•

ATM = At-the-money

•

ITM = In-the-money

•

OTM = Out-the-money

•

K = Strike level (K1 is the lowest strike level and then increases by K2, K3 etc.)

•

* = This strategy can also be constructed with Put options

•

For one option contract = 100 underlying securities

Figure 2: Symbol icon

Beginner

Intermediate

Expert

Source: own illustration, according to Archeolog-home (2014).

70

EUREX Exchange (2014).

36

“Option strategies – A practical Guideline for Retail Investors”

6.1. Neutral Strategies
For this strategy, investors are expecting in general that the prices of the underlying assets will move only sideways with low upside and downside peaks. In other words, he is mainly looking for low volatility during the lifetime of the option strategy and thus bearish on volatility.
Table 14: Neutral Strategies
Maximum Potential
Profit

Maximum Potential
Loss

Limited reward

Limited risk

4 transactions:

• 1 x Short OTM Call option with K3 (C)

(K2 – K1– net debit

(Net debit paid)

• Buying two different options – (A), (B)

• 1 x Long OTM Call option with K4 (D)

Strategy

paid)

The Setup

Long Condor

• 1 x Long ITM Call option with K1 (A)

Spread*

Transactions

Payoff-diagram
Figure 3: Long Condor Spread

• 1 x Short ITM Call option with K2 (B)

• Selling two different options – (C), (D)

Source: own illustration, according to
Optionsplaybook (2014).

Long Butterfly
Spread*

• 1 x Long ITM Call option with K1 (A)

Figure 4: Long Butterfly Spread
Limited reward

Limited risk

3 transactions:

(K2 – K1 – Net debit

(Net debit paid)

• Buying two different options – (A), (C)

• 2 x Short ATM Call options with K2 (B)
• 1 x Long OTM Call option with K3 (C)

paid)

• Selling two equal options – (B)

Source: own illustration, according to
Optionsplaybook (2014).

37

“Option strategies – A practical Guideline for Retail Investors”

Strategy

The Setup

Short Straddle

• 1 x Short ATM Call option with K1 (A)

Maximum Potential
Profit

Maximum Potential
Loss

Limited reward

Unlimited risk

Transactions

Payoff-diagram
Figure 5: Short Straddle

• 1 x Short ATM Put option with K1 (B)

2 transactions:
• Selling two different options – (A), (B)

(Net credit received)

Source: own illustration, according to
TheOptionsGuide (2009).

Short Strangle

• 1 x Short OTM Put option with K1 (B)

Figure 6: Short Strangle
Limited reward

Unlimited risk

• 1 x Short OTM Call option with K2 (A)

2 transactions:
• Selling two different options – (A), (B)

(Net credit received)

Source: own illustration, according to
TheOptionsGuide (2009).

Short Gut

• 1 x Short ITM Call option with K1 (A)

Spread

Figure 7: Short Gut Spread

• 1 x Short ITM Put option with K2 (B)

Limited reward

(Net credit received)

Unlimited risk

2 transactions:
• Selling two different options – (A), (B),

Source: own illustration, according to
Cohen (2005, p.185).

38

“Option strategies – A practical Guideline for Retail Investors”

Strategy

The Setup

Long Iron But-

• 1 x Long OTM Put option with K1 (A)

terfly Spread

Maximum Potential
Profit

Maximum Potential
Loss

Limited reward

Limited risk

4 transactions:

(Net credit received)

K3 – K2 – Net credit

• Selling two different options – (A), (D)

Payoff-diagram
Figure 8: Long Iron Butterfly Spread

• 1 x Short ATM Put option with K2 (B)
• 1 x Short ATM Call option with K2 (C)

Transactions

received

• 1 x Long OTM Call option with K3 (D)

• Buying two different options – (B), (C)
Source: own illustration, according to
TheOptionsGuide (2009).

Long Box

• 1 x Long ITM Call option with K1 (A)

Figure 9: Long Box Spread
Limited risk

4 transactions:

• 1 x Long ITM Put option with K2 (C)

(K2 – K1 – Net debit

(– K2 – K1 – Net debit

• Selling two different options – (B), (D)

• 1 x Short OTM Put option with K1 (D)

paid or + Net credit

paid or + Net credit

received)

Spread

Limited reward

received)

• 1 x Short OTM Call option with K2 (B)

• Buying two different options – (A), (C)
Source: own illustration, according to
TheOptionsGuide (2009).

Long Ladder

• 1 x Long ITM Call option with K1 (A)

Spread*

Figure 10: Long Call Ladder Spread

• 1 x Short ATM Call option with K2 (B)
• 1 x Short OTM Call option with K3 (C)

Limited reward

(K2 – K1 – Net debit paid) Unlimited risk

3 transactions:
• Selling two different options – (B), (C)
• Buying one option –
(A)
Source: own illustration, according to
TheOptionsGuide (2009).

39

“Option strategies – A practical Guideline for Retail Investors”

Strategy

The Setup

Ratio Call Write

• 1 x Short ATM Call option with K1 (A)

Maximum Potential
Profit

Maximum Potential
Loss

Limited reward

Unlimited risk

Transactions

Payoff-diagram
Figure 11: Ratio Call Write

• 100 x Long underlying securities (B)

2 transactions:
• Selling one option –
(A)

(Net credit received)

• Buying 100 underlying securities – (B)
Source: own illustration, according to
TheOptionsGuide (2009).

Ratio Put Write

• 100 x Short underlying securities (A)

Figure 12: Ratio Put Write
Limited reward

Unlimited risk

• 1 x Short ATM Put option with K1 (B)

2 transactions:
• Selling 100 underlying securities – (A)

(Net credit received)

• Selling one option –
(B)
Source: own illustration, according to
TheOptionsGuide (2009).

Double Butter-

• 1 x Long ITM Call option with K1 (A)

fly Spread*

Figure 13: Double Butterfly Spread

• 2 x Short ATM Call option with K2 (B)

Limited reward

Limited risk

6 transactions:

• 2 x Long OTM Call option with K3 (C)

(K2 – K1 – Net debit

(Net debit paid)

• 2 x Short OTM Call option with K4 (D)

paid) or (K4 – K3 –

• Buying three different options – (A),
(C), (E)

• 1 x Long OTM Call option with K5 (E)

Net debit paid)

• Selling two different options – (B), (D)

Source: own illustration, according to
OptionTradingpedia (2014).

40

“Option strategies – A practical Guideline for Retail Investors”

Strategy

The Setup

Variable Ratio

• 100 x Long underlying securities (A)

Write

Maximum Potential
Profit

Maximum Potential
Loss

Limited reward

Unlimited risk

Payoff-diagram
Figure 14: Variable Ratio Write

• 1 x Short ITM Call option with K1 (B)
• 1 x Short OTM Call option with K2 (C)

Transactions

(Net credit received +
K1 – purchase price of (A))

3 transactions:
• Buying underlying securities – (A)
• Selling two different options – (B), (C)

Source: own illustration, according to
TheOptionsGuide (2009).

41

“Option strategies – A practical Guideline for Retail Investors”

6.2. Volatile Strategies
This strategy is for an investor, who has an aggressively bullish outlook on volatility. He expects that the underlying security will move drastically and explosively downwards or upwards during the lifetime of the option strategy. In general, traders of volatile strategies have a neutral outlook.
Such scenarios are often the case before corporations are publishing the results of their earnings and profits.
Table 15: Volatile Strategies

Long Straddle

The Setup

• 1 x Long ATM Call option with K1 (A)

Maximum Potential
Profit

Maximum Potential
Loss

Unlimited reward

Limited risk

2 transactions:

(Net debit paid)

Strategy

• Buying two different options – (A), (B)

Transactions

Payoff-diagram
Figure 15: Long Straddle

• 1 x Long ATM Put option with K1 (B)

Source: own Illustration, according to
OptionTradingTips (2005).

Long Strangle

• 1 x Long OTM Call option with K2 (A)

Figure 16: Long Strangle
Unlimited reward

Limited risk

2 transactions:

(Net debit paid)

• Buying two different options – (A), (B)

• 1 x Long OTM Put option with K1 (B)

Source: own illustration, according to
Option Trading Guide (2013).

42

“Option strategies – A practical Guideline for Retail Investors”

The setup

Long Gut

• 1 x Long ITM Call option with K1 (A)

Spread

Maximum potential profit Maximum potential loss Unlimited reward

Limited risk

2 transactions:

(Net debit paid)

Strategy

• Buying two different options – (A), (B)

Transaction costs

Payoff-diagram
Figure 17: Long Gut Spread

• 1 x Long ITM Put option with K2 (B)

Source: own illustration, according to
Cohen (2005, p.143).

Call Ratio Back

• 1 x Short ATM Call option with K1 (A)

Spread*

Figure 18: Call Ratio Back Spread

• 2 x Long OTM Call option with K2 (B)

Unlimited reward

Limited risk

2 transactions:

K2 – K1 – net credit

• Selling one option –
(A)

received or + net debit paid

• Buying two equal options – (B)
Source: own illustration, according to
Optionsplaybook (2014).

Strap

• 1 x Long ATM Put option with K1 (A)

Figure 19: Strap
Unlimited reward

Limited risk

2 transactions:

(Net debit paid)

• Buying two different options – (A), (B)

• 2 x Long ATM Call option with K2 (B)

Source: own illustration, according to
TheOptionsGuide (2009).

43

“Option strategies – A practical Guideline for Retail Investors”

Strip

The Setup

• 1 x Long ATM Call option K1 (A)

Maximum Potential
Profit

Maximum Potential
Loss

Unlimited reward

Limited risk

2 transactions:

(Net debit paid)

Strategy

• Buying two different options – (A), (B)

Transactions

Payoff-diagram
Figure 20: Strip

• 2 x Long ATM Put option K2 (B)

Source: own illustration, according to
TheOptionsGuide (2009).

