Steve Smith
Steve Smith have been involved in all facets of the investment industry in a variety of roles ranging from speculator, educator, manager and advisor. This has taken him from the trading floors of Chicago to hedge funds on Wall Street to the world online. From 1987 to 1996, he served as a market maker at the Chicago Board of Options Exchange (CBOE) and Chicago Board of Trade (CBOT). From 1997 to 2007, he was a Senior Columnist and Managing Editor for TheStreet.com, handling their Option Alert and Short Report newsletters. The Option Alert was awarded the MIN “best business newsletter” in 2006. From 2009 to 2013, Smith was a Senior Columnist and Managing Editor for Minyanville’s OptionSmith newsletter, as well as a Risk Manager Consultant for New Vernon Capital LLC. Smith acted as an advisor to build models and option strategies to reduce portfolio exposure and enhance returns for the four main funds. Since 2015, he has worked for Adam Mesh Trading Group. There, he has managed Options360 and Earning 360, been co-leader of Option Academy, and contributed to The Option Specialist website.
Steve Smith's Latest Posts
Using Options To Protect Gains While Maintaining Upside Potential
The stock market is hitting all-time highs and investors are torn between the possibility of an economic downturn, or entering a new leg of the bull market. Last week’s article noted that money managers were increasingly using call options to gain additional exposure to the stock market. Some of this behavior might be deemed as a reckless […]
Why Smart Investors Use Covered Calls To Profit
Recent market volatility has both put traders on edge and pumped up the volatility in options. Those two usually go hand in hand and they create a great opportunity for longer term investors with a cooler demeanor to capitalize on the current dislocation. One of the best, and most popular approaches, especially among investors that […]
2 Distinct Concepts That Options Traders Need To Know
Market volatility is starting to tick back up as macro headlines from Iran/Iraq come in. And now we are about to enter earnings season, which not only will cause big moves in the individual names, but over the past few years, has proved to be a volatile first quarter. More specifically, on individual names that are […]
How To Read Options Activity For Clues To A Move
Using option activity as an indicator of impending price moves is difficult, subjective, and unreliable. That being said, it can help confirm other indicators and increase the probability of a profitable trade. Indeed, there have been many situations in which activity in the options pits accurately predicts or presages an impending price move. There are […]
The 6 Rookie Mistakes Options Traders Should Avoid
I thought this would be a good time to review some of the common mistakes traders make when using options. As shoppers have become increasingly savvy in finding online bargains and discounts, we see similar behavior spilling into other aspects of their lives. This includes investment advice and stocks they seek. But sometimes it’s better to […]
The Winning Way To Play Options During The Holidays
Back in 1992 when I was a market maker on the floor of the Chicago Board of Options Exchange (CBOE) and Board of Trade, a crazy event occurred; Lake Michigan started pouring into underground tunnels and flooding the city in what became known as the Great Chicago Flood. Most of downtown, including the exchanges, were closed for three […]
Why I’m Bearish On Disney (DIS) In The Short-Term
I know being bearish on Disney (DIS) might cast me as a villain but I have to got to call it like I see it. And I think it’s stock is due for a pullback and I will be employing a limited risk option strategy to establish a bearish position that will profit on a pullback. To […]
Using Options To Invest Tax-Efficiently
With 2019 drawing towards a close, it’s time investors need to look at their portfolios for rebalancing and determining asset allocation. While it should never be the driver of investment decisions, one needs to always keep an eye on tax implications as they can have a significant impact on the final total returns. Typically, at […]
The Options Way To Play Takeovers
Yesterday, financial media revitalized the term “merger Monday” as some $60 billion in deals were confirmed. A few such as LVHM’s bid for Tiffany (TIF) has surfaced a few weeks ago. But, others such as Schwab’s (SCHW) move to acquire TD Ameritrade (AMTD) came to light just recently, and Novartis (NVS) purchase of Medicines Co. (MDCO) came as a surprise and sent shares surging. Overall, […]
What Is A Collar Option Strategy And When To Use Them
Stocks keep grinding to new highs but there’s an uneasy feeling we might get a year end shake out. On the macro front, trade talks with China still appear to be unresolved. In addition, Home Depot (HD) and Kohl’s (KSS) reported disappointing earnings, sending their shares down 7% and 15% respectively. Of more concern is whether these reports represent […]
How Are 2019’s IPO Unicorns Performing?
