blog style posts that break down concepts about options trading in the markets
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PUT index's performance from June 1986 to December 2018. The PUT index delivered a comparable annual compound return (9.54%) to the S&P 500 (9.80%) but with substantially lower volatility, as indicated by its standard deviation (9.95% vs. 14.93%).
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Credit spreads are one of the most popular options trading strategies around. You collect premium up front, limit your dowside risk and can control your risk/reward on trade entry. What do you do when it goes wrong?
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The reality is that options offer a versatile tool that can be used for the exact opposite purpose: to reduce the overall risk in your portfolio.
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The Idea of the Wheel trade strategy is to collect premium via selling options, secured against cash (to take on stock) or stock as collateral is appealing to most options traders. It can reduce risk, create more consistent returns and provide hedging potential by reducing net delta exposures.
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Expected move vs directional bets are not competing concepts; they are two distinct, complementary data points. One informs your opinion on the trend, while the other quantifies the market's expectation of volatility.
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Probability of Touch (P.O.T). P.O.T tells you the likelihood that the underlying’s price will hit your strike price at any point during the life of the trade. For active traders, especially those selling premium, this metric is vital to understanding the likely outcomes before entry.
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Do you ever read the news headlines that exclaim "Investors were fearful" or "The market is worried"? The Volatility Index is the tool that provides that information. Also known as the Fear Index, the Volatility Index is a measure of the market's expectation of future price fluctuations.
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Run your trading portfolio as you would a business. The traders who find sustainable success are those who treat their portfolio not as a series of speculative bets, but as a serious business operation.
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When panic reigns, Implied Volatility (IV) – the market's expectation of future price swings – goes through the roof. Options become "expensive." While this is a nightmare for option buyers, it can be a sweet dream for option sellers.
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Implied Volatility (IV) is a critical concept in the world of options trading, often acting as the stock market's "fear gauge."1 It reflects the market's expectation of how much an asset's price is likely to swing in the future
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Delta Hedging: Navigating Market Moves with Precision In the sophisticated world of options trading, managing risk is paramount. One of the most fundamental and widely used techniques for this is Delta Hedging. While it might sound like jargon from a financial thriller, delta hedging is a practical strategy employed by