Short Condor

• 1 x Short ITM Call option with K1 (A)

Spread*

Figure 21: Short Condor Spread

• 1 x Long ITM Call option with K2 (B)
• 1 x Long OTM Call option with K3 (C)

Limited reward

Limited risk

4 transaction:

(Net credit received)

(K2 – K1 – Net credit

• Buying two different options – (A), (D)

received)

• 1 x Short OTM Call option with K4 (D)

• Selling two different options – (B), (C)
Source: own illustration, according to
TheOptionsGuide (2009).

Short Butterfly

• 1 x Short ITM Call option with K1 (A)

Spread

Figure 22: Short Butterfly Spread

• 2 x Long ATM Call option with K2 (B)
• 1 x Short OTM Call option with K3 (C)

Limited reward

Limited risk

3 transactions:

(Net credit received –

(K2 – K1 – net credit

• Selling two different options – (A), (C)

net debit paid)

received + net debit paid) • Buying one option –
(B)
Source: own illustration, according to
TheOptionsGuide (2009).

44

“Option strategies – A practical Guideline for Retail Investors”

Strategy

The Setup

Short Ladder

• 1 x Short ITM Call option with K1 (A)

Spread*

Maximum Potential
Profit

Maximum Potential
Loss

Unlimited reward

Limited risk

3 transactions:

(Price of underlying

(K2 – K1 – Net credit

• Selling one option –
(A)

at maturity – Breake-

received + net debit

ven of (C))

paid)

Payoff-diagram
Figure 23: Short Call Ladder Spread

• 1 x Long ATM Call option with K2 (B)
• 1 x Long OTM Call option with K3 (C)

Transactions

• Buying two different options – (B), (C)
Source: own illustration, according to
TheOptionsGuide (2009).

45

“Option strategies – A practical Guideline for Retail Investors”

6.3. Moderately Bullish Strategies
In a moderately bullish strategy, investors are counting on slightly rising prices of the underlying security during the lifetime of the instrument. With this strategy, investors are able to maximize the profits in a sideway moving market.

Table 16: Moderately Bullish Strategies

• 1 x Short OTM Call option with K1 (A)

Limited reward

Limited risk

3 transactions:

(K1 – Purchase price

(Purchase price of

• Selling one option –
(A)

(C) – K2 – Net credit received or + Net

received)

Collar

Maximum Potential
Loss

paid or + Net credit

The Setup

Maximum Potential
Profit

of (C) – Net debit

Strategy

debit paid)

Payoff-diagram
Figure 24: Collar

• 1 x Long OTM Put option with K2 (B)
• 100 x Long underlying securities (C)

Transactions

• Buying one option –
(B)
• Buying underlying securities – (C)

Source: own illustration, according to
Optionseducation (2014).

Long Call

• 1 x Long ATM Call option with K1 (A)

Spread*

Figure 25: Long Call Spread

• 1 x Short OTM Call option with K2 (B)

Limited reward

Limited risk

2 transactions:

(K2 – K1 – Net debit

(Net debit paid)

• Selling one option –
(B)

paid)

• Buying one option –
(A)
Source: own illustration, according to
Optionsplaybook (2009).

46

“Option strategies – A practical Guideline for Retail Investors”

Strategy

The Setup

Short Ratio

• 1 x Long ATM Call option with K1 (A)

Call Spread*

Maximum Potential
Profit

Maximum Potential
Loss

Limited reward

Unlimited risk

Transactions

Payoff-diagram
Figure 26: Short Ratio Call Spread

• 2 x Short OTM Call option with K2 (B)

2 transactions:
• Selling two equal option – (B)

(K2 – K1 – Net debit paid or + Net credit

• Buying one option –
(A)

received)

Source: own illustration, according to
Optionseducation (2014).

Uncovered Put

• 1 x Short ATM Put option with K1 (A)

Figure 27: Uncovered Put
Limited reward

Unlimited risk

1 transaction:
• Selling one option –
(A)

Net credit received

Source: own illustration, according to
Optionseducation (2014).

Covered

• 1 x Short OTM Put option with K1 (A)

Combination

Figure 28: Covered Combination

• 1 x Short OTM Call option with K2 (B)
• 100 x Long underlying securities (C)

Limited reward

(K2 – Purchase price of (B) + Net credit received) Unlimited risk

3 transactions:
• Selling two different options – (A), (B)
• Buying underlying securities – (C)
Source: own illustration, according to
TheOptionsGuide (2009).

47

“Option strategies – A practical Guideline for Retail Investors”

Collar

Maximum Potential
Loss

• 1 x Short OTM LEAPS Call option with K1 (A)

Limited reward

Limited risk

3 transactions:

(K1 – Purchase price

(K1 – Purchase price

• Selling one LEAPS option – (A)

of (C) – Net debit

of (C) – Net debit

• 100 x Long underlying securities (C)

Zero-Cost

Maximum Potential
Profit

• 1 x Long ATM LEAPS Put option with
K2 (B)

Strategy

paid)

paid)

The Setup

Transactions

Figure 29: Zero-Cost Collar

• Buying one LEAPS option – (B)
• Buying underlying securities – (C)

Covered Short
Call

• 1 x Short ATM Call option with K1 (A)

Payoff-diagram

Source: own illustration, according to
TheOptionsGuide (2009).
Figure 30: Covered Short Call

Limited reward

Unlimited risk

• 1 x Long underlying securities (B)

2 transactions:
• Selling one option
(A)

(K1 – purchase price of (B) – Net credit

• Buying underlying securities (B)

received)

Source: own illustration, according to
Optionseducation (2014).

Cash-Secured
Put

• 1 x Short ATM Put option with K1 (A)

Figure 31: Cash-Secured Put
Limited reward

• 1 x Cash on account (B)
(Net credit received)

Unlimited risk

2 transactions:
• Selling one option
(A)
• Deposit cash – (B)
Source: own illustration, according to
Optionseducation (2014).

48

“Option strategies – A practical Guideline for Retail Investors”

6.4. Sustained Bullish Strategies
An investor is expecting substantial rising prices of the underlying security in the next three to six months. To maximize his profit and minimizing the potential loss if possible, he has the possibility to construct the following option strategies.
Table 17: Sustained Bullish Strategies

Protective Put

The Setup

• 1 x Long ATM Put option with K1 (A)

Maximum Potential
Profit

Maximum Potential
Loss

Unlimited reward

Limited risk

2 transactions:

(Net debit paid)

Strategy

• Buying one option –
(A)

Transactions

Payoff-diagram
Figure 32: Protective Put

• 100 x Long underlying securities (B)

• Buying underlying securities – (B)
Source: own illustration, according to
OptionMonster (2014).

Long Call

• 1 x Long ATM Call option with K1 (A)

Figure 33: Long Call
Unlimited reward

Limited risk

1 transaction:

(Net debit paid)

• Buying one option –
(A)

Source: own illustration, according to
Optionsplaybook (2014).

49

“Option strategies – A practical Guideline for Retail Investors”

Strategy

The Setup

Synthetic Long

• 1 x Long ATM Call option with K1 (A)

Stock

Maximum Potential
Profit

Maximum Potential
Loss

Unlimited reward

Unlimited risk

Transactions

Payoff-diagram
Figure 34: Synthetic Long Stock

• 1 x Short ATM Put option with K1 (B)

2 transactions:
• Selling one option –
(B)
• Buying one option –
(A)
Source: own illustration, according to
TheOptionsGuide (2009).

Bull Spread

• 1 x Long OTM Put option with K1 (D)

Spread

Figure 35: Bull Spread Spread

• 1 x Short OTM Put option with K2 (C)

Limited reward

Limited risk

4 transactions:

• 1 x Long OTM Call option with K3 (B)

(K4 – K3 – Net debit

(K2 – K1 – Net debit

• Selling two different options – (B), (D)

• 1 x Short OTM Call option with K4 (A)

paid)

paid)

• Buying two different options – (A), (C)
Source: own illustration, according to
Optionseducation (2014).

Cash-Secured
Call

• 1 x Long ATM Call option with K1 (A)

Figure 36: Cash-Secured Call
Unlimited reward

Limited risk

2 transactions:

Net debit paid

• Buying one option –
(A)

• 1 x Cash on account (B)

• Deposit cash – (B)
Source: own illustration, according to
Optionseducation (2014).

50

“Option strategies – A practical Guideline for Retail Investors”

The Setup

Call Back

• 1 x Short ATM Call option with K1 (A)

Spread

Maximum Potential
Profit

Maximum Potential
Loss

Unlimited reward

Limited risk

2 transactions:

(K2 – K1 – net credit

Strategy

• Selling one option –
(A)

• 2 x Long OTM Call option with K2 (B)

Transactions

Payoff-diagram
Figure 37: Call Back Spread

received or + net debit paid)

• Buying two equal options – (B)
Source: own illustration, according to
Optionsplaybook (2014).

Long Combo

• 1 x Short OTM Put option with K1 (A)

Spread

• 1 x Long OTM Call option with K2 (B)

Figure 38: Long Combo Spread
Unlimited reward

Unlimited risk

2 transactions:
Selling two different options – (A), (B)

Source: own illustration, according to
Cohen (2005, p.278).

