Options Trading

Option spreads can be used in a number of ways, its definition is simply taking opposite positions in terms of buying different strike prices on the same or different expiry dates for the same traded underlying financial instrument, thus creating a spread of positions as part of a single strategy.

When you wake up in the morning, do you know what the weather will be like today? Will it be sunny or will it rain? Just by walking outside, you would have a hard time making a prediction. This is because when you stand on the ground you cannot see beyond the horizon. You cannot see into the future. The sky may be blue where you are, but just over the horizon there may be a big thunderstorm headed your way. How can you decide if you should plan your outdoor picnic for later in the day?

Many complex factors influence the value of an option, including the price of the asset today and its price history in the past. Then, of course, there’s the future—whether the stock will rise or fall in price.
How can a beginner learn how to trade options without risking huge amounts of money?

The Ratio Spread, is a vertical type spread used in trend-less market periods, it’s a simple strategy. In the case of Call Ratio Spreads it involves the buying of one ITM Call option and the writing  .... read more

Diagonal option spreads is yet another kind of option trading strategy, that aims to shift the odds more in our favour. Generally diagonal spreads can have a better risk / reward ratio than any other strategy. Particularly in cases where you consider writing naked options, it might be possible to replace the whole naked option writing idea with a safer diagonal spread.......read more

Options’ trading offers the opportunity to investors, to fully protect their long stock portfolio, using what is known as a Costless-Collar strategy. The idea is to provide hedging on the long stock held, without paying a net premium for it!.....   read more

Most short term stock traders, from day-traders to swing traders are completely unaware of a tendency that exists in the US markets, that is a tendency to close up or down depending on what day of the week it is! Believe it or not, the day of the week, has been statistically tested, and back-tested over 20years, the results are conclusive that the pattern does exist!.....   read more

Using the VIX as an indicator
What is the VIX? The VIX or Option Volatility Index is a measure introduced by the Chicago board of options exchange (CBOE), it is an index that measures how volatile the market is expected to be in the next 30 days!...Read more

Option spreads are trading strategies involving taking both sides of an option trade, but in such a way as to achieve an overall lower risk / reward ratio than standard, outright option purchases. Generally, there are two types of spreads, Horizontal and Vertical. Horizontal means that we pick 2 option contracts,.....   read more

The Bull Put Spread is one of the easiest spreads to understand, yet it is one of the most profitable option trades. As we know a spread trade can always be better than a lame outright option trade!.....   read more

Forex options are very interesting trading vehicles, that offer greater flexibility than futures contracts do. Generally they are not very suitable for very short term intraday trading, however they are very useful in longer term trading. I have found out myself, being a forex futures trader is extremely hard.,.....   read more

Some technical setups on the stock charts, can fairly accurately indicate which direction the stock will go. Precision is always needed in trading, but with the flexibility of options and the tools of technical analysis,.....   read more

Most untrained option traders, and even seasoned stock traders and investors who have just moved onto option trading, make a series of mistakes, and that really shows a lack of understanding and a tendency to do things in a hasty way, a tendency to underestimate numerical values and data readings as being ‘too small and not much of an issue.....   read more

As we all know, the passage of time affects the premium of options, particularly the OTM options, the less an option is ITM the more the factor of time decay matters (The Theta metric) we know that this time decay accelerates....   read more

We know that when we buy options contracts, we use the appropriate strategy and then attempt to make money either on the intrinsic part of the option premium (where Delta matters most) or on the extrinsic part of the option premium (where volatility matters most),  beyond that, there are also.....

We all know how to use options and profit from stock trends, but how can you tell at a glance, what is the realistic probability of the trade becoming profitable? The answer lies on few stock metrics, namely: Volatility, and technical status, as well as the breakeven point of the trade in terms of stock price percentage movement... read more

The simplest way to make a smooth transition from stock trading to options trading, is to implement a straightforward, directional stock trading strategy, based upon your existing stock trading system, the only real reason you prefer options trading in this case, is because you can take advantage of the asymmetrical behaviour of Delta. That is what allows you to win $1,000 from a given stock price move, and only lose $700 if you are wrong and incur the same stock price trend on the losing side.