[Insert Student’s Name]
[Enter Affiliation]
[Enter Date]
Introduction
The trading game is one of the things that sustains and enhances the gap between rich and poor within the international trading system that guides strong, well organize countries in comparison to more than poor ones. While, the Chicago board options exchange is the exchange market utilized for trading standardized options contracts, which include stock options, leaps, interest rate options, foreign currency options and index options . Several CBOE options are traded in the open protest system in which exchanging members perform as market makers where the Chicago board options exchange calls for market makers while the backbone of the trading system rely upon. They are usually willing to risk their personal capital liquidity to CBOE option trading .
The Chicago board options exchange is the biggest united states exchange and development of listed options which are continuing to place the bar options trading by means of product modernism, trading knowledge and investor learning. It provides equity, index, and ETF options that include proprietary products including SPX 500 options where the most active united State index options on the CBOE volatility index where the global barometer came from market volatility . This paper evaluates the online trading game activities, strategies, illustration of motivation for doing online trading, what we have learned, and what should be done in the future. Initially student has opened a free online trading account with CBEO with the initial balance of €25,000 in virtual funds to trade.
Concept of Trading Game and Derivatives Options
In the trading game, participant’s role is playing with different countries and country groups. While, each group should manufacturers' products from raw materials that are demonstrated by online illustration with different values . Then, a group of students has sold their products to the banker while each group intends to develop as much money as predictable. However, manufacturing and trading happens where the game leader can modify the terms of trade and creating innovative trading circumstances, which reflects real life situations . The innovative terms of trade influence the way countries' trade, either by stimulating enhancement in trading and limiting the manufacturing capacity of the limiting country .
When manufacturing and trading is finished where the game leader is required to protect the important brief arguments and discussions. Players demonstrate their feelings and experience while understanding in what way their role reflected real life globally trading systems and identifying the morality of international trading. The recent global trading systems are assisting them to sustain the gap between rich and poor nations. There are trading systems that assist strong, well-organized nations, including as the United States America and European Union states somewhat in comparison to poorer countries .
The trading game assists to demonstrate in what way trade influences the prosperity of the country in the both ways positively and negatively. It is the enjoyable and thrilling introduction to the concerns of trade, giving the simple outline of the some very complex relationships . It is the important introduction to the fundamental concerns that is analyzed in what way the gap can be maintained between rich and poor nations. Before the broad spreading utilization of online trading for the general public and online trading was considered quite complex by several innovative investors. Through, computers perform online trading system, most of the calculations; innovative investors can develop fortunes repeatedly before actually committing financially. Where, investors also utilize trading to verify innovative and different investment strategies, the stock market games, which are usual for the academic purposes .
However, other advanced strategies including leveraging, short selling, forex and derivatives trading, efficient execution and profit production from the strategies. These strategies usually, need high level of technical knowledge where investors can verify these strategies through online trading for avoiding an excessive risk because of inexperience behaviors. The derivatives are the particular type of contract that derives its values from the performance of the fundamental entity, which can be assets, index, and interest rate and usually termed as underlying. The derivatives in the online trading system can be utilized for several reasons, which may include insuring in response of price movements, enhancing exposure to price movements for speculation or attaining accessibility for providing difficulty for trading assets and markets. Some of the major derivatives that are used including futures, forwards, swaps, options and changes of the products including caps, collars, floors and credit default swaps.
Most derivatives are traded over the off exchange, including Chicago mercantile exchange, however, most insurance contracts having created in the separate industry. The derivatives are one of the three major categories of financial instruments where the two being equities, including stocks and shares as well as debt that bonds and mortgages. In the derivatives, the options are the contracts that provide the owner the right, but it is not obligatory to purchase or sell the asset . The prices at which we have sold our products were strike price and illustrated at the time the parties entering into the option. The option contract also demonstrates the maturity date while in the situation of European option where the owner has the right to need the sale from taking place on the maturity date .
Overall Profit/Loss
For providing ease and comfort, several online trading platforms automatically calculate the profit and loss of the traders opening positions. While, it was good and efficient to understand in what way this calculation is developed. I suppose that the current bid for EUR is 1.4515/19, which demonstrates that buying 1 euro for 1.4515 or sell 1 euro for 1.4616. I have observed that the Euro is undervalued in response of United States dollars where the execution of this strategy, I have bought Euros and then was waiting for its exchange rate to rise.
Therefore, being online trader, I have bought 100,000 Euros with 146,190 dollars with two percent 50:1 advantage where the initial margin deposit was €25,000 in virtual funds to trade. As I was expecting, Euro highlights to 1.4623 and attained 146,230 $. I have bought 100k Euros in 1.4619 while paying $146,190. Nevertheless, I have sold 100k Euros at 1.4623 attaining $146,230. That is the difference between amount to have profited in dollar terms $146,190 - $146,230 = $40.
Hence, I have earned total profit as follows
Total profit = US $40.