51

“Option strategies – A practical Guideline for Retail Investors”

6.5. Moderately Bearish Strategies
A moderately bearish strategy pursues the goal of slightly falling prices of the underlying security during the lifetime of the option strategy. Therefore an investor has the possibility to maximize his profit in the short-term even if the market and the underlying security is in a bearish trend.
Table 18: Moderately Bearish Strategies
The Setup

Short Call

• 1 x Short ATM Call option with K1 (A)

Spread*

Maximum Potential
Profit

Maximum Potential
Loss

Limited reward

Limited risk

2 transactions:

(Net credit received)

Strategy

(K1 – K2 – Net credit

• Selling one option –
(A)

• 1 x Long OMT Call option with K2 (B)

Transactions

Payoff-diagram
Figure 39: Short Call Spread

received)

• Buying one option –
(B)
Source: own illustration, according to
Optionsplaybook (2014).

Uncovered Call

• 1 x Short ATM Call option with K1 (A)

Figure 40: Uncovered Call
Limited reward

Unlimited risk

1 transaction:
Selling one option –

(Net credit received)

(A)

Source: own illustration, according to
Optionsplaybook (2014).

52

“Option strategies – A practical Guideline for Retail Investors”

Strategy

The Setup

Short Ratio Put

• 2 x Short OTM Put options with K2 (A)

Spread

Maximum Potential
Profit

Maximum Potential
Loss

Limited reward

Unlimited risk

Transactions

Payoff-diagram
Figure 41: Short Ratio Put Spread

• 1 x Long ATM Put option with K1 (B)

2 transactions:
• Selling two equal options – (A)

(K1 – K2 – Net credit received) • Buying one option –
(B)
Source: own illustration, according to
Optionseducation (2014).

Covered Short

• 1 x Short ATM Put option with K1 (A)

Put

Figure 42: Covered Short Put

• 100 x Short underlying securities (B)

Limited reward

Unlimited risk

2 transactions:
• Selling one option –
(A)

(Net credit received)

• Selling underlying securities – (B)
Source: own illustration, according to
Cohen (2005, p. 83)

Bear Spread

• 1 x Long OTM Call option with K4 (A)

Spread

Figure 43: Bear Spread Spread

• 1 x Short OTM Call option with K3 (B)

Limited reward

Limited risk

4 transactions:

• 1 x Long OTM Put option with K2 (C)

(K2 – K1 – Net debit

K4 – K3 – Net debit

• Selling two different options – (B), (D)

• 1 x Short OTM Put option with K1 (D)

paid)

paid

• Buying two different options – (A), (C)
Source: own illustration, according to
TheOptionsGuide (2009).

53

“Option strategies – A practical Guideline for Retail Investors”

6.6. Sustained Bearish Strategies
With this strategy, an investor is expecting falling prices of the underlying during the time of the option strategy. Compared with the moderately bearish strategy, traders of such instruments believe in considerably lower prices in the future and a downturn-trend of the markets.
Table 19: Sustained Bearish Strategies

Long Put

The Setup

• 1 x Long ATM Put option with K1 (A)

Maximum Potential
Profit

Maximum Potential
Loss

Unlimited reward

Limited risk

1 transaction:

(Net debit paid)

Strategy

• Buying one option –
(A)

Transactions

Payoff-diagram
Figure 44: Long Put

Source: own illustration, according to
Optionsplaybook (2014).

Synthetic

• 1 x Short ATM Call option with K1 (A)

Short Stock

• 1 x Long ATM Put option with K1 (B)

Figure 45: Synthetic Short Stock
Unlimited reward

Unlimited risk

2 transactions:
• Selling one option –
(A)
• Buying one option –
(B)
Source: own illustration, according to
TheOptionsGuide (2009).

54

“Option strategies – A practical Guideline for Retail Investors”

Strategy

The Setup

Short Combo

• 1 x Long OTM Put option with K1 (A)

Spread

Maximum Potential
Profit

Maximum Potential
Loss

Unlimited reward

Unlimited risk

• 1 x Short OTM Call option with K2 (B)

Transactions

Payoff-diagram
Figure 46: Short Combo Spread

2 transactions:
• Selling one option –
(B)
• Buying one option –
(A)
Source: own illustration, according to
Cohen (2005, p. 282)

Put Back

• 1 x Short ITM Put option with K1 (A)

Spread

Figure 47: Put Back Spread

• 2 x Long OTM Put option with K2 (B)

Unlimited reward

Limited risk

2 transactions:

(K1 – K2 – net credit

• Selling one option –
(A)

received + net debit paid) • Buying two equal options – (B)
Source: own illustration, according to
TheOptionsGuide (2009).

55

“Option strategies – A practical Guideline for Retail Investors”

7. Conclusion II
7.1. Conclusion of Option Strategies
After explaining every option strategy in more detail, I will now analyze each one in relation to cost efficiency and loss and profit potential. On the basis of the terms and conditions from the different trading platforms, I will rank every option strategy according to the average transaction costs.
Furthermore, this analysis is divided into the six market expectations and it can be seen the different transaction costs when using only EUREX options, on one hand, and warrants as an addition on the other hand. There is also the difference between of the two approaches in percentages and thus the reader is able to see what the potential costs savings are.
Moreover, if the average transaction costs of two different option strategies are similar, an investor should also take into account the loss- and profit-outlook of the investment. Therefore an unlimited profit potential is preferred to a limited profit potential. In contrary, an unlimited loss potential is less favorable than a limited loss potential.

7.1.1. Neutral Strategies
Table 20: Evaluation Option Strategies - Neutral Strategies 71
Ø Transaction Costs
Strategy

Change
EUREX

Neutral Strategies

Options

Warrants

in %

Maximum

Maximum

Potential

Potential

Profit

Loss

Ratio Put Write*

58.00

(58.00)

0%

Limited

Unlimited

Ratio Call Write

141.88

(141.63

0%

Limited

Unlimited

Short Straddle

206.19

(206.19)

0%

Limited

Unlimited

Short Strangle

206.19

(206.19)

0%

Limited

Unlimited

Short Gut Spread

206.19

(206.19)

0%

Limited

Unlimited

Variable Ratio Write

244.98

(244.73)

0%

Limited

Unlimited

Long Butterfly Spread

309.28

187.28

-39%

Limited

Limited

Long Ladder Spread

309.28

248.28

-20%

Limited

Unlimited

71

All material in this table is derived from chapter 8.4 Evaluation Matrix.

56

“Option strategies – A practical Guideline for Retail Investors”

412.38

290.38

412.38

290.38

Long Box Spread

412.38

290.38

Double Butterfly Spread

515.47

Ø Transaction Cost

286.22

Neutral Strategies

Long Condor Spread
Long Iron Butterfly
Spread

-30%

Limited

Limited

Limited

Limited

-30%

Limited

Limited

332.47

-36%

Limited

Limited

223.83

-15%

-30%

* This strategy can only constructed at the trading platform of Saxo Bank because it contains short selling of the underlying without owning it.

7.1.2. Volatile Strategies
Table 21: Evaluation Option Strategies - Volatile Strategies 72
Ø Transaction Costs
Strategy

Change
EUREX
Options

Warrants

in %

Maximum
Potential
Profit

Maximum
Potential Loss

Volatile Strategies

Long Straddle

206.19

75.79

-63%

Unlimited

Limited

Long Strangle

206.19

75.79

-63%

Unlimited

Limited

Long Gut Spread

206.19

75.79

-63%

Unlimited

Limited

Strap

206.19

75.79

-63%

Unlimited

Limited

Strip

206.19

75.79

-63%

Unlimited

Limited

Call Ratio Back Spread

206.19

145.19

-30%

Unlimited

Limited

Short Condor Spread

412.38

290.38

-30%

Limited

Limited

Short Butterfly Spread

309.28

248.28

-20%

Limited

Limited

Short Ladder Spread

309.28

187.28

-39%

Unlimited

Limited

Ø Transaction Cost

252.01

138.90

-48%

72

All material in this table is derived from chapter 8.4 Evaluation Matrix.

57

“Option strategies – A practical Guideline for Retail Investors”

7.1.3. Moderately Bullish Strategies
Table 22: Evaluation Option Strategies - Moderately Bullish Strategies 73
Ø Transaction Costs

Moderately Bullish Strategies

Strategy

EUREX
Options

Change

Warrants

in %

Maximum
Potential
Profit

Maximum
Potential Loss

Uncovered Put

103.09

(103.09)

0%

Limited

Unlimited

Cash-Secured Put

103.19

(103.19)

0%

Limited

Unlimited

Covered Short Call

141.88

(141.63)

0%

Limited

Unlimited

Long Call Spread

206.19

145.19

-30%

Limited

Limited

Short Ratio Call Spread

206.19

145.19

-30%

Limited

Unlimited

Collar

244.98

183.73

-25%

Limited

Limited

Covered Combination

244.98

(244.73)

0%

Limited

Unlimited

Zero-Cost Collar*

244.98

183.73

-25%

Limited

Limited

Ø Transaction Cost

186.94

156.31

-14%

* According to Adam Matuszewski, Equity Product Manager at SIX Swiss Exchange Ltd, the
SIX Exchange does not LEAPS, which are long-term options, as a special single derivative. 74
Nevertheless there is the possibility to trade options with a time to maturity of several years. 75

7.1.4. Sustained Bullish Strategies
Table 23: Evaluation Option Strategies - Sustained Bullish Strategies 76
Ø Transaction Costs
Strategy

EUREX

Change

Warrants

in %

Maximum

Potential

Potential

Profit

Loss

Long Call

103.09

37.9

-63%

Unlimited

Limited

Cash-Secured Call

103.19

38.3

-63%

Unlimited

Limited

Protective Put

141.88

73.31

-48%

Unlimited

Limited

Call Back Spread

206.19

145.19

-30%

Unlimited

Limited

Synthetic Long Stock

206.19

144.36

-30%

Unlimited

Unlimited

Long Combo Spread

206.19

206.19

0%

Unlimited

Unlimited

Bull Spread Spread

412.38

290.38

-30%

Limited

Limited

Ø Transaction Cost

Strategies

Sustained Bullish

Options

Maximum

197.02

133.66

-38%

73

All material in this table is derived from chapter 8.4 Evaluation Matrix.

