Tag: option
The Many Uses Of Option Delta
In an option chain, the delta for a given option strike price can vary from -1 to +1. Call options have a positive delta for option buyers somewhere between 0 and +1. Calls increase in value when the underlying increases in value. Put options have a negative delta somewhere between 0 and -1 as Put […]
Trading Options 101: A Beginner’s Guide
“What is an option?” This may be a question you’ve asked yourself before. If so, options trading might be a suitable investment for you! An options contract offers the buyer the opportunity to buy or sell the underlying asset depending on the type of contract they hold. Unlike futures, the holder is not required to […]
The Synthetic Dividend Option To Generate Profits
Many companies regularly distribute a portion of their profits in the form of a dividend to attract investors and incentivize them to remain long-term shareholders. But most companies, ETFs, and commodities don’t pay a dividend at all. When there’s no dividend, the only opportunity for income or a profit comes from a capital gain (or […]
Death, Taxes, And Time Decay
Few things are certain in life. But as the old saying goes, there is nothing quite so certain as “death and taxes”. As an Options Trader, I would enthusiastically add option time decay to that list. Options offer traders and investors more leverage and risk mitigation than just purchasing shares outright. For example, if I were to […]
Eight Easy Tips That Can Turn Your Trades From Losers to Winners
There are many profitable option trading strategies, but none of them will work unless you are willing to stick to a set of guiding principles. Several rules I employ are helpful in maximizing profits, limiting losses and, most importantly, taking the emotion out of trading. Below, I will go over my basic trading philosophy, why […]
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 […]
