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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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.
Professionals in all walks of life are engaged day and night. My leisure passion is golf. I study the game and hone my craft through practice. I did the same as a baseball player during my college years. Through sports I learned hard work and diligence pay off. My dream to be
On the surface, it seems silly to think one is not motivated to make money option trading. But if you look deeper, lack of motivation is what holds back many traders. Having the proper attitude can go a long way in life including in your potential success as an option trader. So
Options involve risk and are not suitable for all investors. Before trading options, please read Characteristics and Risks of Standardized Option (ODD) which can be obtained from your broker; by calling (888) OPTIONS; 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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