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 [...]
The key to using options to increase your stock market profits is that you must be able to correctly predict both the direction that the stock will move, and the approximate time frame in which the move will take place. If you miscalculate on either of these values, you will either break even, or [...]
Clinging on to Fundamental Analysis and stock picking software, only keeps you stuck in trading equities. Trading this way, compounds concentration risk in one asset class and fails to adequately diversify risks across Equities, Bonds, Currencies and Commodities. Thereâs much more to stock option trading, than stock itself.I cite Benjamin F. Kingâs study, quoted repeatedly [...]
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 [...]
The Reward of Profit and the Risk of Losses for retail option trading needs to be managed at 2 related levels of performance: Portfolio and Trade Specific.At the Portfolio level for online options trading, there are 3 types of Targets that must be set, even before you trade.Maximum Return Target: complete achievement of the âidealâ [...]
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 [...]
There are four different types of players in the stock option trading game. They are buyers of calls, sellers of calls, buyers of puts, and seller of puts. The buyers are called holders, and the sellers are called writers. Buyers of calls are said to have a long position, while buyers of puts are said [...]
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 [...]
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 [...]
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 [...]