2019 was expected to be a stellar year for Initial Public Offerings (IPOs) as a stable full of private companies, including many well-known ‘unicorns,’ came to the public market. But instead of being welcomed with buying that would catapult valuations into the stratosphere, investors took a hard pass sinking shares into the abyss. Some companies, […]
Understanding A Covered Call Strategy
The other day, I wrote about how people are piling into funds, then employ option premium-selling strategies, particularly covered calls or buy-writes. I figure it’s a good time to drill down into exactly what these strategies entail and highlight both the pros and cons. The covered call strategy is one of the most popular options strategies especially among investors that […]
Earnings Season: What To Know Right Now Before Making A Trade
It’s that time of year again: earnings season. Things will officially kick off next week when big banks such as Bank America (BAC) and JP Morgan (JPM) report Monday and Tuesday, and then move into some big tech such as Netflix (NFLX) and IBM (IBM) on Wednesday afternoon. After a few months of being waffled and swayed by political trade […]
The Relationship Between Volatility & Vega
Market volatility is starting to tick back up as macro headlines ranging from inverted yield curve to drones striking Saudi oil complexes to impeachment to failed IPOs have ratcheted up uncertainty and nervousness. And now we are about to enter earnings season which not only will cause big moves in the individual names but could […]
CME Looks To Launch Options Trading On Bitcoin Futures In 2020
It was in November 2017 when the CME Group Inc. (CME) launched futures contracts on Bitcoin for trading. Now, two years later, the exchange announced list options on Bitcoin to begin trading in January 2020. For some, this was a long time coming, for others, it’s a sign that Bitcoin’s still a bubble waiting to burst. At the time the futures launched, […]
Find Out: A Bearish Trading Opportunity In A Cloud-Based Software Company
Atlassian Corporation (TEAM) was one of the hottest company’s in terms of its growth and stock price. But now, it looks like it’s losing steam and breaking down, setting it up for a bearish trade. Atlassian Corporation Plc – Class A Ordinary Shares (TEAM) is a cloud-based software company which provides a variety of tools for content […]
Butterfly Spreads: A Smart Options Strategy for a Volatile Market
“Do not touch nothing. The truth will be revealed by the facts as they exist.” -Hercule Poirot’s in the Murder on the Orient Express One of the biggest challenges of using options, as an investment tool, is that you must be right on direction and price target, and also accurate in your timing. And, with all […]
Using Options To ‘Own’ Stocks For No Cost
With the Federal Reserve ready to embark on a new round of free money, here’s an options strategy that also has a ‘free’ or no money down way to be long stocks. Of the many options strategies that provide leverage, one of the most interesting is synthetic long stock. This combines a long call and short put opened at the […]
An Essential Options Strategy To Use As The Stock Market Hits New Highs
With the major indices pushing to all-time highs and some of the many names sitting on large double-digit percentage gains, this year alone, it can be difficult to not only hold on but climb aboard even the bluest chip names like Amazon (AMZN) and Microsoft (MSFT) at this stage. But, one strategy that helps overcome the psychological hurdle of […]
The One Rule You Must Follow When Trading Options
When people talk about options trading, the conversation often turns to ultra-risky strategies like buying a call or put options — ahead of an earnings number in the hope of being on the right side. The upside in getting lucky on such an unpredictable event is a big, fat profit. The downside when you’re wrong? […]
Have Option Gamma Trades Taken Control Of The Market?
