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Decisions, Decisions: Understanding Option Probabilities

Decisions, Decisions: Understanding Option Probabilities

Options trading, like all investing really, is about decision making: weighing the potential reward against the potential risk, and the probabilities thereof. But isn't that life in general? By some estimates, the average human makes 35,000 decisions in a typical day. Whether you believe that statistic or not, let's just agree that we make a lot of decisions every day. In general, ...

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With Volatility Back in Town, It Could Be Short Iron Condor Time
March 27, 2018

With Volatility Back in Town, It Could Be Short Iron Condor Time

Just 3 months ago, volatility was near record lows. The absence of moderate to elevated option premiums made it hard to justify selling vertical spreads or iron condors.

Getting Down to the Basics of Options
March 8, 2018

Getting Down to the Basics of Options

Are you thinking about adding options to your investing arsenal? If so, it's important to educate yourself about what they are and how they work before you jump in...

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Options Expiration: Definitions, a Checklist, and More
February 19, 2018

Options Expiration: Definitions, a Checklist, and More

In the early days of options trading—two or three decades ago—for market makers in the option trading pits in Chicago and other financial centers, there was ...

Risk and Reward: The Basics of Buying Stocks on Margin
February 1, 2018

Risk and Reward: The Basics of Buying Stocks on Margin

Although it’s been available in the brokerage industry for decades, buying stocks on margin ranks up there with short selling as one of the things many investors ...

Lower Margin Requirements with a Vertical Option Spread
January 31, 2018

Lower Margin Requirements with a Vertical Option Spread

Let’s say you have been selling naked puts, and the market has made an extended move higher in your favor. Chances are, you're getting a little nervous. Will the ...

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Versatility, Flexibility: The Continuing Allure of Listed Options
January 19, 2018

Versatility, Flexibility: The Continuing Allure of Listed Options

In 2018, the exchange-traded equity options market will celebrate its 45th anniversary in the U.S. Though 2017 marked another year of historically low volatility, with ...

Option Collar Options: Rolling Up, Rolling Down, Rolling Out ...
January 4, 2018

Option Collar Options: Rolling Up, Rolling Down, Rolling Out ...

A previous article explored how options collars can help protect long stock positions while allowing the stock to appreciate in price by a limited amount. We showed ...

Wearing a Collar? Here’s How and When You Might Adjust It
December 28, 2017

Wearing a Collar? Here’s How and When You Might Adjust It

The stock market has made a number of new highs. So protective puts and other option strategies designed to defend against downside moves may not be foremost ...

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Turn a Long Butterfly Spread into a Credit Spread? Break a Wing
December 21, 2017

Turn a Long Butterfly Spread into a Credit Spread? Break a Wing

A butterfly spread is a common choice among options traders who anticipate a move in a stock toward a specific strike price, in hopes it will expire right at...

Looking to Buy or Accumulate Stock? Consider Put Spreads
December 14, 2017

Looking to Buy or Accumulate Stock? Consider Put Spreads

Stock traders and investors often enter orders to buy shares at a price that’s lower than the prevailing price. But did you know that certain options strategies can ...

Derivatives With a Twist: Options on Futures vs. Equity Options
December 7, 2017

Derivatives With a Twist: Options on Futures vs. Equity Options

Tax audit. Crash. Emergency liquidation. Let's face it—some financial terms are scary, perhaps for good reason. But here's a term that may sound scarier than it is ...

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Tinsel and Trading: Options and Holiday Markets
November 30, 2017

Tinsel and Trading: Options and Holiday Markets

It’s late December, and you’ve taken the last two weeks of the year off. The kids are visiting friends, your spouse is out doing some shopping, and you’re home all alone ...

Options and Calendar Spread Decision Time: Close It or Roll It?
November 30, 2017

Options and Calendar Spread Decision Time: Close It or Roll It?

So you’ve put on a calendar spread in XYZ by buying a deferred-month 50-strike call and selling a nearer-term 50-strike call. Fast-forward a few weeks. How did the...

Options for Low Volatility: Setting Up and Rolling Calendars
November 16, 2017

Options for Low Volatility: Setting Up and Rolling Calendars

Option traders interested in premium collection strategies, those that profit from time decay, often turn to short strategies such as iron condors or short verticals...