74

CBOE (2014).

75

Interview Matuszewski (2014).

76

All material in this table is derived from chapter 8.4 Evaluation Matrix.

58

“Option strategies – A practical Guideline for Retail Investors”

7.1.5. Moderately Bearish Strategies
Table 24: Evaluation Option Strategies - Moderately Bearish Strategies
Moderately Bearish Strategies

Ø Transaction Costs
Strategy

Change
EUREX
Options

Warrants

Maximum

in %

Potential
Profit

Maximum
Potential Loss

Covered Short Put*

58.00

(58)

0%

Limited

Unlimited

Uncovered Call

103.09

(103.09)

0%

Limited

Unlimited

Short Call Spread

206.19

145.19

-30%

Unlimited

Unlimited

Short Ratio Put Spread

206.19

145.19

-30%

Limited

Unlimited

Bear Spread Spread

412.38

288.71

-30%

Limited

Limited

Ø Transaction Cost

197.17

148.04

-18%

* This strategy can only constructed at the platform of Saxo Bank because it contains selling the underlying without owning it.

7.1.6. Sustained Bearish Strategies
Table 25: Evaluation Option Strategies - Sustained Bearish Strategies 77

Strategy

EUREX
Options

Strategies

Sustained Bearish

Ø Transaction Costs

Maximum
Change in %

Warrants

Potential
Profit

Maximum
Potential Loss

103.09

37.90

-63%

Unlimited

Limited

Put Back Spread

206.19

144.36

-30%

Unlimited

Limited

Synthetic Short Stock

206.19

144.36

-30%

Unlimited

Unlimited

Short Combo Spread

206.19

144.36

-30%

Unlimited

Unlimited

Ø Transaction Costs

77

Long Put

180.42

118.37

-38%

All material in this table is derived from chapter 8.4 Evaluation Matrix.

59

“Option strategies – A practical Guideline for Retail Investors”

8. Final Conclusion
The final conclusion contains the two previous outcomes from the chapters Conclusion I and
II about the different option strategies and the twelve trading platforms.

8.1. Trading Platform
First of all, not every trading platform is offering the possibility to trade EUREX options. As a result, only at nine out of twelve banks, investors are able to construct option strategies. If a retail client is interested in trading all 45 strategies, only Saxo Bank is providing all financial instruments and possibilities to overcome the Swiss legal limitations.

Secondly, the most attractive platforms to trade option strategies are Swissquote with an average total transaction costs of CHF 28.92 (with warrants CHF 42.22) and Saxo Bank with
CHF 91.06 (CHF 92.60). At the third place there is the Berner Kantonalbank with CHF 180.28
(CHF123.84) followed by the Zürcher Kantonalbank with CHF 179.84 (CHF 171.65) and
Credit Suisse with CHF 176.99 (CHF 175.99). Further to this, Raiffeisen (CHF 372.28;
239.73), UBS (CHF 422.84; 269.73) and Migros Bank (CHF 458.52; 283.64) are offering the most expensive conditions to their customers. PostFinance, Cash zweiplus and Banque Cantonal Vaudoise doesn’t offer EUREX options and therefore option strategies cannot be traded.

Thirdly, when it comes to fixed costs, there are financial institutions, who do not charge any basic fee for the safekeeping account like PostFinance and Saxo Bank. In contrary, the universal banks and the Zürcher Kantonalbank charge up to CHF 448.80 to their customers.
Consequently investments made at those banks have to perform clearly better to be in the profit zone than on a portfolio at PostFinance or Saxo Bank. Especially nowadays with higher standardization, technological progress in the IT-infrastructure and increasing competition in the retail market, the pressure for offering attractive conditions will lower the fees in the midand long-run. 78

78

Interview Eichenberger (2014).

60

“Option strategies – A practical Guideline for Retail Investors”

Since the beginning of 2009, the Swiss National Bank is setting an operational target range for its reference interest rate (three-month LIBOR) lower than 0.5%. Nevertheless, some banks didn’t adapt the current level to their interest-rate policy. As a result, only seven banks have an interest rate-spread below 10%. As we are talking only from the perspective of a retail investor, the differences in absolute numbers are not tremendous.

Nonetheless, a higher interest spread indicates a general higher margin requirement of the financial institutions. It can be seen that banks with a higher spread of 10% tends to have higher transaction and fixed costs.

There are several ways for retail investors to minimize the variable (direct) and fixed (indirect) costs. One way is to concentrate the assets on one bank (pension funds, mortgages, portfolios, and cash) and thus having more negotiation power when it comes to terms and conditions. Another possibility is to buy trading packages, where the client buys a fixed number of trades per months, which is in general cheaper than single fees. 79 Additionally, by increasing numbers of trades or/and trading volume, banks upgrade such clients to the Private Bankingdesk, where they get an extensive and qualitatively superior service for lower conditions.

8.2. Option Strategies
Generally speaking, most of the option strategies are technically feasible at most of the platforms. There are only two strategies, which cannot be constructed because they are containing short selling of the underlying security. There is also a strategy, where it is necessary to execute LEAPS, which are not offered in Switzerland. In such a case, investors can trade normal EUREX options with longer time to maturity.

By using warrants, the transaction costs can be reduced on average by about 29% (from 0% just to -63%). Therefore retail investors should be using warrants instead of more expensive
EUREX options with the exception of Swissquote and Saxo Bank. In general, strategies with fewer transactions are easier to trade and also related to lower transaction costs. As a result, retail investors should rather choose an option strategy with fewer legs and less different options. Moreover, an option strategy with unlimited profit or limited loss potential should be favored over a limited maximal profit respectively an unlimited loss potential.

79

Swissquote (2010).

61

“Option strategies – A practical Guideline for Retail Investors”

Of course, every strategy has different features, especially if it’s a credit or debit transaction.
This aspect is not weighted, because a retail investor only receives a small credit amount from selling EUREX options and therefore the possible payoff is more important.

8.3. Break-Even Point
As we have seen before, Swissquote and Saxo Bank have the most attractive conditions.
Hence this paragraph is only covering those two trading platforms. The break-even point
(short BE) is a fixed level, where an investor does not make a net profit nor a net loss (after fees) and is equal off before the investment was made. 80 Therefore, the break-even is depending on the amount of the investment and the indirect and direct transaction costs. As already mentioned above, the maximal amount for each investment is CHF 6’000 for retail investors. As a consequence, the break-even of Swissquote is in average 0.5% with EUREX options and when including warrants 0.7%. Saxo Bank has an average BE of 1.5% with EUREX options (warrants are not offered). With such conditions, option strategies are, in principle, attractive because of the low break-even level and therefore retail investors are also able to invest in such strategies with a smaller amount of money.
When including the other banks, the break-even point varies between 2.8% and 7.6%, respectively for warrants 2.1% and 4.7%. With such conditions, the option strategies are clearly less attractive because the investment has to perform noticeably better to be equal off.

We must not lose sight of the fact that there are also other influences like the opportunity costs, the risk premium, especially when it is an unlimited loss potential, as well as the spread of bid and ask price of securities. Those costs have to be taken into account when trading a certain strategy.

To sum up my bachelor thesis, option strategies are an interesting and multifunctional tool of generating profits in every market direction. When it comes to transaction costs, Swissquote and Saxo Bank are offering the most attractive conditions, where it is possible to invest in such strategies with a minimum of assets. In contrary to those two trading platforms, the other ten analysed banks have much higher costs. This makes it more difficult to trade option strategies successfully and to generate net profits. Nevertheless, there are also hidden costs, which have a negatively influence on the payoff of the strategy.

80

Investorwords (2014).

62

“Option strategies – A practical Guideline for Retail Investors”

