6:14:12 PM EDT |
Get Out Your Calculators
Manually calculating standard deviations on your favorite trading vehicles provides a deeper understanding of how your underlying moves.
4:25:45 PM EDT |
Liquidity Problems in European-Style Options?
One writer proposes that traders of options with European-style settlement might notice liquidity problems in a strong move that is deemed temporary.
2:17:30 PM EDT |
Does Volatility Trend?
Steve Meizinger posed that question in "Market Expectations and the implications on Options Trader," the lead article in the Options Industry Council's Fall 09 newsletter. Since I believe in using standard technical analysis tools to study the volatility indices, the question caught my attention.
3:07:24 PM EDT |
Thursday's Child Has Far to Go
Thursday is a long way away from Monday's opening. Many who sell premium think of that long expanse of time as the weekend nears.
6:59:11 PM EDT |
Option Myths and Odd Facts
It's time to debunk a couple of options myths.
3:04:10 PM EDT |
Managing by the Greeks
I once dreaded having to learn anything to do with the Greeks of options pricing. All the variables were dependent on one another, making the topic more difficult to comprehend. For years, though, I've been taking baby steps toward managing by the Greeks and I invite you to do so, too.
2:29:56 PM EDT |
What's That Profit Based On?
When traders make trading plans, they may include a desire to make 5, 10 or even 15 or 20 percent profits. But what's that profit based on?
5:54:16 PM EDT |
Change Is Coming
Two changes are being rolled out, one which will definitely impact options traders. Hopefully, the other one won't.
5:12:14 PM EDT |
Uncle Sam Wants You, Options Traders!
Everyone had picked up on the controversy over flash trading. Now the SEC wants you to weigh in on the topic.
5:31:39 PM EDT |
In this follow-up article to last week's Options 101 article, I employ examples from my own portfolio. I thought last week's general comments might be more practical if viewed against the requirements of an actual portfolio.
5:29:04 PM EDT |
Top Trading Rules for Option Trading, Redux
Back when option prices were still quoted in eighths, a staff write authored an article on the top ten rules for trading options. It's time to look at a couple of those still-relevant rules again.
6:09:01 PM EDT |
Why Is My Bull Call Spread Not Making as Much Money as I Expected?
What predicts how much a certain options strategy will move with a move in the underlying?
8:45:17 AM EDT |
A new backtest of the collaring strategy shows it outperforming the underlying index over the last ten years.
8:25:12 AM EDT |
In the option world, a couple of types of options seem more closely linked to the gambling world than others: binary and event options.
9:28:04 AM EDT |
ETF Options and Dividends
Many ETF's offer dividends. However, they sometimes do so in a way that causes maximum angst to option traders.
3:01:40 PM EDT |
When Do Options Trade?
Options on various securities may have different trading hours.
2:03:41 PM EDT |
Three Options on the OEX
Options traders who have an opinion about where the OEX might go have three choices for trading that view: OEX, XEO and OEF options.
2:29:34 PM EDT |
Evaluating Options Strategies
Options are versatile, so that there's often more than one way to capitalize on a move. This article requires some patience, but it evaluates the outcomes of a couple of theoretical strategies, using different option strategies at a time when one has reason to believe options might be expensive.
2:25:44 PM EDT |
Notice Anything Different?
The SEC recently expanded the original one-point strike program. The expansion allows exchanges to price more options, on more expensive securities, at one-point strike intervals.
4:42:51 PM EDT |
Cheap Options, Relatively Speaking
Some traders are always on the hunt for cheap options. Scans can find cheap options but think carefully before buying them. Know the risks.
4:09:12 PM EDT |
In the Market for a Profit
Be aware of the pluses and minuses of placing triggers for spread orders based on the spread's price, especially during amateur hour.
7:00:07 AM EDT |
Portfolio Diversification with VIX Options
Is using VIX call options for diversification a good idea?
11:51:40 AM EDT |
Why You Always Need a Cash Cushion in Your Option Trading Account
A cash cushion ensures that your account isn't wiped out if something unforeseen happens. It also provides you with the money you might need if another tempting trade comes along. But there's another important reason for keeping a cash cushion.
12:08:58 PM EDT |
Negative Gamma Effects in Option Expiration Week
While the topic of this article proves somewhat advanced, it's not necessary to understand every bit of the discussion to capture the main point. If you're not familiar with the Greeks of options pricing, just skim the calculations and read for the important main point.
9:34:42 AM EDT |
Testing, Testing, Testing
Should you back test option strategies? Sure you should. Before you devote too much of your trading portfolio or emotional capital into a back-tested options trade, however, trade the new signal live in small lots only.
12:00:07 AM EDT |
A trading friend's question about the merits of a one-lot in-the-money option position versus a three-lot out-of-the-money position prompted this article. Which would be better for creating a position that was short a certain number of deltas? That depends.
2:42:15 PM EDT |
Art and Science
We would all like to have a cut-and-dried method of trading with ironclad rules we could follow to profitability. That's not the way of the trading world. It's our responsibility as traders to accept that it's not.
2:21:22 PM EDT |
What's the Plan?
What's in a trading plan? Here's a look at a page from my trading book.
3:47:38 PM EDT |
Customer Portfolio Margining
In an article for the Options Industry Council's newsletter, Todd Wilemon explains that in Regulation T accounts, margin is computed using a strategy-based calculation. In accounts with customer portfolio margining, Wilemon terms the calculation of margin a risk-based approach that can result in lower margin requirements for the same options trades