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 […]
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 […]
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 […]
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 […]
What Does The Options Market Say About Interest Rates?
Why are investors so fixated on interest rates? If you follow the financial markets regularly, you’ll notice how laser-focused the investment community is on what the Federal Reserve is doing, how bond markets react, and what it all means for interest rates. But why are interest rates so important? What does a change of a […]
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 […]
Is Volatility Going To Continue To Plummet This Summer?
July is traditionally a very slow month for the financial markets. Not only is it the prime vacation month for families (most kids go back to school in August), but there’s also the July 4th holiday week. Generally speaking, investors and traders are often far away from the markets at this time of year. Even in […]
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, […]
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 […]
3 Smart Trades For A Troubled Market
Try these options trades for high-odds profits in DIS, AMD and RUT Another trade war headline delivered another nasty market open. With volatility on the rise and overnight swoons in stock futures now the norm, the environment has turned treacherous for directional traders. If you’re seeking the best trades to weather the turmoil, I suggest […]
Here’s A Quick Win You Can Make From Trump’s Tariffs
I’m at the MoneyShow in Las Vegas this week and it’s obvious that interest in options trading is growing by leaps and bounds. Every year, the crowd keeps getting larger. Plus, I notice more sessions and classes about options each time I come. It always makes me happy to see the growing interest in options […]
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 […]
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 […]
Your Questions, My Answers For $7,050 In “Bonus” Monthly Payouts
We received many thoughtful questions after last Wednesday’s “options for income” editorial. (If you missed the original piece, you can read it in its entirety here.) Many of you are understandably interested in my favorite strategy for generating thousands of dollars in extra income each month regardless of what happens with the S&P 500. After all, it’s […]
Make This Easy Trade To Profit From Stalled Real Estate Prices
Investing has come a long way from the days when it was just a simple choice between stocks and bonds. Typically your portfolio consisted of some mix of stocks and bonds (60%/40% stock/bonds was a pretty standard mix – and still is in some cases) with the only decision being how much to change the […]
Using Cash-Secured Puts: The AT&T Example
Investors that have the goal of generating income from their portfolio generally have two methods at their disposal to do so. They can simply increase the size of their portfolio and thereby boost the number of dollars that are produced by the portfolio’s average yield. But “have more money” is rarely an option. Alternatively, investors […]
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 […]
How To Make A 186% Return On Video Games
Typically, when growth in the video game industry is discussed, it’s all about mobile gaming growth. After all, playing games on smartphones and tablets has been where most of the action has been in recent years, at least in terms of investing. While casual gamers may still be driving plenty of business in mobile gaming, […]
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 […]
3 Ways To Add $1,000 In Monthly Income For Summer Cash
Create additional monthly income by selling puts for cash Summertime approaches, and that may mean you want to enhance your income a little bit. Did you know there is a way to generate $1,000 or more every single month using option trades known as naked puts? Brokers do require Level 4 options approval, but you […]
2 Ideal Stocks To Generate Covered Call Portfolio Income
We’ve enjoyed a tremendous bull market from 2009 into early 2018, but for the past three months the S&P 500 has been in correction territory. Is this another hiccup in the journey upwards, or is it the start of another multi-year period of flat or negative returns? Some investors prefer to avoid that question and […]
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 […]
Create Your Own Dividend Using These 3 Covered Calls
Use options to enhance your monthly income Fixed-income or retired investors may dismiss using options because they seem exotic. Yet they don’t have to be, and covered calls can provide you additional income without terribly much additional risk than holding a stock. Many of you retired or income investors already own blue-chip stocks in your […]
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 […]
3 Naked Puts To Help You Make $1,000 Monthly
Naked puts generate regular monthly income if you use them with the right stocks The most frequent email question that I get is “how can I generate more monthly income from my portfolio?” There are many answers to that question, and I always reply that this question cannot be answered in a vacuum. All investors […]
Options, Hurricanes And Hedging
We always look at our investment process and ask ourselves, “What can we do better?” How can we increase returns and lower risk? We think we have found a new, sensible way to do both. We can hedge a portion of our market exposure with put options. Put options are contracts that trade on an […]
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 […]
How To Trade Bonds To Make Up To 200%
Most people think bonds are boring. And it’s true, if you buy a bond and just wait for the coupon payment to arrive, it is definitely an uneventful investment… boring and safe. Of course, that’s exactly why people buy bonds. However, trading bonds is a completely different matter. Bonds, even government bonds, can move as […]
Options Pricing Predicts Wilder Swings For 2018 – But For Which Asset Classes?
