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Are You Reviewing Your Trades?

Sometimes the best move is to do nothing and stay in cash. But that doesn’t mean sit idle. This is the perfect time to review your past trades.

Volatility Induces Anxiety

Economic uncertainty, trade tensions, geopolitical events and inflation have added considerable volatility to markets. There have been big swings in interest rates, which have a direct influence on equity indexes, currencies, precious metals and numerous commodities. In addition, automated trading systems can exacerbate rapid price changes during volatile periods. As volatility rises, so do risk and anxiety.

Your Naked Put Warning

With market volatility at extreme levels, option premiums are tempting—but don’t let that fool you. Selling naked puts can be a high-risk strategy, especially if things move against you.

Fair Value Is a Foundation for Trading

Spend time with a broker or pit trader from the era when all trades were executed by brokers in trading pits at exchanges and you will learn about open outcry and the information it provides. Pits were created to facilitate trade. To an untrained eye a trading pit is a ring filled with angry, aggressive people wearing badges on various colored jackets. But for a seasoned observer a trading pit reveals incredible amounts of information not available on screens or trading platforms. Professional traders monitor order flow. They use a combination of market-generated information (technicals) and fundamentals (supply/demand or earnings) to define and refine strategies.

Reminder: Tighten Your Option Management

Have you noticed how volatile the market is and how it seems to gap almost every session at the open? Of course you have—unless you have been stuck under a rock. This post is a reminder that option management needs to be front and center at all times, and many times risk need to be taken off the table early.

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Options involve risk and are not suitable for all investors. Before trading options, please read Characteristics and Risks of Standardized Options (ODD) which can be obtained from your broker; by emailing investorservices@theocc.com; or from The Options Clearing Corporation, 125 S. Franklin St., Suite 1200, Chicago, IL 60606. The content on this site is intended to be educational and/or informative in nature. No statement on this site is intended to be a recommendation or solicitation to buy or sell any security or to provide trading or investment advice. Traders and investors considering options should consult a professional tax advisor as to how taxes may affect the outcome of contemplated options transactions.

Futures and forex trading contains substantial risk and is not for every investor. An investor could potentially lose all or more than the initial investment. Risk capital is money that can be lost without jeopardizing ones financial security or life style. Only risk capital should be used for trading and only those with sufficient risk capital should consider trading. Past performance is not necessarily indicative of future results.

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