Fear is as much a part of modern trading as macroeconomics. But don’t let those fears haunt your trading dreams. Two lesser-known market measures can help self-directed traders get a deeper understanding of risk and what makes the market jumpy. You can’t trade a gauge or index or “feeling.” But you can keep an eye […]

Continue Reading

As any fashion professional would tell you, though your collection of outfits provides the base of your wardrobe, the accessories—those extra little add-ons—can make the difference. If we were to draw a parallel to the options market, the base would consist of your typical options strategies—single-leg options, verticals, straddles, strangles, and such—that make up the […]

Continue Reading

Suppose you’re long a stock that has appreciated nicely, but you’re getting nervous that it may move lower. You don’t really want to exit the stock, but you’re not sure how to protect your investment. Or suppose you’re thinking about buying a rallying stock that looks like it still has some upside, but you want […]

Continue Reading

The following, like all of our strategy discussions, is strictly for educational purposes only.  It is not, and should not be considered, individualized advice or a recommendation. Options trading involves unique risks and is not suitable for all investors. Options traders can potentially make money in the market when one of two things happens: when […]

Continue Reading

So you’ve got an options strategy in a stock or exchange-traded fund (ETF)—say a covered call, a naked call option, or even a multiple-leg strategy like a call vertical spread—that’s humming along, and all of a sudden you receive notice that one leg, likely a short in-the-money call, has been assigned. Worse yet, it’s happened […]

Continue Reading

If you’ve ever flown a plane, or flown in a plane actually, you know that the captain doesn’t step into the cockpit at the last moment, hit the “takeoff” button and sail off into the sky. Not only have there been many hours of pre-flight preparation, from the flight and maintenance crews to the traffic […]

Continue Reading

Volatility is like a sunset. You’ve seen one, you’ve seen ’em all, right? Well, yes and no. Sure, volatility (“vol”) means how much the price of a stock or index might change. High vol suggests the market anticipates bigger potential future price changes. Low vol means the market anticipates smaller future price changes. Simple enough. […]

Continue Reading

Many options traders say that they trade a consistent quantity when initiating vertical spread trades. And while this strategy might keep the contract numbers orderly, it ignores the fact that each vertical spread has a different risk amount based on a few things: Is it a debit spread or a credit spread?  How wide is […]

Continue Reading

Many traders tend to gravitate to options strategies with positive theta—those in which the theoretical value increases with the passage of time. Certain positive theta spreads such as an out-of-the-money vertical credit spread or a short iron condor are sometimes referred to as “high probability” trades. But that doesn’t mean that long option strategies, which […]

Continue Reading

Editor’s note: Volanthology is a multi-part series on volatility, the various means of tracking volatility and incorporating volatility assessments into trading and investment research. Part 1 introduces historical and implied volatility, the VIX and other equity volatility indexes. When you hear the phrase “stock market volatility, what’s the first thing that pops into your mind? […]

Continue Reading