Theta is the component inside the options pricing model that measures and values the sensitivity of an option contract price in correlation to the passage of time. The theta value embedded in an option depends on the price of a specific option contract in relation to its expiration date, the current price of the underlying […]
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This is a guest post by Jake @TrendSpider. In this weekend blog post, you will find our “Top 5 TrendSpider Charts This Week”, weekend analysis, and the link the this Sunday’s show! Make sure to check out our Sunday Chart Show this weekend at 6 PM EST with Ben Bennet, founder of patternprofits.net!
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Here are five ways to effectively manage risk as an option trader: The first step in managing risk as an option trader is position sizing. When buying options the amount of capital you spend buying an option contract long is the most you can lose if your option expires worthless before expiration. The best way
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The efficient market hypothesis or ‘EMH’ for short is the theory in economics that believes all known information is already reflected in current stock prices. The followers of this hypothesis believe that due to this fact it is not possible to beat buy and hold investing over the long term in returns or even in
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Order flow is the process of buyers and sellers trading between one another that causes market prices to stay the same or move up and down. Zooming in on order flow it is the volume bars along with the time and sales information of trades. Order flow is where buyers and sellers meet at an agreed
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Mental models are used as frameworks and filters and a way to think about the world and make the right decisions based on principles. Mental models are not always correct but they can raise your probability of having success with how you think and the decisions you make based on robust principles. Jeff Bezos used
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The Wheel Options Strategy or the Triple Income Strategy is an option play where an option trader tries to profit from a trade on a single stock in three different ways. Step 1 is where the trader sells cash secured put options and collects the premiums on a stock that they wanted to buy at a specific price to
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Insider trading is defined as buying or selling stocks on public exchanges using information that is not publicly known or available to other investors or traders. This happens when people with access or connections to confidential or non-public financial information, news, or facts about a publicly traded company trade based on what they know or share
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This is a video guest post by Jake @TrendSpider. Chart Courtesy of TrendSpider.com
Finding An Edge During A Stock Market Crash Read More »
Everyone should have their own strategy and plan for trading or investing in the stock market to create an edge in their own timeframe. Each time you buy a dip in price action it should create a good risk/reward ratio and fit your own risk tolerance and have the potential to achieve your own return
When to Buy the Dip and When Not To Read More »
This is a guest post by Jake @TrendSpider. In this weekend blog post, you will find our “Top 5 TrendSpider Charts This Week”, weekend analysis, and the link the this Sunday’s show! Make sure to check out our Sunday Chart Show this weekend at 6 PM EST with Arun Chopra, founder of Fusion Point Capital!
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Dollar cost averaging is an investment process where you invest a set amount of money into a market at regular intervals. The strategy is to put a fixed amount of dollars in a specific investment like an index fund so you get more shares when the price is lower and less shares if the price
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Elliott Wave Theory is a method of technical analysis that traders use to analyze and quantify price patterns in financial markets by looking at cycles. The theory believes that changes in investor sentiment and their psychology creates impulse waves and corrective waves inside the larger trends in market price action. The theory attempts to forecast market
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This is a Guest Post by Miad Kasravi @ZFXtrading of speculatorstrading.com. Trading with the Flow Part 1 of 3 Volume analysis Volume spread analysis or VSA. Looks at the relationship between volume traded and size of candlesticks. In it’s basic state the body size of a candle is in proportion with volume traded, in the FOREX market it is
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In option trading a straddle play is created when two option trades are opened in the same underlying asset at the same strike price at the same expiration date but with both a call and a put. One side of the option play will become higher priced in an uptrend and the other will move higher
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An Iron Condor trading strategy is an option play that is created with two vertical spreads. An Iron Condor is a combination of both a put option spread and a call option spread that have the same expiration date and four different strike prices. A long iron condor is when an option trader sells both sides
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A ‘Poor Man’s’ Covered Call option play is a way for an option trader to structure a very similar type of risk/reward ratio as an ordinary covered call but with much less capital required. A ‘Poor Man’s’ Covered Call is another name for a Long Call Diagonal Debit Spread that is used to create a
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In Black–Scholes option pricing model, the implied volatility or ‘IV’ of an option contract is the cost embedded in the option of the volatility of the underlying instrument that it is being valued against. Volatility is the input in an option pricing model that measures when an asset will likely return to a theoretical value
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This is a guest post by Jake @TrendSpider. In this weekend blog post, we take a look at the continued wild ride the markets took last week. Make sure to check out our Sunday Chart Show this weekend at 6 PM EST with Peter Hegedus, founder of thetraderspath.com !
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The Maximum Pain theory in the options market or simply ‘Max pain’ tries to explain that market prices for stocks and commodities will many times settle at the approximate price on the option expiration date where the most option buyers will end up losing the maximum amount of money. The Max Pain is always the
Max Pain in Options Explained Read More »