2017 was a year in which markets experienced depressed levels of realised volatility. From an option trader’s point of view 2017 was a selling paradise – a lucrative opportunity to collect favourably priced premiums as volatility drifted steadily lower with time. 2017 saw a gradual climb in major stock markets and related ETFs – a key example is the […]
This Surprise Stock Could Make You Big Bucks
It’s no secret that options are often the investment vehicle of choice for “smart money” traders. Big funds and trading firms regularly use options to establish their biggest positions – sometimes in conjunction with stock holdings, other times just using options. It’s especially true for the most heavily traded ETFs and stocks. Less often, you’ll […]
One Way To Trade This Monster Tech Stock In January
It’s officially the start of a new trading year, but that doesn’t mean you have to create all new investment strategies. While there are certainly going to be some changes (possibly big ones) in 2018, there is plenty that happened in 2017 which will more or less be repeated this year. For instance, the leading […]
Why The SPDR S&P Metals And Mining (ETF) Is Set For A Breakout
XME is breaking out as capital flows to late cycle leaders Metal stocks are waking up. With inflation expectations ratcheting higher and the anticipation of further rate hikes, capital is flowing into late cycle stocks. And this is boosting shares of the SPDR S&P Metals and Mining (ETF) (NYSEARCA:XME). Indeed, XME is fast approaching a new 52-week […]
3 Of This Week’s Best Trades On The Street
Two breakouts and one pullback are waiting for you in the options trading pits With stocks continuing to skirt the stratosphere, finding lucrative opportunities is as easy as falling out of bed. Particularly for those engaged in options trading. If anything, earnings season provides more chances to discover actionable setups due to the elevated volatility. […]
How To Trade Facebook Earnings
Earnings season is upon us again, seemingly out of nowhere. Has it already been three months since last quarter’s results were released? Well, many of the most widely followed companies don’t report until November, so I guess we have some time to come up with earnings-related trading ideas. Most of the time, traders think of […]
The Limitations Of Trading Options
I’ve always been a fan of options trading. In fact, I still use covered calls as a tool in my investing arsenal. That being said, options, when not used correctly, can pose a serious amount of risk to the unknowing investor. While options can be used as an effective tool for hedging and speculation, by nature […]
The Advantages Of Investing In Options
Options are often associated with risk. This couldn’t be farther from the truth if used correctly. Before we dive into some advantages, it’s important that you know exactly what an option is. Here are a couple guides that should help you develop an understanding of an option: What Is An Option By Stocktrades Options Basics […]
VIX Options And Taxes
Like many investors, the nine year bull market has left my fund with a large amount of unrealized capital gains. With prices now very rich, at least in my view, I feel the risk/return trade-off is much less favorable then when those investment were made. I fear there is a reasonable probability of a large […]
3 Breakout Trades In A Nosebleed Market
CRM, FDX and BABA are all ready to bust through resistance The bull market is charging on, and breakout trades are multiplying. If you’ve ever wondered why chart watchers are obsessive about trading with the trend, wonder no longer. The adage of a trend in motion staying in motion has been on full display this […]
The Beauty of Covered Calls
My goal and my promise to Peak Income readers is to secure for them a high and stable income stream, no matter their situation: in retirement, close to retirement, or just even thinking about retirement. I want paychecks to hit brokerage accounts every month, with consistency and low risk and without worry. No wonder I’m […]
The Dummies Guide To Option Greeks
There you are in a conversation with a professional trader about their strategy and suddenly the “inside baseball” terms start rolling off their tongue – Delta Hedging, Short Gamma, Theta Burn, and Vega Risk. You smile and nod without perhaps knowing exactly what these terms mean, and just like that, what started as a good […]
Do Buyers Of Options Benefit From High Volatility?