8.4. Evaluation Matrix

160.00

33.40

X

800.00

563.00

X

645.00

412.38

Long Butterfly Spread

2

1

0

0

0

3

540.00

165.00

202.50

225.00

X

120.00

25.05

X

600.00

422.25

X

483.75

309.28

Short Straddle

0

2

0

0

0

2

360.00

110.00

135.00

150.00

X

80.00

16.70

X

400.00

281.50

X

322.50

206.19

Short Strangle

0

2

0

0

0

2

360.00

110.00

135.00

150.00

X

80.00

16.70

X

400.00

281.50

X

322.50

206.19

Short Gut Spread
Long Iron Butterfly
Spread
Long Box Spread

0

2

0

0

0

2

360.00

110.00

135.00

150.00

X

80.00

16.70

X

400.00

281.50

X

322.50

206.19

2

2

0

0

0

4

720.00

220.00

270.00

300.00

X

160.00

33.40

X

800.00

563.00

X

645.00

412.38

2

2

0

0

0

4

720.00

220.00

270.00

300.00

X

160.00

33.40

X

800.00

563.00

X

645.00

412.38

Long Ladder Spread

1

2

0

0

0

3

540.00

165.00

202.50

225.00

X

120.00

25.05

X

600.00

422.25

X

483.75

309.28

Ratio Call Write

0

1

1

0

0

2

222.25

112.25

119.75

102.25

X

60.25

31.45

X

242.25

183.00

X

203.50

141.88

Ratio Put Write

0

1

0

1

0

2

X

X

X

X

X

58.00

X

X

X

X

X

X

58.00

703.75

X

806.25

515.47

Double Butterfly
Spread
Variable Ratio Write

Raiffeisen

X

PostFinance

300.00

Bank Coop

270.00

Migros Bank

220.00

Cash zweiplus

720.00

Swissquote

4

Saxo Bank

0

BCV

Total transactions

0

BEKB

Other

0

ZKB

Short Stock

2

Credit Suisse

Long Stock

2

UBS

Short Option

Long Condor Spread

Neutral Strategies

Long Option

Ø Transaction Cost per Strategy

8.4.1. EUREX Options

337.50

375.00

X

200.00

41.75

X

0

2

1

0

0

3

402.25

167.25

187.25

177.25

X

100.25

39.80

X

442.25

323.75

X

364.75

244.98

2

0

0

0

0

2

360.00

110.00

135.00

150.00

X

80.00

16.70

X

400.00

281.50

X

322.50

206.19

2

0

0

0

0

2

360.00

110.00

135.00

150.00

X

80.00

16.70

X

400.00

281.50

X

322.50

206.19

Long Gut Spread

2

0

0

0

0

2

360.00

110.00

135.00

150.00

X

80.00

16.70

X

400.00

281.50

X

322.50

206.19

1

1

0

0

0

2

360.00

110.00

135.00

150.00

X

80.00

16.70

X

400.00

281.50

X

322.50

206.19

Strap

2

0

0

0

0

2

360.00

110.00

135.00

150.00

X

80.00

16.70

X

400.00

281.50

X

322.50

206.19

Strip

2

0

0

0

0

2

360.00

110.00

135.00

150.00

X

80.00

16.70

X

400.00

281.50

X

322.50

206.19

Short Condor Spread

2

2

0

0

0

4

720.00

220.00

270.00

300.00

X

160.00

33.40

X

800.00

563.00

X

645.00

412.38

1

2

0

0

0

3

540.00

165.00

202.50

225.00

X

120.00

25.05

X

600.00

422.25

X

483.75

309.28

2

1

0

0

0

3

540.00

165.00

202.50

225.00

X

120.00

25.05

X

600.00

422.25

X

483.75

309.28

Collar

1

1

1

0

0

3

402.25

167.25

187.25

177.25

X

100.25

39.80

X

442.25

323.75

X

364.75

244.98

Long Call Spread

1

1

0

0

0

2

360.00

110.00

135.00

150.00

X

80.00

16.70

X

400.00

281.50

X

322.50

206.19

1

1

0

0

0

2

360.00

110.00

135.00

150.00

X

80.00

16.70

X

400.00

281.50

X

322.50

206.19

0

1

0

0

0

1

180.00

55.00

67.50

75.00

X

40.00

8.35

X

200.00

140.75

X

161.25

103.09

Covered Combination

0

2

1

0

0

3

402.25

167.25

187.25

177.25

X

100.25

39.80

X

442.25

323.75

X

364.75

244.98

Zero-Cost Collar

1

1

1

0

0

3

402.25

167.25

187.25

177.25

X

100.25

39.80

X

442.25

323.75

X

364.75

244.98

Covered Short Call

0

1

1

0

0

2

222.25

112.25

119.75

102.25

X

60.25

31.45

X

242.25

183.00

X

203.50

141.88

Cash-Secured Put

0

1

0

0

1

2

180.00

55.00

67.50

75.00

X

40.00

9.20

X

200.00

140.75

X

161.25

103.19

1

0

1

0

0

2

222.25

112.25

119.75

102.25

X

60.25

31.45

X

242.25

183.00

X

203.50

141.88

1

0

0

0

0

1

180.00

55.00

67.50

75.00

X

40.00

8.35

X

200.00

140.75

X

161.25

103.09

1

1

0

0

0

2

360.00

110.00

135.00

150.00

X

80.00

16.70

X

400.00

281.50

X

322.50

206.19

Bull Spread Spread

2

2

0

0

0

4

720.00

220.00

270.00

300.00

X

160.00

33.40

X

800.00

563.00

X

645.00

412.38

Cash-Secured Call

1

0

0

0

1

2

180.00

55.00

67.50

75.00

X

40.00

9.20

X

200.00

140.75

X

161.25

103.19

Call Back Spread

1

1

0

0

0

2

360.00

110.00

135.00

150.00

X

80.00

16.70

X

400.00

281.50

X

322.50

206.19

Long Combo Spread

0

2

0

0

0

2

360.00

110.00

135.00

150.00

X

80.00

16.70

X

400.00

281.50

X

322.50

206.19

Short Call Spread

1

1

0

0

0

2

360.00

110.00

135.00

150.00

X

80.00

16.70

X

400.00

281.50

X

322.50

206.19

Uncovered Call

0

1

0

0

0

1

180.00

55.00

67.50

75.00

X

40.00

8.35

X

200.00

140.75

X

161.25

103.09

1

1

0

0

0

2

360.00

110.00

135.00

150.00

X

80.00

16.70

X

400.00

281.50

X

322.50

206.19

Covered Short Put

0

1

0

1

0

2

X

X

X

X

X

58.00

X

X

X

X

X

X

58.00

Bear Spread Spread

2

2

0

0

0

4

720.00

220.00

270.00

300.00

X

160.00

33.40

X

800.00

563.00

X

645.00

412.38

Long Put

Volatile Strategies

275.00

Synthetic Long Stock

Moderately bullish Strategies

900.00

Long Call

gies

5

Protective Put

Strategies

0

Short Ladder Spread

Strategies

0

Short Butterfly Spread

Sustained bullish Strate-

0

Long Strangle

Moderately bearish

2

Long Straddle

Sustained bearish

3

1'000.
00

1

0

0

0

0

1

180.00

55.00

67.50

75.00

X

40.00

8.35

X

200.00

140.75

X

161.25

103.09

1

1

0

0

0

2

360.00

110.00

135.00

150.00

X

80.00

16.70

X

400.00

281.50

X

322.50

206.19

1

1

0

0

0

2

360.00

110.00

135.00

150.00

X

80.00

16.70

X

400.00

281.50

X

322.50

206.19

1

1

0

0

0

2

360.00

110.00

135.00

150.00

X

80.00

16.70

X

400.00

281.50

X

322.50

206.19

2.42

408.74

132.11

159.20

171.88

X

91.06

22.44

X

453.39

321.11

X

366.88

236.11

Call Ratio Back
Spread

Short Ratio Call
Spread
Uncovered Put

Short Ratio Put
Spread

Synthetic Short
Stock
Short Combo
Spread
Put Back Spread

Ø Transaction Cost per Bank

63

“Option strategies – A practical Guideline for Retail Investors”

Ø Transaction
Cost per Strategy

Raiffeisen

PostFinance

Bank Coop

Migros Bank

Cash zweiplus

Swissquote

Saxo Bank

BCV

BEKB

ZKB

Credit Suisse

UBS

Long Option
Short Option
Long Stock
Short Stock
Other

8.4.1. Warrants

2

2

0

0

0

440.00

220.00

255.00

200.00

X

160.00

58.40

X

480.00

397.50

X

402.50

290.38

Long Butterfly Spread

2

1

0

0

0

260.00

165.00

187.50

125.00

X

120.00

50.05

X

280.00

256.75

X

241.25

187.28

Short Straddle

0

2

0

0

0

360.00

110.00

135.00

150.00

X

80.00

16.70

X

400.00

281.50

X

322.50

206.19

Short Strangle

0

2

0

0

0

360.00

110.00

135.00

150.00

X

80.00

16.70

X

400.00

281.50

X

322.50

206.19

Short Gut Spread

0

2

0

0

0

360.00

110.00

135.00

150.00

X

80.00

16.70

X

400.00

281.50

X

322.50

206.19

2

2

0

0

0

440.00

220.00

255.00

200.00

X

160.00

58.40

X

480.00

397.50

X

402.50

290.38

Long Box Spread

2

2

0

0

0

440.00

220.00

255.00

200.00

X

160.00

58.40

X

480.00

397.50

X

402.50

290.38

Long Ladder Spread

1

2

0

0

0

400.00

165.00

195.00

175.00

X

120.00

37.55

X

440.00

339.50

X

362.50

248.28

Ratio Call Write

0

1

1

0

0

222.25

112.25

119.75

102.25

X

60.25

29.21

X

242.25

183.00

X

203.50

141.63

Ratio Put Write

0

1

0

1

0

X

X

X

X

X

(58.00)

X

X

X

X

X

X

(58.00)