I have once again purchased Euro when trading at 1.4616/19. I have bought 100,000 Euros that I have paid with 146,190 dollars (100,000 x 1.4619). While, the Euro has turned out be weakens to 1.4611/14. In order to reduce the loss to sell, 100,000 Euros at 1.4611 and receive $146,110, I have budgeted100,000 Euros at 1.4619, paying $146,190. You sold 100,000 Euros attained 1.4611,in $146,110. That is a difference in terms of dollars $146,190 - $146,110 = $80.
Total loss = $80 US
Description of Strategy/Motivation for the Trades
The strategy that I have adopted is the best one to practice investment strategies, testing theories, practicing day trading, learning regarding several markets and competing with other players. Joining the trading game where the students were required to invest some money and then evaluating their profit and loss situation. I usually discuss with my student traders regarding the significance of having the business plan being the trading business and not only considering myself as the trader with the trading plan. Therefore, many friends of mine were involved in the online trading game due to which I was motivated to learn new concepts related to financial analysis, derivatives, different investment options and many other things.
Learning and Future Steps
I have learned that the trading game is developed for players aged fourteen years and older, while it can be implemented for the younger children. This game is best suitable for the group of fifteen to thirty year old aged players. If the group is larger, run two separate games at the same times.
The rules and skills needed are simple so that the game can be utilized with the broad range of capabilities, the trading game can be played at the initial stage of the program, including a long series of lessons or and one day conference for identifying individual interested in international trade concerns. However, it is also effective for the fun summary after the single session. I have learned that this strategy will be helpful discussion after the game if the players have some background knowledge of the differences between rich and poor nations. To define that in what way trading can be beneficial and hindering the economic development of different countries and trading options. I have also learned that in what way trading world, enabling players for providing experience the unfairness of inequality trading relationships .
I have also become capable to produce interest and discussion regarding the global trading system in the pleasant and in the non-educational form along with the intention of assisting players understanding obviously in what way trading influences the country's prosperity. The trading game also gives only simple outlining of some very difficult relationships where one of its objectives and demonstrating the fundamental concerns that is evaluating them. In the future, I am interested to develop a trading plan before starting a trading game, which can be considered as the crucial part of the overall trading business. Many business people may develop such plans in order to affect the business plan, which is actually living, and making lifestyle as a trader .
I believe it is very important to comprise all of the subsequent Trading Business Plan at its most basic level, I will include the following aspects of the trading or business plan.
1. Business Vision
In it, I will discuss what my vision for trading business is and what will be the future of the business in the coming five to ten years .
2. Mission Statement
My reason for entering and being in the trading business is the genuine inspiration. That is why I want to trade requirements to be more influential and significant than immediately to create money and reputation of the company, since there will be times at what time you are not and that the earnings I can misplace your inspiration.
3. Evidently Definite Aims & Objectives
The aims and objectives are long-term decisions that I wish to attain objectives that are tangible achievement, which can be attained by following a convinced several steps. As an online Trader, I require performance goals and objectives. Then focal point for the Performance, Process, Goals, and Objectives as eventually the meeting point of these assists I attain the conclusion .
4. Financial Plan
It describes capital requirements, planned expenses, planned income structure and 3-5 year projected cash flow forecast .
5. Trading Framework
- Markets to trade,
- Attitudes regarding the market,
- Daily preparation plan,
- Considerate plan,
- Implementation plan,
- Hazard and position sizing models, and
- Trade management options
6. Self-Expansion and Enlargement Plan
How will I predict and plan for my enlargement in a never ending learning procedure, how will I make up my learning in the form that the considerateness of the idea can be instated in for example method that I can carry them out with faith and self-assurance .
7. Contingency Plans
In the contingency plan I will make scenarios, conducting risk analysis, trading plan contingency as well as software contingency .
Conclusion
It is concluded that through playing trading game student will become capable to learn different concepts of finance including investment strategies, derivatives and advantage as well as many other concepts. Different types of options, call options and put options, in call option the buyer will have the right to purchase a particular quantity of the underlying asset at the particular price on or before the provided date in the future. Likewise, the purchaser of a put option has the right to sell a convinced amount of fundamental asset, at a particular price on or before a specified date in the future, though he has no responsibility whatever to complete this right.
Through, evaluation of the trading game, the prices in a structured derivative market not just duplicate the discrimination of the marketplace members concerning the future, but also guide the prices of fundamental to the apparent future level. On the running out of the derivative contract, the prices of derivatives gather together with the prices of the fundamental. Consequently, derivatives are necessary tools to decide both present and future prices. The trading game assists to demonstrate in what way trade influences the prosperity of the country in the both ways positively and negatively. It is the enjoyable and thrilling introduction to the concerns of trade, giving the simple outline of the some very complex relationships .
Bibliography
DeRosa, D. (1998). Currency derivatives. New York: Wiley.
Hull, J. and Hull, J. (2012). Solutions manual, Options, futures, and other derivatives. Upper Saddle River, N.J.: Pearson Prentice Hall.
Tang, Y. and Li, B. (2007). Quantitative analysis, derivative modeling, and trading strategies. Hackensack, NJ: World Scientific Pub.
