Options trading can be a powerful tool for investors looking to hedge their positions, generate income, or speculate on the direction of a stock or index. With the ability to purchase a contract for the right to buy or sell an underlying asset at a predetermined price and time, options offer a flexible way to […]
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Options are a market of derivatives that gives traders and investors the right but not the obligation to buy or sell shares of stock over a time period at a strike price before an expiration date for the cost of the option contract. The options market is a zero-sum game where there is a buyer
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With options trading, brokers quantify different levels of risk exposure for different types of option plays and traders must be approved for each level. The level is based on the risk that the broker is exposed to with potential open ended unhedged short options. The option trader must have a correspondent hedge to limit the
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Options are a market of derivatives that gives traders the right to buy or sell shares of stock over a set time period at a specific strike price for the cost of the contract. The options market is a zero sum game where there is a seller and buyer for every contract until it is
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The options market presents both great opportunities for gains but also the potential for the risks of losses. Here are ten things that I learned quickly through experience that all new traders should understand before they start trading options. 1. Short options have unlimited risk when they have no hedge. It’s important to understand the
Options Trading Tips: Ten Things I Wish I Knew Before I Started Trading Options Read More »
Covered calls are an income strategy for traders and investors to earn money on stocks they hold. Covered Call Writing Covered call writing is an appropriate strategy in a bull market or one that is trading inside a repeating price range. Creating a covered call option play is when a trader or investor sells out-of-the-money
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When implied volatility for options pricing is high it is usually the best risk/reward ratio to look at selling option premium with strategies like iron condors, credit spreads and short strangles. When implied volatility falls the price of options can drop quickly creating profits for short volatility option plays. Should I buy options when volatility
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Here are twelve powerful options trading strategies every option trader should understand how to execute. Links included in the option play names to articles explaining each strategy with graphics. Bull Call Spread Bull Put Spread Poor Man’s’ Covered Call Synthetic Shares Bear Call Spread Bear Put Spread Jade Lizard Married Put Long & Short Straddles
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Selling put options is one way to get paid to buy the stock you want at the price you are waiting on. How does selling put options work? The way to use this strategy to buy stocks for less is to sell put options at strike prices at the lower level on a chart where
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Here is a list of the best options trading books based on Amazon sales, reviews, ratings and author popularity. It is important to have a full understanding of the options market and pricing model before diving into options trading with real money. Options are derivative contracts and complex instruments where time, strike price, and volatility are
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Option contracts pricing consists of both the extrinsic value and intrinsic value that combine to create what each strike price and expiration is worth in an option chain. Extrinsic value is the potential of what an option has to be worth in the future while the intrinsic value is how much an option is worth
What are covered puts? A covered put is created when put options are sold that correlates with a short stock position already being held or opened as a sell/write at one time. The stock position acts as a hedge for the short puts to limit losses as the short shares can be used if the
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What is IV in Options? 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
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How to calculate an option price A Black-Scholes Calculator can be used to figure the price (fair market value) of a put or call option contract based on the Black-Scholes pricing model. It also calculates and plots the Greeks: Delta, Gamma, Theta, Vega, Rho. Enter your own values through the website in the link below
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A common misunderstanding among new option traders is that 80% to 90% of all option contracts expire worthless, so a seller of option premium will have a higher win rate than a trader that buys options. This belief misinterprets a statistic published by the Chicago Board Options Exchange (CBOE) that only 10% of option contracts
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Rolling options is the process of moving from one call strike price and expiration on a specific stock to a different call of a different strike price and expiration on the same stock. It entails exiting the current option contract and then entering a new position immediately after or at the same time . The
Open interest and the volume traded in options are two different metrics that show the liquidity and trading activity of options contracts at different strike prices and expiration dates. Volume is the quantity of contracts traded in a period, while the open interest shows the number of contracts that currently exist and are active in
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Instead of searching for an options play structure every time you come across a potential option trade you want to make you can now simply refer to the below guides created by Gavin McMaster at OptionsTradingIQ.com you can also following Gav on Twitter at @OptionTradinIQ. Options traders at all trading levels can find having these
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Buy to open versus buy to close in options trading are very different processes that many stock traders don’t understand. A buy to open order in options trading is when a call or put contract is bought and entered as a long position. The term comes mostly from the fact that when the option seller
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Option contracts are different than stock shares in the way they are created, traded, and closed. There are two different types of selling in options trading: sell to open vs sell to close. An options trader will sell to open a new option contract that they want to be short. This is also called writing
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