ATM, ITM and OTM Options Explained
There are three ways based on strike prices to buy and sell options with varying degrees. An option can be at-the-money (ATM), in-the-money (ITM) or out-of-the-money (OTM). But what makes an option ATM, ITM or OTM? Below we will answer that very question and show a few examples that should make the concept a little […]
Using VXX as a Portfolio Hedge
During the past couple of weeks, several people have asked me about using VXX as a portfolio hedge. Maybe people feel things are getting a little toppy with all the Fed intervention and the many other harbingers of potential danger hanging over the markets. I wanted to write about this subject because it’s pretty darned […]
Option Trading Success Secrets Unveiled
Are there such things as option trading success secrets? That can be debated, but what you should know is that there are ways to improve your odds for success in option trading. Are they necessarily a secret? Probably not. However, most option traders don’t do certain things that could enable them to extract money from […]
How to Use Moving Averages and Pivot Points in Trading
Moving averages are the most popular directional gauges. They are typically the first technical indicator in the novice trader’s toolbox. Many professional traders rely on them as well. Typically, the directional signals come when a short-term MA crosses a long-term MA. The problem with this method is that by the time the averages converge and […]
Option Gamma and How It Differs from Option Delta
Although it will always be debatable which is the most important option greek, many option traders point to option delta. This is understandable, considering most new option traders become acquainted with delta first. However, you cannot dismiss option gamma, which is sometimes referred to as a derivative of a derivative. Option Delta and Option Gamma […]
ETF or Exchange Traded Fund Option Trading Strategies
Futures traders have access to markets nearly around the clock. Stock and exchange traded fund (ETF) traders must deal with gaps in time and price when there is no market to trade or a huge drop in liquidity of those markets that do trade overnight. When liquidity is low, bid ask spreads are too. Entering […]
Option Delta – A Comprehensive Guide for Traders
Option delta is probably the first option greek many option traders learn. When I first heard and learned about the power of options, I was intrigued. Instead of buying shares of stock I could purchase a call for far less money and profit if my outlook is correct? Sign me up! There are other greeks […]
Stop Loss Orders and Options for a Profitable Trade
As traders we endeavor to catch a trend early and hold that position until an objective or target price is met. Catching a trend is difficult enough; squeezing the last dollar out of a trade is even harder. Stop loss orders are used to set risk. As another option they can also be used to […]
Butterfly Spread Trading Strategy Explained
An option butterfly spread trading strategy is very versatile because it can be used in multiple ways to potentially profit and also remove or reduce risk. As usual, it is nice to have options with your option strategies. Below we will talk about how to create a butterfly spread and how time decay is a […]
Track Market Correlation, Price Targets and Profit Potential
When markets begin to trend, they frequently do so with fast and furious moves. It’s important to track market correlation, price targets and profit potential. Quite often there are clues or patterns that occur prior to a breakout and just after one. It is a trader’s goal to recognize that critical moment when a directional […]
Your Option Greeks Quick Reference Guide
Knowing and understanding the option greeks is pivotal for your potential or continued success as an option trader. Listed below are some of the finer points of delta, gamma, theta and vega. Realistically, each could have its own book explaining how it works and its ramifications, but in this options greeks quick reference guide we […]
How to Identify Market Trends and Catch Them Early
To recognize market trends early is every trader’s ambition. The earlier you catch a trend, the more profit potential grows and risk decays. Timing this phenomenon requires a breakout strategy. Entry at the beginning of a sharp vertical move (trend) is the goal. Breakout Setup Timing is the ideal entry price and moment to enter […]
Bullish Bases – What Do You Need to Know?
Technical analysis can be a big part of your potential success even as an option trader. I truly believe this and talk about technical analysis every single day in my Group Coaching class. A lot of my education focuses on support and resistance. Often a stock needs to move above resistance (if there is any) […]
Technical Analysis and Indicators to Gain Edge
Technical analysis is using history to forecast the onset of a trend or determine when a trend is nearing an end. Technical analysis and indicators are also used to improve entry and exit levels. Fundamentals, or the forces of supply and demand, earnings, inflation, weather etc., move markets. Technical analysis is most useful when fundamental […]
Outright Call Options and Put Options – All You Need to Know
A topic that is brought up more often than you might think in my Group Coaching class is buying outright call options and put options. When option traders first learn about trading options, they often only consider buying call options for a bullish outlook and put options for a bearish outlook. I know I did […]
These Work-From-Home Stocks Will Continue to Climb Even After COVID
One of the big stock market stories of 2020 was the domination of so-called Work-From-Home Stocks. While some companies lost massive share value last year, these work-from-home stocks skyrocketed. But what happens after COVID? Can some of these stocks continue to climb? I think they can. To understand why, let’s take a trip through innovation […]
Trading Options and Cash-Secured Puts Over Earnings
With the next round of quarterly earnings just about to start, it is a good time to take a look at trading options and in particular cash-secured puts. Option prices (implied volatility levels) tend to increase around an expected earnings report. This could be potentially good (if traded correctly) for premium sellers and not so […]
Technical Analysis to Endure Unprecedented Times
Technical analysis is playing a bigger role than usual due to the effects of the pandemic and subsequent stimulus packages. Guidance and earnings estimates have been difficult to quantify making them unreliable. Yet of the Dow Jones 30 companies, 28 have beaten earnings estimates in Q3. Only American Express (AXP) did no,t and NKE had […]
Bull Call Spreads and Bull Put Spreads Explained
Option traders often ask me is there a way that you can take advantage of this bullish investing scenario while limiting risk? Certainly, there are a few option strategies that can accomplish this goal. One that may be an option (no pun intended) is a debit call spread, which is sometimes referred to as a […]
Learn to Identify Charting Patterns
There are numerous books and journals written on charting techniques and seemingly countless patterns. There is terminology that describes popular patterns using bar or candlestick charts. Some of the most well-known charting patterns include flags and pennants, trendlines, head and shoulders, gaps, island reversals, and ascending/descending triangles. Some of the basic patterns for candlesticks are […]
A Detailed Credit Spread Guide for Option Traders
What does an option trader do if he or she thinks that an underlying won’t most likely go higher but doesn’t feel confident that it will drop much or vice versa? Without using options, it is hard to profit from that scenario. Using options, a credit spread in particular, you absolutely can. A Brief Explanation […]