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Double Calendars: The Low Volatility Trade with Two Peaks
November 6, 2017

Double Calendars: The Low Volatility Trade with Two Peaks

If you’re looking for an option strategy that's designed for a lower-volatility environment where the underlying price action gravitates toward either of two different...

Straddles and Strangles: Basic Volatility, Magnitude Strategies
October 31, 2017

Straddles and Strangles: Basic Volatility, Magnitude Strategies

“This could be the start of something big,” you say? Perhaps there’s an earnings report coming up in a stock you’re considering. Or maybe there’s a product launch ...

Your Options ABCs: Basic Call and Put Option Strategies
October 26, 2017

Your Options ABCs: Basic Call and Put Option Strategies

Before learning to run, you had to first crawl, then walk. Before penning that masterpiece, the writer needed to learn the ABCs. And before jumping into options ...

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On Any Given Friday: An Introduction to Weekly Options
October 19, 2017

On Any Given Friday: An Introduction to Weekly Options

It used to be that option expiration occurred once a month, generally on the third Friday of the month. That all changed in 2005 when exchanges began listing options ...

Confidence Boost: Tools to Help Hone Your Options Strategy
October 12, 2017

Confidence Boost: Tools to Help Hone Your Options Strategy

Are you new to options trading? Do you have a potential trade idea but you're not quite confident enough to pull the trigger? Since it may be unwise to put on a trade ...

Volanthology World Tour: Foreign Exchange Volatility
October 5, 2017

Volanthology World Tour: Foreign Exchange Volatility

Despite what you read in the papers and see on the business reports, there's a lot more to volatility than VIX—the CBOE Volatility Index, aka "the fear index."

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Scalping the Gamma: Dynamic Hedging of Option Positions
September 28, 2017

Scalping the Gamma: Dynamic Hedging of Option Positions

So you’ve identified a stock in which you believe the implied volatility (IV) is too low. Maybe it’s been fluctuating quite a bit, or maybe you think it is entering a period of ...

Know Your Contract Specifics: Multiplier, Delivery Terms and More
September 28, 2017

Know Your Contract Specifics: Multiplier, Delivery Terms and More

When trading stock, knowing the amount of capital you’re investing is as straightforward as multiplying the price of the stock by the amount of shares ...

Gamma Scalping Intro: Synthetics, Put-Call Parity and Delta-Neutral
September 21, 2017

Gamma Scalping Intro: Synthetics, Put-Call Parity and Delta-Neutral

A recent article introduced negative theta—that is, options positions that lose theoretical value each day due to the passage of time. The article demonstrated how ...

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Volanthology: A Tour of VIX and Other Volatility Indexes
September 15, 2017

Volanthology: A Tour of VIX and Other Volatility Indexes

When you hear the phrase "stock market volatility, what's the first thing that pops into your mind? If you're like many investors, you think of the VIX—the CBOE ...

Price Action vs. Price Erosion: The Positive Side of Negative Theta
September 7, 2017

Price Action vs. Price Erosion: The Positive Side of Negative Theta

Many traders tend to gravitate to options strategies with positive theta—those in which the theoretical value increases with the passage of time. Certain positive ...

Got a Directional View? Here’s an Option Spread to Consider
August 31, 2017

Got a Directional View? Here’s an Option Spread to Consider

Directional trades, like long calls or long puts, offer you the chance to profit if you’re right about the direction of the underlying stock. But, having profits that aren’t ...

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Do the Math: Calculating Risk and Potential Profit on Vertical Spreads
August 24, 2017

Do the Math: Calculating Risk and Potential Profit on Vertical Spreads

Many options traders say that they trade a consistent quantity when initiating vertical spread trades. And while this strategy might keep the contract numbers orderly ...

Term Structure and Covered Calls in a Low-Volatility Environment
August 17, 2017

Term Structure and Covered Calls in a Low-Volatility Environment

When summer trading is slow, and everyone’s either at the beach or wishing they were, implied volatility (IV) can get pretty low. For covered call sellers, lower IV means ...

Hold Onto Your Floaties! New Swim Lessons with Video
August 7, 2017

Hold Onto Your Floaties! New Swim Lessons with Video

If you're a dedicated (or even an occasional) participant in our daily Swim Lessons broadcasts in the thinkorswim® platform, you understand how dynamic the market can ...