Back in my day as a market maker on the floor of the Chicago Board of Options Exchange (CBOE), the third Friday of the month was known as ‘gamma day.’ That was prior to 2005 when weekly options were introduced—to show my age, I was on the CBOE from 1991-2002—and ever since ‘gamma day, it has been a weekly occurrence. Actually, […]
3 Steps For Using Options To Protect Your Portfolio
With the stock market having a sizzling run to new all-time highs, investors are rightfully asking how they can protect their gains while still retaining upside exposure. This is where options trading can be extremely helpful. The most straight forward and simplest form of hedging or limiting downside risk is buying put options. While it is essentially true […]
Options Trading: Profit And Probability Discussion [Part 3]
![Options Trading: Profit And Probability Discussion [Part 3]](http://optionstradingresearch.com/wp-content/uploads/2016/07/stocksvsbonds-150x150.jpg "Options Trading: Profit And Probability Discussion [Part 3]")
If the 2016 election results and market response taught us anything, it’s to expect the unexpected and make sure your positions and portfolio can withstand even the most outlier of events. In [the first part] of this series, we looked at how to properly measure risk and return, before even stepping in the batter’s box. […]
Options Trading: Profit And Probability Discussion [Part 2]
![Options Trading: Profit And Probability Discussion [Part 2]](http://optionstradingresearch.com/wp-content/uploads/2013/01/marketing-research-150x150.gif "Options Trading: Profit And Probability Discussion [Part 2]")
In the [first part of this series], we discussed how returns need to calculate returns on a risk-adjusted basis in both percentage and dollar terms. This applies to within the context of each position but, the overall portfolio. Now, let’s take a look at how setting up the proper risk/reward profile for each individual position […]
Options Trading: A Probability & Profitability Discussion
It’s a well-known investment maxim where risk is correlated to reward. But, when it comes to options, it seems people are making claims to both consistently hitting singles while simultaneously being home run kings. In my next three articles (this is one of three), I want to explore how returns should be calculated, whether it’s […]
Do You Want To Become A Better Options Trader?
The passing of Memorial Day, with its historical weight, is also a time to look forward — to the light and carefree days of summer. While some have used this turning of the season to clear “sell in May and go away,” I think it’s a good time to brush up on your options knowledge. […]
A Slingshot Options Strategy For Income And Gains
In looking for ways to maintain a bullish stance and generate income while protecting from a downside disaster, the standard collar (long stock, long protective put and short a higher strike call to pay for the put) is the standard approach. And while there is no reason to re-invent the wheel, there is a small […]
What Percentage Of Options Expire Worthless?
One of the persistent and pernicious myths regarding options trading is that 80% of all of them expire worthless. The number relies on the fact that most options get closed well before expiration and can create a misleading belief that selling premium is the only sure way to make money trading options. We’ve all seen the marketing […]
2 Essential Options Trading Concepts That You Need To Know
Market volatility has contracted back down to historically low levels with the VIX, which acts as the benchmark measure, sitting just above 52-week low at the pre-teen level of 12. But, with earnings season upon us, tons of IPOs such as Uber hitting market, and pickup in mergers and acquisition activity such as Chevron’s (CVX) $33 billion […]
The Inner Workings Of Time Decay In Options Trading
After a steep decline and rapid rebound, the stock market seems to be settling in. Following such a period of big moves and high volatility, I wouldn’t be surprised if it went nowhere for the next couple weeks, or until the next earnings period. But, as an options trader, one thing’s for certain: Time never stands […]
The Options Strategy That You Need To Know
One of the most popular options strategies is the covered call, or buy-write, in which one owns underlying stock and sells a call. It’s a bullish position which generates income through a premium collection. Many investors and money managers consider it a very conservative approach and employ it in their retirement accounts. But suggest selling a put, and […]
Does Texas Instruments Represent A Selling Opportunity?
Texas Instruments (TXN) shares are up over 6% to $102 following its earnings report. I think it represents a selling opportunity. The company beat on the bottom line by $0.02 but missed revenues with a YoY decline. More worrisome is the company lowered next quarters guidance by some 17% to $1.12 per share saying they see […]
1 Predictable Pricing Behavior That Savvy Options Traders Use
Earnings season officially kicks off next week with some of the big banks such as JP Morgan (JPM) and Bank America (BAC) set to report on Tuesday and the first of FAANG, Netflix (NFLX) reports on Thursday. Earnings can be very tricky to trade as there are many moving and unknown parts; will the company miss or beat expectations, what will be the […]
What Happens Next After VXX Expiration?
