Time-based charts (namely Candlesticks, OHLC Bars and Heikin-Ashi) fail to truly depict price. This article will help you realize that time-based pattern recognition is an unreliable method for stock option trading.Some retail training firms like to popularize the myth that, âEveryone looks at these patterns in the chartsâ. They are partly right. Though, their use [...]
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 [...]
Managing the performance of your trading account must go beyond the discipline of money management. While money management remains critical, it is a subset of the total picture of managing your trading accountâs profit and loss.That total picture is what Kenneth L. Grant aptly paints in his book, Trading Risk. Total performance management of trading [...]
Time-based charts (namely Candlesticks, OHLC Bars and Heikin-Ashi) fail to truly depict price. This article will help you realize that time-based pattern recognition is an unreliable method for stock option trading.Some retail training firms like to popularize the myth that, âEveryone looks at these patterns in the chartsâ. They are partly right. Though, their use [...]
Not all volatilities are constructed equal. It is critical to differentiate between Historical Volatility and Implied Volatility, so retail traders learn how to trade options focused on what is material to theoretically price option spreads forward.Historical Volatility (HV) measures past price movements of the underlying asset recording the asset’s actual or realized volatility. The more [...]
If you are trading a mix of Verticals, Calendars and Iron Condors across highly liquid indexes like the DJX, DIA, MNX, QQQQ, RUT, SMH, SPY and XSP, is your trading risk adequately diversified? No.In choosing the MNX, QQQQ, SMH, SPY and XSP, there is a duplication of stock components in these Indexes: for example, AMAT [...]
Contrast these 2 days. 29 Sep, 2008: Dow down -7.50%, Nasdaq down -10.06% and S&P 500 down -9.63%. Versus 13 Nov, 2008: Dow up +6.25%, Nasdaq up +6.11% and S&P 500 up +6.47%. Many retail option traders would have rushed to get their spreads filled on such big days, either to get short or long. [...]
The Implied Volatility (IV) of Calls needs separate treatment from the IV of Puts. Also, for specific options trading strategies treat the IV of both Puts and Calls as a combined bundle.Each option at each strike implies its own individual percentage value of the underlying product’s future volatility. This makes it unique from any other [...]
Applying a more complete definition of diversification can help retail option traders diversify their portfolio profitably, beyond equities.A buddy started online options trading from home, in the last 6 months. He was trading a mix of Verticals, Calendars and Iron Condors using highly liquid Indexes but was failing to get consistent profits. Naturally, I asked, [...]
Most trading literature on option strategies tend to lean towards mathematical formulas to define the construction of a spread. Guy Cohen has chosen to use pictorial logic, even with the Greeks unique to a particular strategy, to piece together the legs of a spread with diagrams.Diagrams that connect with each other are a much more [...]