3

2

0

0

0

480.00

275.00

315.00

225.00

X

200.00

79.25

X

520.00

455.50

X

442.50

332.47

Variable Ratio Write

0

2

1

0

0

402.25

167.25

187.25

177.25

X

100.25

37.56

X

442.25

323.75

X

364.75

244.73

Long Straddle

2

0

0

0

0

80.00

110.00

120.00

50.00

39.80

80.00

41.70

58.00

80.00

116.00

54.00

80.00

75.79

Long Strangle

2

0

0

0

0

80.00

110.00

120.00

50.00

39.80

80.00

41.70

58.00

80.00

116.00

54.00

80.00

75.79

Long Gut Spread

2

0

0

0

0

80.00

110.00

120.00

50.00

39.80

80.00

41.70

58.00

80.00

116.00

54.00

80.00

75.79

1

1

0

0

0

220.00

110.00

127.50

100.00

X

80.00

29.20

X

240.00

198.75

X

201.25

145.19

Strap

2

0

0

0

0

80.00

110.00

120.00

50.00

39.80

80.00

41.70

58.00

80.00

116.00

54.00

80.00

75.79

Strip

2

0

0

0

0

80.00

110.00

120.00

50.00

39.80

80.00

41.70

58.00

80.00

116.00

54.00

80.00

75.79

Short Condor Spread

2

2

0

0

0

440.00

220.00

255.00

200.00

X

160.00

58.40

X

480.00

397.50

X

402.50

290.38

Short Butterfly Spread

1

2

0

0

0

400.00

165.00

195.00

175.00

X

120.00

37.55

X

440.00

339.50

X

362.50

248.28

Short Ladder Spread

2

1

0

0

0

260.00

165.00

187.50

125.00

X

120.00

50.05

X

280.00

256.75

X

241.25

187.28

Collar

1

1

1

0

0

262.25

167.25

179.75

127.25

X

100.25

50.06

X

282.25

241.00

X

243.50

183.73

Long Call Spread

1

1

0

0

0

220.00

110.00

127.50

100.00

X

80.00

29.20

X

240.00

198.75

X

201.25

145.19

1

1

0

0

0

220.00

110.00

127.50

100.00

X

80.00

29.20

X

240.00

198.75

X

201.25

145.19

Uncovered Put

0

1

0

0

0

180.00

55.00

67.50

75.00

X

40.00

8.35

X

200.00

140.75

X

161.25

103.09

Covered Combination

0

2

1

0

0

402.25

167.25

187.25

177.25

X

100.25

37.56

X

442.25

323.75

X

364.75

244.73

Zero-Cost Collar

1

1

1

0

0

262.25

167.25

179.75

127.25

X

100.25

50.06

X

282.25

241.00

X

243.50

183.73

Covered Short Call

0

1

1

0

0

222.25

112.25

119.75

102.25

X

60.25

29.21

X

242.25

183.00

X

203.50

141.63

Cash-Secured Put

0

1

0

0

1

180.00

55.00

67.50

75.00

X

40.00

9.20

X

200.00

140.75

X

161.25

103.19

Protective Put

1

0

1

0

0

82.25

112.25

112.25

52.25

39.80

60.25

41.71

58.00

82.25

100.25

54.00

82.25

73.13

Long Call

1

0

0

0

0

40.00

55.00

60.00

25.00

19.90

40.00

20.85

29.00

40.00

58.00

27.00

40.00

37.90

Synthetic Long Stock

1

1

0

0

0

220.00

110.00

127.50

100.00

X

80.00

29.20

X

240.00

198.75

X

201.25

145.19

Bull Spread Spread

2

2

0

0

0

440.00

220.00

255.00

200.00

X

160.00

58.40

X

480.00

397.50

X

402.50

290.38

Cash-Secured Call

1

0

0

0

1

40.00

55.00

60.00

25.00

21.90

40.00

21.70

29.00

40.00

58.00

29.00

40.00

38.30

Call Back Spread

1

1

0

0

0

220.00

110.00

127.50

100.00

X

80.00

29.20

X

240.00

198.75

X

201.25

145.19

Long Combo Spread

0

2

0

0

0

360.00

110.00

135.00

150.00

X

80.00

16.70

X

400.00

281.50

X

322.50

206.19

Short Call Spread

1

1

0

0

0

220.00

110.00

127.50

100.00

X

80.00

29.20

X

240.00

198.75

X

201.25

145.19

Uncovered Call

0

1

0

0

0

180.00

55.00

67.50

75.00

X

40.00

8.35

X

200.00

140.75

X

161.25

103.09

1

1

0

0

0

220.00

110.00

127.50

100.00

X

80.00

29.20

X

240.00

198.75

X

201.25

145.19

Covered Short Put

0

1

0

1

0

X

X

X

X

X

(58.00)

X

X

X

X

X

X

(58.00)

Bear Spread Spread

Neutral Strategies

Long Condor Spread

2

2

0

0

0

440.00

220.00

255.00

200.00

X

160.00

58.40

X

480.00

397.50

X

402.50

290.38

Long Put

1

0

0

0

0

40.00

55.00

60.00

25.00

19.90

40.00

20.85

29.00

40.00

58.00

27.00

40.00

37.90

Synthetic Short Stock

1

1

0

0

0

220.00

110.00

127.50

100.00

X

80.00

29.20

X

240.00

198.75

X

201.25

145.19

1

1

0

0

0

220.00

110.00

127.50

100.00

X

80.00

29.20

X

240.00

198.75

X

201.25

145.19

1

1

0

0

0

220.00

110.00

127.50

100.00

X

80.00

29.20

X

240.00

198.75

X

201.25

145.19

255.72

132.11

151.01

117.23

(33.39)

91.06

35.74

(48.33)

278.51

230.66

(45.22)

234.35

169.66

Long Iron Butterfly
Spread

Double Butterfly

Strategies
Strategies
ish Strategies

Sustained bear-

Moderately bearish

Sustained bullish

Moderately bullish Strategies

Volatile Strategies

Spread

Call Ratio Back
Spread

Short Ratio Call
Spread

Short Ratio Put
Spread

Short Combo
Spread
Put Back Spread

Ø Transaction Cost per Bank

64

“Option strategies – A practical Guideline for Retail Investors”

8.4.2. Break-Even Point
ERX = EUREX Options

UBS

CS

ZKB

BEKB

BCV

Saxo Bank

Swissquote

Cash zweiplus

Migros Bank

Bank Coop

PostFinance

Raiffeisen

Ø Break-Even

WRT = Warrants
ERX

WRT

ERX

WRT

ERX

WRT

ERX

WRT

ERX

WRT

ERX

WRT

ERX

WRT

ERX

WRT

ERX

WRT

ERX

WRT

ERX

WRT

ERX

WRT

ERX

WRT

Long Condor Spread

12.2%

7.6%

4.4%

4.4%

4.6%

4.6%

5.1%

3.5%

X

X

2.7%

2.7%

0.7%

1.1%

X

X

13.4%

8.1%

9.5%

6.7%

X

X

10.8%

6.8%

7.1%

5.0%

Long Butterfly Spread

9.2%

4.6%

3.5%

3.5%

3.5%

3.5%

3.9%

2.2%

X

X

2.0%

2.0%

0.5%

0.9%

X

X

10.1%

4.8%

7.1%

4.4%

X

X

8.2%

4.1%

5.3%

3.3%

Short Straddle

6.2%

6.2%

2.6%

2.6%

2.4%

2.6%

2.6%

2.6%

X

X

1.3%

1.3%

0.4%

0.4%

X

X

6.8%

6.8%

4.8%

4.8%

X

X

5.5%

5.5%

3.6%

3.6%

Short Strangle

6.2%

6.2%

2.6%

2.6%

2.4%

2.6%

2.6%

2.6%

X

X

1.3%

1.3%

0.4%

0.4%

X

X

6.8%

6.8%

4.8%

4.8%

X

X

5.5%

5.5%

3.6%

3.6%

Short Gut Spread

6.2%

6.2%

2.6%

2.6%

2.4%

2.6%

2.6%

2.6%

X

X

1.3%

1.3%

0.4%

0.4%

X

X

6.8%

6.8%

4.8%

4.8%

X

X

5.5%

5.5%

3.6%

3.6%

Long Iron Butterfly Spread

12.2%

7.6%

4.4%

4.4%

4.6%

4.6%

5.1%

3.5%

X

X

2.7%

2.7%

0.7%

1.1%

X

X

13.4%

8.1%

9.5%

6.7%

X

X

10.8%

6.8%

7.1%

5.0%

Long Box Spread

12.2%

7.6%

4.4%

4.4%

4.6%

4.6%

5.1%

3.5%

X

X

2.7%

2.7%

0.7%

1.1%

X

X

13.4%

8.1%

9.5%

6.7%

X

X

10.8%

6.8%

7.1%

5.0%

Long Ladder Spread

9.2%

6.9%

3.5%

3.5%

3.5%

3.6%

3.9%

3.1%

X

X

2.0%

2.0%

0.5%

0.7%

X

X

10.1%

7.4%

7.1%

5.8%

X

X

8.2%

6.1%

5.3%

4.3%

Ratio Call Write

3.9%

3.9%

2.6%

2.6%

2.1%

2.3%

1.8%

1.8%

X

X

1.0%

1.0%

0.6%

0.6%

X

X

4.1%

4.1%

3.2%

3.2%

X

X

3.5%

3.5%

2.5%

2.6%

Ratio Put Write

X

X

X

X

X

X

X

X

X

X

1.0%

X

X

X

X

X

X

X

X

X

X

X

X

X

(1.0%)