A year ago, several VIX or volatility related products imploded, and were forced to shut down. It now appears the popular Barclay’s iPath S&P 500 VIX Short-Term (VXX) exchange-traded note will cease to trade at the end of the month. But unlike the VIX, ETN’s, mostly inverse and leveraged — which went poof last February as a spike in volatility […]
Useful Guidelines For Credit Spread & Iron Condor Trading
The stock market continues to fluctuate wildly, on Monday the Dow Jones went from being down 500 points to close positive. Today, it quickly erased a 350-point gain. But within these huge intraday swings, the market seems to be carving out a defined range. This creates a good opportunity for selling credit spreads in general and iron condors […]
Stock News: Digital Platform Presents A Great Buying Opportunity
Paypal (PYPL), a digital mobile payment company, just delivered blow out earnings and its stock jumped some 10%. Is it still a buy? Yes! Thanks to the recent broad market selloff shares of Paypal, which hit a $75 low, or some 20% from the September high. Even with earnings-induced pop, it remained some 15% below the recent […]
Options: Short-Term Money-Making Opportunities
All the political and policy noise is about to brushed aside by what really matters for stock prices- earnings. And this is shaping up to be one of the most interesting, and possibly treacherous, earnings seasons in many years. Here is what you need to know. Earnings season kicked off on Friday with big banks […]
Options Trading: This Stock Is Ready For A Short Squeeze
Earlier this week I highlighted how bears were making money shorting stocks. But short selling can be a dangerous game, as you’re always at risk of a short squeeze inflicting large losses. A short squeeze happens when a stock has a large portion of its float sold short. Remember, every share sold short is like an […]
Options Trading: Is This The Ideal Environment For Calendar Spreads?
In my trading, I usually establish positions with directional bias through the purchase of puts or calls. This can provide the most leverage and biggest bang for your buck. That is assuming the move you predicted happens in a relatively short time and in a pretty orderly fashion. But as we discussed last Monday, the market seems […]
Options Trading: The Right Time For Buy-Write
With the major indices pushing to all-time highs, and some of the many names sitting large double digit percentage, it can be difficult not only holding on, but climbing aboard even the bluest chip names like Amazon (AMZN) and Microsoft (MSFT) at this stage. Fortunately, there’s an options trading strategy that can help you overcome this problem. One way […]
Options: How To Buy Them Before They Expire Worthless
One of the persistent and pernicious myths regarding options is that 80% of all them are worthless. The number belies the fact that most options get closed well before expiration and can create some misleading beliefs that selling premium is the only sure way to make money trading options. We’ve all seen the marketing emails […]
Futures Trading: Will VIX Term Structure Remain Calm?
Despite increasing drag of trade tariffs and swirling cross-currents of currency valuations curtailing global growth causing overseas markets in bear territory, the U.S. stock market keeps powering higher. And judging from the Volatility Index, or VIX traders expect the calm to continue even as we head into the notoriously turbulent month of October. The term […]
SPDR ETFs: This Group Is Down 12% In 2018 [DETAILS]
![SPDR ETFs: This Group Is Down 12% In 2018 [DETAILS]](http://optionstradingresearch.com/wp-content/uploads/2018/09/spdr-etfs-150x150.png "SPDR ETFs: This Group Is Down 12% In 2018 [DETAILS]")
After being one of the best performing sectors in 2017, homebuilders have been pretty shabby in 2018. As measured by the SPDR Homebuilder ETF (XHB), the group is down some 12% year to date. And because that ETF includes some companies that are only tangentially housing related such as Home Depot (HD) and William Sonoma (WMS) which has done quite well, […]
Options Trading: 5 Basic Rules Of Thumb
One of the members of my Options360 service wrote asking whether I had hard rules for managing my options trading. He knows I’m pretty much a stickler for entry points relative to the underlying shares, but when it comes to applying the options strategies, I allow more leeway for flexibility. That, in fact, is one of the […]
Options Trading: From Weed Killer To Profit Tiller
As laws regarding recreational marijuana continue to loosen restrictions and expand applications, many traditional ‘vice’ companies such as alcohol and tobacco are looking to get in on what is expected to be a $300 billion business by 2025. As we’re about to see, this process creates some lucrative options trading opportunities. Most recently, we saw Constellation […]
Investing Advice: How To Safely Short A Stock