Search “options and volatility” in Google and you’ll get a dozen websites that say the same thing: option buyers want high volatility and option sellers want low volatility. Oddly enough, this old and relied upon rule of thumb isn’t completely correct. In reality, as an option trade plays out, trend has a far more powerful […]
How To “Write” Covered Calls For Safe 8% Yields
Most investors buy stocks and hope they’ll go up in price. They do nothing in the interim to generate cash flow from those stocks while they sit in their portfolio – like writing covered calls. “Write” what? I’ll explain. And I’ll also highlight some popular exchange-traded funds (ETFs) and closed-end funds (CEFs) that will help […]
Don’t Fall Prey To Overpriced Options
I am old enough that I was trading in the markets before decimalization. If an option was trading for a quarter, we called it a “quack.” If it was trading for a sixteenth, we called it a “teeny” or a “stink.” Beware the teeny puts. If you were a market maker on the floor, you […]
The Decades-Low Currency Trade For Triple-Digit Profits
An Oil and Commodities crush killed the Loonie with the Canadian Dollar currency down nearly 25% in five years. DOLLAR POWER priced in rising rates in the United States on only optimistic outlook. The FXC Canadian Dollar exchange-traded fund dropped from $100 to a decade-low at just under $70 in the last four years. The […]
Step-By-Step To Triple Digit Returns By June On This Catch-Up Rally
Alan Knuckman shares easy-to-understand instructions on placing a high-probability options trade that targets 100% returns by June. In this article you will see exactly how much to pay and which contract to buy so you can place this trade with ease. WORLD OF OPPORTUNITY – China Rhetoric versus Reality US stock market strength has investors […]
Earn 100% Returns By June On This Tech Stock Laggard
Having lagged behind its tech peers in the NASDAQ and not participated in the rally to all-time highs, this stock is the perfect set-up for a short-term options trade that targets 100% returns by summer. Alan Knuckman shares the step by step details on how to execute this trade. This common price pattern requires patience […]
A Snapback Options Trade For 100% Gains By March
See how a small positive turn in this broad market exchange traded fund can power huge returns in just a few short months with the power of options. Don’t miss out on this opportunity with a similar set up to a trade recommended in August that’s now up 75%. A tale of two markets […]
A Stalled-Out Stock Ready To Rebound For 100% Returns
Tilt the scales in your favor and use options to profit from this range-bound stock with a high probability of rallying higher. Only a small move higher will hand investors upwards of 100% returns. Stocks here in the states have surged to new ALL TIME FOREVER highs after an epic relief rally with election uncertainty […]
Ditch Options And Buy Stocks With “Cheap Optionality” Instead Lessons From David Tepper
It probably didn’t take long after becoming a trader to stumble upon options. Brokerages and websites all over the internet are constantly pitching these complex financial derivatives, claiming things like “defined risk” and “100% returns a month”. But these advertisements only end up luring novices into a game that creates losses rather than stunning returns. […]
5 Foolproof Reasons You Should Be Trading Options
With a little guidance, options trades can be a safe and effective way to supercharge the returns in your portfolio. Just see what our lead options analyst Alan Knuckman has to say about his 100% return trade from September and how he regularly scores wins just like that. This is the Power Of Options. A […]
5 “Facts” Smart People Get Wrong About Options
Using options contracts to boost returns and income could be the most powerful investing tool that you’re not using. While trading options for the first time might be intimidating, we’ve broken it down to its core pieces and show that options aren’t as dangerous as you might think. 1) Options Trading is complicated Markets can […]