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Going on Strike: Consider Widths when Buying Vertical Spreads
August 3, 2017

Going on Strike: Consider Widths when Buying Vertical Spreads

Experienced options traders understand how buying vertical spreads can help you take advantage of directional moves, but with defined risk. And because ...

Earnings Moves: When Being Below Average Might Be a Good Thing
July 27, 2017

Earnings Moves: When Being Below Average Might Be a Good Thing

Earnings announcements can be volatile events for the company reporting, and have the potential to propel the stock higher or lower depending on the results. Option ..

Proportional Proposal: An Intro to Put Ratio Options Spreads
July 27, 2017

Proportional Proposal: An Intro to Put Ratio Options Spreads

Ready for a primer on put ratio spreads? Take a deep breath and let’s dive in. For options traders, basic spreads are typically created on a ratio of 1:1. ...

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Piloting Your Options Strategy? Remember the Pre-Flight Checklist
July 20, 2017

Piloting Your Options Strategy? Remember the Pre-Flight Checklist

If you've ever flown a plane, or flown in a plane actually, you know that the captain doesn't step into the cockpit at the last moment, hit the "takeoff" button and sail off ...

Calendar Spreads: Options Strategy for the Dog Days of Summer
July 13, 2017

Calendar Spreads: Options Strategy for the Dog Days of Summer

Ah, summertime— a time of barbecues, lounging poolside on extended vacations. Perhaps it's time to kick back and open up a...calendar spread? A while back ...

Swim Lessons: Trading Options During Earnings Season
July 6, 2017

Swim Lessons: Trading Options During Earnings Season

Earnings season is one of those times when stocks can see larger than normal moves. You also might see that the implied volatility has risen to unusually high levels ...

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Swim Lessons: Collaring Your Stock for a Measure of Protection
June 29, 2017

Swim Lessons: Collaring Your Stock for a Measure of Protection

Even in the strongest of rallies, a stock can experience a pullback. And understanding that downturns are a natural part of any market doesn’t make them any more fun.

Same Building Blocks, Different Products: Options on Futures Intro
June 22, 2017

Same Building Blocks, Different Products: Options on Futures Intro

While a good chunk of our Swim Lessons episodes feature equity options—options on stocks and stock indexes—we also like to feature options on futures ...

Who Adjusted My Options? And Other Corporate Action Questions
June 22, 2017

Who Adjusted My Options? And Other Corporate Action Questions

It seems like each month or so there's a major company announcement—a mega-merger, acquisition, stock split or a special dividend—but these are just the big ones ...

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Swim Lessons: Introduction to the Butterfly Spread
June 15, 2017

Swim Lessons: Introduction to the Butterfly Spread

TD Ameritrade clients can join a special Swim Lessons episode on "Butterfly Mechanics and Utility" in the thinkorswim platform® on June 21st at 10:30 AM CT.

Swim Lessons: Three Key Elements to Consider in Your Options Strategy
June 1, 2017

Swim Lessons: Three Key Elements to Consider in Your Options Strategy

In our daily Swim Lessons program, co-host Kevin Hincks and I look at all sorts of options trading strategies, and we consider scenarios under which a strategy might ...

Swim Lessons: Option Melting and Theta Decay Strategies
May 18, 2017

Swim Lessons: Option Melting and Theta Decay Strategies

Options traders can potentially make money in the market when one of two things happens: when their long option goes up in value, or their short option goes down in...

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Looking to Limit Stock Risk? Popping a Collar Is an Option
May 18, 2017

Looking to Limit Stock Risk? Popping a Collar Is an Option

Suppose you’re long a stock that has appreciated nicely, but you’re getting nervous that it may move lower. You don’t really want to exit the stock, but you’re not sure ...

Swim Lessons: Spread Your Trading Wings With Iron Condors
May 11, 2017

Swim Lessons: Spread Your Trading Wings With Iron Condors

In Swim Lessons, we seek to teach options traders about risk-defined, high probability options trades. We’ve covered buying and selling vertical spreads.

Swim Lessons: Asking ‘What If?’ With the Theoretical Price Tool
May 4, 2017

Swim Lessons: Asking ‘What If?’ With the Theoretical Price Tool

Often, when a company has a big news event, such as an earnings release or announcement of a new product or initiative, the company’s stock will have one big move ...