Over the years, Tesla (TSLA) has been a bit of a widow maker to short sellers. The stock has gained over 300 percent since 2013. But even as the price rose, or probably because it rose, the short position continued to increase. It is now one of most heavily shorted stocks out there, with over 25% of the float […]
Options Trading: A Golden Opportunity
When I first started publishing options trading articles online in 2002, I quickly learned that if you wanted to get feedback, write something negative about gold. People will really bug out. At the time, gold was trading around below $400 an ounce and I thought that was too high. It of course proceeded to have […]
Options Trading: 4 Ways To Protect Your Portfolio
Amidst heavy saber rattling over tariffs and a seeming slowdown in global growth, earnings season is about to kick off. We have big banks such as JPM and BAC reporting on Friday and Netflix set to post results on Monday. This will be the real acid test for the bull market. Will companies post sufficient […]
Trade War: 4 Potential Market Outcomes
With the U.S. set to initiate some $34 billion in tariffs on China tomorrow and the Chinese expected to respond in kind 24 hours later, the opening skirmish in what could spiral into a trade war is upon us. So far, except for a few down days that have been more hiccup than correction, the stock market […]
Recession Prediction: Is Call Buying A Warning?
Going by the reaction in China, you would’ve thought global markets were in for a thrashing after President Donald Trump’s latest belligerence on trade. And while a few cracks widened, in the end it was another muffled reaction in U.S. stocks. Any immediate recession prediction has yet to bear fruit. For the S&P 500 Index, […]
Options Trading: Introducing The Synthetic Long
Of the many options trading strategies that provide leverage, one of the most interesting is synthetic long stock. This combines a long call and a short put opened at the same strike and expiration. The name “synthetic” is derived from the fact that the two positions change in value dollar for dollar, with changes in 100 shares of stock. […]
Market Volatility: Traders Are Short VIX – Again
In the wake of February’s market volatility induced sell-off that resulted in the implosion of several volatility-based ETFs, I’ve written plenty on the topic. I’ve covered everything from what exactly happened, and the opportunities it presented to basic flaws in VIX related products, to the current SEC investigation as to whether there was market manipulation at work. In the course […]
Options Trading: Time To Swipe Right On IAC
On Tuesday, Facebook (FB) ‘Amazoned’ the online dating industry by announcing it would add a dating feature. The news sent shares of IAC Interactive (IAC) and Match (MTCH) into a tailspin dropping some 20% each and wiping out $4 billion of market capitalization between the two companies. As we’re about to see, this opens up some interesting options trading possibilities. This is […]
Options Trading: Get PEPE With This Tech Trade
The selling of decent reports continues to be a theme, and the whole market looks on shaky ground. Today’s options trading will try and sidestep these larger issues. I’m going to establish a Pre-Earnings Premium Expansion, or PEPE, trade in Skyworks Solutions (SWKS). Skyworks develops semiconductor products that go into a wide variety of products from cell […]
Options Trading: How To Handle Earnings Reports
Earnings season officially kicks off with some of the big banks such as JP Morgan (JPM) and Citi set to report this coming Friday morning. This is an important, yet difficult time for options trading. Earnings can be very tricky to trade as there are many moving and unknown parts; will the company miss or […]
Recession Prediction: Is Volatility A Problem?
Stock market volatility has increased substantially over the past two months. While large declines during the first week of February and over the past few days have garnered most of the attention, it should be noted that the S&P 500 has spent over 30 of past 40 trading days within 3% of all time highs. […]
Options Trading: Playing The New Volatility Regime
Whether the stock market correction is over, or if the recent correction signaled the end of a bull market is debatable and will only be determined over time. For options trading, we’re going to have to hedge our bets a little. One thing that does seem to have come to end was the extended period […]
Options Trading: Do Diagonals Beat Covered Calls?
The covered call strategy is one the most popular options trading strategies, especially among investors that don’t consider themselves option traders. It’s a way for owners, especially for buy and hold types, to generate income from the stocks they own while also providing a bit of a hedge for their portfolio. But for those that might […]
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