The following excerpt is taken from my book Show me Your Options co authored with Christopher Ebert the “Option Scientist”. (The following chat is set inside a facebook group in 2011, Apple has appreciated greatly since this book was published). Income Investor: I heard you were the group’s resident guru on stock options. I sell […]
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The current pace of change in the world is at the highest velocity it has ever been. It use to take decades to build companies now it takes years. Apple can go from the verge of bankruptcy to the largest company by market cap in about a decade. General Motors can
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Options are great tools in the hands of knowledgeable traders but options are also dangerous in the hands of a gambler. Option contracts can be used to manage risk or expose your account to excessive risk that can lead to ruin. They can be used to put the odds in your favor or
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I am holding two long picks going into Monday morning $AAPL and $MLNX. While both of the stocks are in very strong bases they are very near to all time highs and have the potential to pop up and run if the market price action stays healthy. This is the
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Here are principles from Dana Glante from the Stock Market Wizards book by Jack Schwager on how she made double digit returns year after year from her short only trading strategies even in bull markets. Steve Watson in the same book contributed the last one. RED FLAGS: High receivables (large outstanding billings for goods and
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Option delta is represented as the velocity of a price change in an option, given a 1 point move in the underlying asset and is usually displayed as a decimal value. Delta values range between 0 and 1 for call options and -1 to 0 for put options. The delta
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I believe a surprisingly dangerous way to play options are to sell covered calls. This may sound strange to most option traders as it is the most safe convenient ways to use options for long term holdings. Many Individual Retirement Accounts (IRAs) will even allow participants to write covered calls on their stock holdings.
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There are people that believe stock options are dangerous, risky, and are to be avoided in place of safer shares of stock. They know it is possible to lose your entire account trading options. If you are selling options short then it is even possible to lose more than your account is worth if you use
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The key to managing risk in options while trading them in place of stocks is to roll them over when you have nice profits and would like to stay in a trending stock. If you buy a SPY ETF call option contract with a $200 strike price for $300 when SPY is trading at $203 and the ETF runs
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How can an option trader enter into a position, risk only $500 of their total trading capital but control $50,000 worth if stock? The numbers will vary greatly depending on the option pricing factors of intrinsic value and the Greeks but the point here is that it is possible to control a large dollar value of shares with a small outlay of cash. You
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