X

Double Butterfly Spread

15.2%

8.2%

5.3%

5.3%

5.8%

5.6%

6.4%

3.9%

X

X

3.3%

3.3%

0.8%

1.4%

X

X

16.8%

8.8%

11.8%

7.7%

X

X

13.5%

7.5%

8.8%

5.7%

Variable Ratio Write

6.9%

6.9%

3.5%

3.5%

3.3%

3.5%

3.1%

3.1%

X

X

1.7%

1.7%

0.8%

0.7%

X

X

7.5%

7.5%

5.5%

5.5%

X

X

6.2%

6.2%

4.3%

4.3%

Long Straddle

6.2%

1.6%

2.6%

2.6%

2.4%

2.3%

2.6%

1.0%

X

0.7%

1.3%

1.3%

0.4%

0.8%

X

1.1%

6.8%

1.4%

4.8%

2.0%

X

0.9%

5.5%

1.4%

3.6%

1.4%

Long Strangle

6.2%

1.6%

2.6%

2.6%

2.4%

2.3%

2.6%

1.0%

X

0.7%

1.3%

1.3%

0.4%

0.8%

X

1.1%

6.8%

1.4%

4.8%

2.0%

X

0.9%

5.5%

1.4%

3.6%

1.4%

Long Gut Spread

6.2%

1.6%

2.6%

2.6%

2.4%

2.3%

2.6%

1.0%

X

0.7%

1.3%

1.3%

0.4%

0.8%

X

1.1%

6.8%

1.4%

4.8%

2.0%

X

0.9%

5.5%

1.4%

3.6%

1.4%

Call Ratio Back Spread

6.2%

3.9%

2.6%

2.6%

2.4%

2.5%

2.6%

1.8%

X

X

1.3%

1.3%

0.4%

0.6%

X

X

6.8%

4.1%

4.8%

3.4%

X

X

5.5%

3.4%

3.6%

2.6%

Strap

6.2%

1.6%

2.6%

2.6%

2.4%

2.3%

2.6%

1.0%

X

0.7%

1.3%

1.3%

0.4%

0.8%

X

1.1%

6.8%

1.4%

4.8%

2.0%

X

0.9%

5.5%

1.4%

3.6%

1.4%

Strip

6.2%

1.6%

2.6%

2.6%

2.4%

2.3%

2.6%

1.0%

X

0.7%

1.3%

1.3%

0.4%

0.8%

X

1.1%

6.8%

1.4%

4.8%

2.0%

X

0.9%

5.5%

1.4%

3.6%

1.4%

Short Condor Spread

12.2%

7.6%

4.4%

4.4%

4.6%

4.6%

5.1%

3.5%

X

X

2.7%

2.7%

0.7%

1.1%

X

X

13.4%

8.1%

9.5%

6.7%

X

X

10.8%

6.8%

7.1%

5.0%

Short Butterfly Spread

9.2%

6.9%

3.5%

3.5%

3.5%

3.6%

3.9%

3.1%

X

X

2.0%

2.0%

0.5%

0.7%

X

X

10.1%

7.4%

7.1%

5.8%

X

X

8.2%

6.1%

5.3%

4.3%

Short Ladder Spread

9.2%

4.6%

3.5%

3.5%

3.5%

3.5%

3.9%

2.2%

X

X

2.0%

2.0%

0.5%

0.9%

X

X

10.1%

4.8%

7.1%

4.4%

X

X

8.2%

4.1%

5.3%

3.3%

Collar

6.9%

4.6%

3.5%

3.5%

3.3%

3.3%

3.1%

2.3%

X

X

1.7%

1.7%

0.8%

0.9%

X

X

7.5%

4.8%

5.5%

4.1%

X

X

6.2%

4.1%

4.3%

3.3%

Long Call Spread

6.2%

3.9%

2.6%

2.6%

2.4%

2.5%

2.6%

1.8%

X

X

1.3%

1.3%

0.4%

0.6%

X

X

6.8%

4.1%

4.8%

3.4%

X

X

5.5%

3.4%

3.6%

2.6%

Short Ratio Call Spread

6.2%

3.9%

2.6%

2.6%

2.4%

2.5%

2.6%

1.8%

X

X

1.3%

1.3%

0.4%

0.6%

X

X

6.8%

4.1%

4.8%

3.4%

X

X

5.5%

3.4%

3.6%

2.6%

Uncovered Put

3.2%

3.2%

1.7%

1.7%

1.3%

1.5%

1.4%

1.4%

X

X

0.7%

0.7%

0.2%

0.2%

X

X

3.4%

3.4%

2.5%

2.5%

X

X

2.8%

2.8%

1.9%

1.9%

Covered Combination

6.9%

6.9%

3.5%

3.5%

3.3%

3.5%

3.1%

3.1%

X

X

1.7%

1.7%

0.8%

0.7%

X

X

7.5%

7.5%

5.5%

5.5%

X

X

6.2%

6.2%

4.3%

4.3%

Zero-Cost Collar

6.9%

4.6%

3.5%

3.5%

3.3%

3.3%

3.1%

2.3%

X

X

1.7%

1.7%

0.8%

0.9%

X

X

7.5%

4.8%

5.5%

4.1%

X

X

6.2%

4.1%

4.3%

3.3%

Covered Short Call

3.9%

3.9%

2.6%

2.6%

2.1%

2.3%

1.8%

1.8%

X

X

1.0%

1.0%

0.6%

0.6%

X

X

4.1%

4.1%

3.2%

3.2%

X

X

3.5%

3.5%

2.5%

2.6%

Cash-Secured Put

3.2%

3.2%

1.7%

1.7%

1.3%

1.5%

1.4%

1.4%

X

X

0.7%

0.7%

0.3%

0.3%

X

X

3.4%

3.4%

2.5%

2.5%

X

X

2.8%

2.8%

1.9%

1.9%

Protective Put

3.9%

1.6%

2.6%

2.6%

2.1%

2.2%

1.8%

1.0%

X

0.7%

1.0%

1.0%

0.6%

0.8%

X

1.1%

4.1%

1.5%

3.2%

1.8%

X

0.9%

3.5%

1.5%

2.5%

1.4%

Long Call

3.2%

0.9%

1.7%

1.7%

1.3%

1.3%

1.4%

0.6%

X

0.4%

0.7%

0.7%

0.2%

0.5%

X

0.6%

3.4%

0.8%

2.5%

1.1%

X

0.5%

2.8%

0.8%

1.9%

0.8%

Synthetic Long Stock

6.2%

3.9%

2.6%

2.6%

2.4%

2.5%

2.6%

1.8%

X

X

1.3%

1.3%

0.4%

0.6%

X

X

6.8%

4.1%

4.8%

3.4%

X

X

5.5%

3.4%

3.6%

2.6%

Bull Spread Spread

12.2%

7.6%

4.4%

4.4%

4.6%

4.6%

5.1%

3.5%

X

X

2.7%

2.7%

0.7%

1.1%

X

X

13.4%

8.1%

9.5%

6.7%

X

X

10.8%

6.8%

7.1%

5.0%

Cash-Secured Call

3.2%

0.9%

1.7%

1.7%

1.3%

1.3%

1.4%

0.6%

X

0.4%

0.7%

0.7%

0.3%

0.5%

X

0.6%

3.4%

0.8%

2.5%

1.1%

X

0.5%

2.8%

0.8%

1.9%

0.8%

Call Back Spread

6.2%

3.9%

2.6%

2.6%

2.4%

2.5%

2.6%

1.8%

X

X

1.3%

1.3%

0.4%

0.6%

X

X

6.8%

4.1%

4.8%

3.4%

X

X

5.5%

3.4%

3.6%

2.6%

Long Combo Spread

6.2%

6.2%

2.6%

2.6%

2.4%

2.6%

2.6%

2.6%

X

X

1.3%

1.3%

0.4%

0.4%

X

X

6.8%

6.8%

4.8%

4.8%

X

X

5.5%

5.5%

3.6%

3.6%

Short Call Spread

6.2%

3.9%

2.6%

2.6%

2.4%

2.5%

2.6%

1.8%

X

X

1.3%

1.3%

0.4%

0.6%

X

X

6.8%

4.1%

4.8%

3.4%

X

X

5.5%

3.4%

3.6%

2.6%

Uncovered Call

3.2%

3.2%

1.7%

1.7%

1.3%

1.5%

1.4%

1.4%

X

X

0.7%

0.7%

0.2%

0.2%

X

X

3.4%

3.4%

2.5%

2.5%

X

X

2.8%

2.8%

1.9%

1.9%

Short Ratio Put Spread

6.2%

3.9%

2.6%

2.6%

2.4%

2.5%

2.6%

1.8%

X

X

1.3%

1.3%

0.4%

0.6%

X

X

6.8%

4.1%

4.8%

3.4%

X

X

5.5%

3.4%

3.6%

2.6%

X

X

X

X

X

X

X

X

X

X

1.0%

X

X

X

X

X

X

X

X

X

X

X

X

X

(1.0%)

X

Bear Spread Spread

12.2%

7.6%

4.4%

4.4%

4.6%

4.6%

5.1%

3.5%

X

X

2.7%

2.7%

0.7%

1.1%

X

X

13.4%

8.1%

9.5%

6.7%

X

X

10.8%

6.8%

7.1%

5.0%

Long Put

3.2%

0.9%

1.7%

1.7%

1.3%

1.3%

1.4%

0.6%

X

0.4%

0.7%

0.7%

0.2%

0.5%

X

0.6%

3.4%

0.8%

2.5%

1.1%

X

0.5%

2.8%

0.8%

1.9%

0.8%

Synthetic Short Stock

6.2%

3.9%

2.6%

2.6%

2.4%

2.5%

2.6%

1.8%

X

X

1.3%

1.3%

0.4%

0.6%

X

X

6.8%

4.1%

4.8%

3.4%

X

X

5.5%

3.4%

3.6%

2.6%

Short Combo Spread

6.2%

3.9%

2.6%

2.6%

2.4%

2.5%

2.6%

1.8%

X

X

1.3%

1.3%

0.4%

0.6%

X

X

6.8%

4.1%

4.8%

3.4%

X

X

5.5%

3.4%

3.6%

2.6%

Put Back Spread

6.2%

3.9%

2.6%

2.6%

2.4%

2.5%

2.6%

1.8%

X

X

1.3%

1.3%

0.4%

0.6%

X

X

6.8%

4.1%

4.8%

3.4%

X

X

5.5%

3.4%

3.6%

2.6%

Ø BE per Bank

7.0%

4.5%

2.9%

2.9%

2.8%

2.9%

3.0%

2.1%

X

(0.6%)

1.5%

1.5%

0.5%

0.7%

X

(0.9%)

7.6%

4.7%

5.5%

4.0%

X

(0.8%)

6.2%

4.0%

4.1%

2.9%

gies
Strategies
gies

Moderately

Covered Short Put

Strategies

bearish

Sustained

bearish Strate-

Sustained bullish

Moderately bullish Strate-

Volatile Strategies

Neutral Strategies

(by including the total transaction costs)

65

“Option strategies – A practical Guideline for Retail Investors”

9. Disclaimer
This disclaimer governs the use of this bachelor thesis. This paper contains data about trading platforms and option strategies. The information is not an advice, and should not be treated as such. I, the author of this paper, that can be found here within, can assure you, that this bachelor thesis is neither a recommendation for trading options nor an active advisory for a specific option strategy. In any case, I am not liable for any actions a reader will do, based on my thesis. Readers are responsible for assessing the relevance and accuracy of the content of this paper. Therefore, I do not accept any liabilities, losses and financial risks incurred as a consequence of the use or misuse of any information of this bachelor thesis.