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The Fearless Index? VIX Hits Fresh Low as Rally Rolls On
May 3, 2017

The Fearless Index? VIX Hits Fresh Low as Rally Rolls On

History was made last week as the Nasdaq Composite Index rallied above 6K for the first time ever, but another milestone was the (near) historic drop in the VIX. ...

Synthetics: A Useful Accessory for Your Options Wardrobe
April 27, 2017

Synthetics: A Useful Accessory for Your Options Wardrobe

As any fashion professional would tell you, though your collection of outfits provides the base of your wardrobe, the accessories—those extra little add-ons—can make ...

Swim Lessons: Brush Up On Your Greeks This Earnings Season
April 20, 2017

Swim Lessons: Brush Up On Your Greeks This Earnings Season

Springtime is upon us—a time for new beginnings, and new seasons. Like baseball, for instance, and earnings. Are you among those considering options strategies ...

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Swim Lessons: Familiar with the Risk Profile Tool?
April 13, 2017

Swim Lessons: Familiar with the Risk Profile Tool?

In last week’s Swim Lessons article we looked at the power of the Risk Profile tool in the thinkorswim® platform from TD Ameritrade, and demonstrated how ...

Looking for a Soft Landing? Try an Iron Condor to Trade Earnings
April 13, 2017

Looking for a Soft Landing? Try an Iron Condor to Trade Earnings

Earnings season is upon us, and with it brings increased volatility for those stocks reporting results. ...

Swim Lessons: Lost at Sea? The Risk Profile Tool Can Be Your Message in a Bottle
April 6, 2017

Swim Lessons: Lost at Sea? The Risk Profile Tool Can Be Your Message in a Bottle

If you were stranded on a deserted island and could pick three things with which to survive, what would you choose? Here’s what I’d pick: sunscreen, a bag of ...

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Swim Lessons: Surf’s Up! Catch A Wave With These Volatility Products
March 30, 2017

Swim Lessons: Surf’s Up! Catch A Wave With These Volatility Products

If history has taught us anything, it’s that market uncertainty can almost always be expected. However, in Swim Lessons?, we like to say that a little volatility ...

Singing the Low-Volatility Blues? Try Calendar Spreads
March 23, 2017

Singing the Low-Volatility Blues? Try Calendar Spreads

In last week's article, Scott Connor, my Swim Lessons co-host, introduced the calendar spread, a risk-defined options strategy involving the sale of a short-term ...

Double Calendars: Is This the Right Strategy for You?
March 23, 2017

Double Calendars: Is This the Right Strategy for You?

If you are looking for an option strategy that is designed for a lower-volatility environment where the underlying price action gravitates towards either ...

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Calendar Spreads: Options Strategies for Quiet Markets
March 16, 2017

Calendar Spreads: Options Strategies for Quiet Markets

One of the advantages that options offer is the potential to profit in an upward, downward, or range bound ...

Rugby and the Art of Options Trading
March 9, 2017

Rugby and the Art of Options Trading

I played rugby in college. There’s an old quote I use when explaining the sport to a skeptical newcomer. I like to think that it applies to options trading as well...

Swim Lessons: How Volatility and The Rule of 16 Can Offer Perspective
March 2, 2017

Swim Lessons: How Volatility and The Rule of 16 Can Offer Perspective

For option traders, volatility can make or break a trade. 'The Rule of 16' is another method that offers perspective on volatility measurements...

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Know Your Options: The Basics of Calls and Puts
February 28, 2017

Know Your Options: The Basics of Calls and Puts

One of the main things that makes options attractive to investors is the flexibility they can provide during a variety of market conditions. Regardless of whether...

Turning a Short Option Into a Risk-Defined Vertical
February 24, 2017

Turning a Short Option Into a Risk-Defined Vertical

Let’s say you have been selling naked puts, and the market has made an extended move higher in your favor. Chances are, you are getting a little nervous. ...

Vertical Credit Spreads: Your High-Probability Trade?
February 23, 2017

Vertical Credit Spreads: Your High-Probability Trade?

In our daily Swim Lessons sessions, we aren't above the occasional sports analogy. Since my co-host, Scott Connor, is an avid tennis player, that sport is a popular ...

