The majority of casual investors buy and sell stocks. If they are bearish on a stock, some will even short-sell stock. But relatively few investors fully understand and take advantage of trading options.
With stocks, you own a small piece of a company. However, with options, you purchase the right to buy or [...]
You have probably heard of the idea of using ‘options’ in trading on the stock market, as one possible active strategy to use in preference to buy-and-hold. You have probably heard of the fact that option prices are much more volatile than share prices, and that you can buy and sell options without ever having [...]
You may have heard of the idea of using ‘options’ in trading on the stock market, as one possible active strategy to use in preference to buy-and-hold. One attractive reason for trading options is the fact that option prices are much lower than share prices. You can buy and sell options without ever having to [...]
If you are one of those who want to gain huge profits from stock options, then it is very important for you to understand the meaning of option trading. At times it can be difficult to learn the exact difference between trading in the stock market and trading in the stock options market. In fact [...]
Is options trading risky? This is one of the most popular questions that options trading beginners ask. In fact, my clients ask me this same question all the time. I would then ask them “What do you mean by risky?”. The usual answer would be “Can I lose a lot of money in options trading?”.
At [...]
Everyone has their own option strategies in option trading, but when you’re just getting started, it can be very confusing. You’ll observe several choices spreads around the web, blogs proclaiming they have the wonderful options program and options trading sites in abundance, providing to teach you trading systems. Now, what is the best option strategy [...]
Combining technical analysis with options trading is not a typical course of study when learning how to trade options. Option traders who want to maximize the return need to understand how to combine their options analysis with certain market conditions. In this article, I will wade through the reasons why a trader would prefer to [...]
Backspreads, also known as reverse ratio spreads, are an option strategy utilized when you believe there will be much volatility in the stock but are not 100% sure whether it will go up or down. If the stock moves a lot in the predicted direction, you will earn a tidy profit. If the stock moves [...]
The Butterfly is an option position that is composed of 2 vertical spreads that have a common strike price. In other words, butterfly trading involves an opening position where options (either calls or puts) are bought (or sold) at 3 different strike prices. The way in which these options are created makes the butterfly a [...]
Let’s face it, derivative trading is risky. Period.
Derivatives such as futures and options are leverage instruments and by virtue of being leverage instruments, derivatives inherently carry more risk and exposure than pure and simple stock trading. Leverage instruments are risky because leverage allows you to do more with the same amount of money than you [...]