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 […]

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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. […]

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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 […]

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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 […]

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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? […]

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When trading stock, knowing the amount of capital you’re investing is as straightforward as multiplying the price of the stock by the amount of shares being traded. But when you trade listed derivatives, such as options and futures, the calculation is not always that simple. Although there are some standard parameters, each product has its […]

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If you’re a millennial, you may not remember a world without computers, and maybe not even a world without cell phones or the Internet. You might take it for granted, but you certainly have faster access to more information than any generation in the history of humankind. And, at the risk of oversimplifying, you’re also […]

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It used to be that option expiration occurred once a month, generally on the third Friday of the month. That all changed in 2005 when exchanges began listing options expiring each Friday. Nowadays, investors can buy and sell puts and calls on the monthly (“serial” or “third Friday”) contracts, plus six weekly expirations (“weeklys”). Weeklys […]

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Before learning to run, you had to first crawl, then walk. Before penning that masterpiece, the writer needed to learn the ABCs. And before jumping into options trading strategies, you need to learn the basics. For many traders and investors, options can be useful in a variety of circumstances and market scenarios. Although some option […]

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Editor’s note: A recent article introduced basic call and put strategies—selling covered calls for potential income and buying puts for downside protection. This follow-up article looks at buying straddles and strangles combinations for the option trader who’s expecting a stock to move significantly in one direction or the other, but not certain which way.    […]

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