American and European Options: An Overview There are two types or styles of equity options. One is an American style option and the other is a European style option. What are some of the similarities and differences in the two styles of options? If you buy a European or an American style option, what rights do you have to exercise … [Read more...] about American vs. European Options
You will likely find it very difficult to reach your trading goals if you do not "keep score." Keeping score is more than just tracking your profits and losses on a regular basis. Said another way… keeping score means being aware of how you're performing, and how this compares with your historical performance. Keeping score makes … [Read more...] about Tips To Improve Your Trading Success by Tracking Your Results – Part I
We all know the U.S. Presidential Election is on Tuesday, November 8th, just a few days away. We've seen how the S&P 500 has had nine straight days of losses, which hasn't happened since December 1980. The S&P 500 Let's take a look at the S&P 500 chart: The decline has been fairly orderly, with the 14-day Average True Range … [Read more...] about How the U.S. Election Will Effect the Markets
Comparing an option to an insurance policy can many times help to simplify your learning curve when it comes to options. What is an option? "An option is a financial derivative that represents a contract sold by one party (option writer) to another party (option holder). The contract offers the buyer the right, but not the … [Read more...] about How is an Option Similar to an Insurance Policy?
"We are programmed to receive. You can check out any time you like, but you can never leave!" Hotel California, The Eagles In my last blog post, I discussed the nuances of change in implied volatility (IV) leading up to earnings release and following the announcement. Today I want to discuss some practical considerations that need … [Read more...] about Trading Options Around Earnings Releases, Part II
One of the advantages of an option based approach to trading is the ability to capitalize on trades that have a statistically well-defined high probability of profit. When events occur with predictable regularity, the knowledgeable option trader can effectively increase his odds of success. One of the most reliable and reproducible … [Read more...] about Trading Options Around Earnings Releases, Part I
What is the VIX? "The VIX Index is an up-to-the-minute market estimate of implied (expected) volatility that is calculated by using the midpoint of real-time S&P 500 Index (SPX) option bid/ask quotes. More specifically, the VIX Index is intended to provide an instantaneous measure of how much the market thinks the S&P 500 … [Read more...] about The VIX: What Is It, and What Can It Mean for Your Options Trading?
As defined in Investopedia.com, the wash sale rule is an Internal Revenue Service (IRS) rule that prohibits a taxpayer from claiming a loss on the sale or trade of a security in a wash sale. The rule defines a wash sale as one that occurs when an individual sells or trades a security at a loss, and within 30-days before or after this … [Read more...] about What is the ‘Wash Sale Rule’?
Several years ago I recall a question that someone wrote to the CBOE's "CBOE - Ask the Institute", asking if there was a scientific way to manage iron condors, or any type of credit spread. They noted that from their observation, some used the Greeks (primarily delta), others used a percentage move away from entry point, etc. Their … [Read more...] about When is Trading an Art and Not a Science?
Have you ever had the feeling that you're just ready to hang up your trading hat and quit? It's happened to many traders at times, both novice and experienced. You are progressing along nicely with your trading plan, then you enter a time period where several losses in a row take away your confidence. It feels like you're getting … [Read more...] about When you’re ready to throw in the towel; what should you do?