10. Declaration
The length of this text, including chapter 1 heading and up to the declaration is 16’786 words. I hereby certify that I have independently written this term paper. Any text passages which were not written by me are quoted as citations and specific references to their origins are made. All used sources (including images, graphics, etc.) are included in the bibliography.

XXX, February 18, 2016

___________________
XXX

66

“Option strategies – A practical Guideline for Retail Investors”

11. Bibliography
11.1. List of Illustrations
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2014).

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March 2014).

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67

“Option strategies – A practical Guideline for Retail Investors”

11.2. Literature
Hull, John C. (2009): Options, Futures, and Derivatives (7th edition), New Jersey, Pearson
Education.

Cohen, Guy (2005): The Bible of Option Strategies, The definitive Guide for practical
Trading Strategies, New Jersey, Pearson Education.

Rhoads, Russel (2011): Option Spread Trading, A comprehensive guide to Strategies and
Tactics, New Jersey, John Wiley & Sons.

Jensen, Greg (2009): Spread Trading, An introduction to trading options in nine simple steps, New Jersey, John Wiley & Sons.

Bouzoubaa, Mohamed/Osseiran, Adel (2010): Exotic Options and Hybrids, A guide to structuring, pricing and trading, West Sussex, John Wiley & Sons.

Banks, Erik/Siegel, Paul (2007): The options applications handbook, Hedging and speculating techniques for professional investors, New York, McGraw-Hill.

Evans, J.L/Archer S.H. (1968): Diversification and Reduction of Dispersion: An Empirical
Analysis, in: Journal of Finance, p. 761.

11.3. Interviews
Ballarin, Daniel, Associate Director and Training Manager at Swissquote Bank SA (2014): subject: Definition of retail investor; how option strategies are technically feasible; costs for trading options; spread of options; conditions for margin account, Upgrade to VIP client; interview conducted on 2 April 2014.

Bichsel, Alain, Head Media Relation of the SIX Swiss Exchange group (2014): subject: short selling; legal environment of option trading; naked short selling; interview conducted on 12 March 2014.

Eichenberger, Roger, Director Private Banking Wealth Management at Credit Suisse
Group (2014): subject: basic fees of banks and the future development, breakeven-level of investments; interview conducted on 6 May 2014.

68

“Option strategies – A practical Guideline for Retail Investors”

Graham, Kyle, Employee of Investor Service at The Options Clearing Corporation (2014): subject: optimal option strategy for retail investor; how to build an option strategy; trading possibilities; interview conducted on 26 February 2014.

Liechti, Thomas, Relationship Manager and Director at Bank Julius Bär (2014): subject: option strategy in general; legal environment in Switzerland; transaction costs in trading; financial instruments; interview conducted on 24 March 2014.

Matuszewski, Adam, Equity Product Manager at SIX Swiss Exchange Ltd (2014): subject:
LEAPS; interview conducted on 9 April 2014.

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“Option strategies – A practical Guideline for Retail Investors”

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“Option strategies – A practical Guideline for Retail Investors”

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“Option strategies – A practical Guideline for Retail Investors”

Raiffeisen (2014d, p. 1): Dienstleistungspreise – Privatkunden, Online: http://www.raiffeisen.ch/raiffeisen/internet/rb0027.nsf/$UNID/F6778E1ACFD4EAE 0C125743D0045557E/$file/DL%20Preise%20Privatkunden_2014_Internet.pdf
(version: 7 April 2014).

Reverso (2014): Investor definition. Online: http://dictionary.reverso.net/englishcobuild/investor (version: 28 February 2014).

Saxo Bank (2013): Contract for Difference (CFD) – Trading CFDs with a market leader,
Online: http://ch.saxobank.com/cfds/ (version: 20 March 2014).

Saxo Bank (2014a): Saxo Bank (Switzerland) Ltd., Online: http://ch.saxobank.com/whysaxo/ (version: 12 February 2014).

Saxo Bank (2014b): Prices, Online: http://ch.saxobank.com/prices/ (version: 7 April 2014).

SFBC (2008): SFBC emphasizes that naked short sales are not permitted, Online: http://www.finma.ch/archiv/ebk/e/aktuell/ (version: 12 March 2014).

SIX Securities Services (2013b): Rules and Regulations SIX x-clear Ltd and SIX SIS Ltd,
Online: http://www.six-securitiesservices.com/dam/dss/downloads/clearing/download-center/operational/clr-xclearlendingnorms-en.pdf (version: 23 March 2014).

SIX Swiss Exchange (2013a): Media Release – Regulation of short selling as part of selfregulation, Online: http://www.six-swissexchange.com/media_releases/online/media_release_201310100730_en.pdf (version: 10 October 2013).

SIX Swiss Exchange (2013b): Rule Book of 23/12/2013 – Effective from: 07/04/2014,
Online: http://www.six-swiss-exchange.com/rule_book/01-RB_en.pdf (version: 12
March 2014).

SIX Swiss Exchange (2014): Fees, Online: http://www.six-swissexchange.com/participants/participation/fees_en.html (version: 27 February 2014).

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Swiss Post Ltd (2014): Strategic partnership between Swissquote and PostFinance,
Online: http://www.swisspost.ch/post-startseite/post-konzern/post-medien/postarchive/2014/post-mm14-strategische-zusammenarbeit-swissquotepostfinance/post-medienmitteilungen.htm (version: 2 May 2014).

SwissBanking (2014): The Economic Significance of the Swiss Financial Centre, Online: http://www.swissbanking.org/en/facts_figures.htm (version: 23 March 2014).

Swissquote (2010): Trading>Costs and Conditions>Packages, Online: http://www.swissquote.ch/sqw-static/trading/fees/packages.jsp?l=e (version: 24
April 2014).

Swissquote (2012a): The group presentation, Online: http://www.swissquote.ch/sqwgroup/group/introduction.jsp?l=e (version: 12 February 2014).

Swissquote (2012b): Executive Management, Online: http://www.swissquote.ch/sqwgroup/corporate/profile_exe_director.jsp (version: 12 February 2014).

Swissquote (2013a): Annual report 2013 – Corporate Governance report and compensation report, Online: http://www.swissquote.ch/sqw-groupresources/doc/pdf/report/report_Q4_2013_e.pdf (version: 1 April 2014).

Swissquote (2013b): Results for the 2013 Business year, Online: http://www.swissquote.ch/sqw-groupresources/doc/pdf/presentation/presentation_2013_Q4_e.pdf (version: 1 April
2014).

Swissquote (2014): Trading – Costs & Conditions – Private Clients, Online: http://www.swissquote.ch/sqw-static/trading/fees/fees_private_clients.jsp (version:
7 April 2014).

The Wall Street Journal (2013): Global Wealth Managers Will Be 'Winners' in 2013 – Analyst, Online: http://online.wsj.com/news/articles/SB10001424127887324539304578262260893 094342 (version: 7 March 2014).

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TradeDirect (2014): Rates & Conditions, Online: https://www.tradedirect.ch/public/portal/guest/signup/rates (version: 7 April 2014).

UBS (2011): Securities trading prices for private and corporate clients, Online: https://www.ubs.com/ch/en/online-services/e-banking.html (version: 5 April 2014).

UBS (2014a): UBS in a few words, Online: https://www.ubs.com/global/en/about_ubs/about_us/ourprofile.html (version: 4
February 2014).

UBS (2014b): Basic Offerings and individual products relating to payments and savings –
Services and prices, Online: https://www.ubs.com/ch/en/online-services/ebanking.html (version: 5 April 2014).

UBS (2014c): Account products – Current interest rates at a glance, Online: http://www.ubs.com/ch/en/swissbank/business_banking/kmu/account/interest_rate s.html (version: 5 April 2014).

Zürcher Kantonalbank (2013a): Preisübersicht Anlagegeschäft, Online: https://www.zkb.ch/etc/ml/repository/prospekte_und_broschueren/sparen_anlegen/ 219853_preisuebersicht_anlagegeschaeft_pdf.File.pdf (version: 5 April 2014).

Zürcher Kantonalbank (2013b): Zinsen & Preise, Online: https://www.zkb.ch/de/startseite/privatkunden/servicecenter/zinsen_und_preise/zin sen.html (version: 5 April 2014).

Zürcher Kantonalbank (2014a): At a glance, Online: http://www.zkb.ch/de/center_worlds/englishwindow/about_us/portrait/at_a_glance. html (version: 7 February 2014).

Zürcher Kantonalbank (2014b): Geschichte, Online: https://www.zkb.ch/de/center_worlds/ueber_uns/portraet/geschichte.html (version:
7 February 2014).

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Zürcher Kantonalbank (2014c): Preisübersicht und Konditionen für Privatkunden, Online: http://www.zkb.ch/etc/ml/repository/prospekte_und_broschueren/zahlen/210727_p reise_konditionen_privatk_pdf.File.pdf (version: 5 April 2014).

11.5. Legislative Texts
Directive 3: Trading of SIX Swiss Exchange Ltd of 01/01/2014, (version: 27 February
2014), Para. VI, Art. 19, No. 2.

Federal Act on Value Added Tax of 01/01/2014, (version: 23 April 2014), Para. 21, Art. 19 lit. e).

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12. Appendix
All sources from the bibliography are available on CD.

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