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Do Vertical Spreads Offer A Better Risk-Reward Than Single Options?
February 16, 2017

Do Vertical Spreads Offer A Better Risk-Reward Than Single Options?

Many investors and traders venturing into the world of options begin by learning about single-legged options strategies. With education, persistence and ...

Greek Graphs Tell the Story of Call Strategies
February 9, 2017

Greek Graphs Tell the Story of Call Strategies

Call options are complicated because there are a lot of moving parts. If you’re new to options, you may not realize that there’s more to them than just ...

DIY Guide to Technical Analysis: Indicators & Oscillators
February 2, 2017

DIY Guide to Technical Analysis: Indicators & Oscillators

Identifying trend, support and resistance levels, and price patterns leaves a lot up to the discretion of the trader. Some traders prefer ...

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Ready to Go Vertical? Options Spreads with Versatility
January 26, 2017

Ready to Go Vertical? Options Spreads with Versatility

Feeling pretty experienced with trading long calls, long puts, and writing covered calls? Vertical spreads are one of the building blocks of options trading, and they can ...

DIY Guide to Technical Analysis: Price Patterns
January 26, 2017

DIY Guide to Technical Analysis: Price Patterns

Price patterns are probably the most recognizable technical analysis technique. This may be because of their simplicity. However, some traders make them ...

DIY Guide to Technical Analysis: Entries and Exits, Bounces and Breaks
January 24, 2017

DIY Guide to Technical Analysis: Entries and Exits, Bounces and Breaks

Charts can help technicians identify potential buying and selling opportunities, including those signaled by support ...

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DIY Guide to Technical Analysis: Support and Resistance
January 12, 2017

DIY Guide to Technical Analysis: Support and Resistance

It’s important to identify general trends, but technicians seek to understand why trends happen, or the investor behavior that creates trends. Technicians ...

DIY Guide to Technical Analysis: Chart Basics
January 5, 2017

DIY Guide to Technical Analysis: Chart Basics

Investors use a variety of methods to identify and evaluate investing opportunities. Two of the most common are technical analysis and ...

’Tis the Season to Be Careful: Trading in Holiday Markets
December 7, 2016

’Tis the Season to Be Careful: Trading in Holiday Markets

It’s late December, and you’ve taken the last two weeks of the year off. The kids are visiting friends, your spouse is out doing some shopping, and you’re home alone ...

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Volatility Update: Giving Thanks to VIX and Other Volatility Indexes
November 23, 2016

Volatility Update: Giving Thanks to VIX and Other Volatility Indexes

Thanksgiving. It’s time for turkey, yams, and pumpkin pie! But Thanksgiving is about much more than the ...

Volatility Update: Post-Election, Term Structure, Sector Volatility
November 17, 2016

Volatility Update: Post-Election, Term Structure, Sector Volatility

When the dust had settled on the U.S. election results Wednesday, November 9, the S&P 500 opened modestly lower (although S&P 500 futures were down ...

How Three of the Worst Trades of All Time Went (Way) Down
November 14, 2016

How Three of the Worst Trades of All Time Went (Way) Down

In his 1905 book "The Life of Reason," George Santayana, a Spanish philosopher, wrote the famous phrase, “Those who cannot remember the past are ...

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Volatility Update: Time to Wake Up? Rising Risk Perceptions
November 10, 2016

Volatility Update: Time to Wake Up? Rising Risk Perceptions

The S&P 500 suffered a nine-day losing streak through the end of last week. The grind lower was rather orderly and resulted in just a 3.1% loss for the S&P 500. In fact ...

DIY Guide to Options Trading: Strategies for Selling Options
November 9, 2016

DIY Guide to Options Trading: Strategies for Selling Options

The extrinsic value of an option depreciates as time passes. However, you can’t just “set it and forget it," because short option trades can have significant ...

Volatility Update: VIX Ticks Higher as Elections Loom Large
November 3, 2016

Volatility Update: VIX Ticks Higher as Elections Loom Large

October wrapped up in quiet fashion, and now the focus is on important political and economic events in early November. The S&P 500 was down roughly 1.5% last ...

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DIY Guide to Options Trading: Ask and Bid to Trade Options
November 1, 2016

DIY Guide to Options Trading: Ask and Bid to Trade Options

Let’s not beat around the bush: Profiting from buying options is difficult. When you’re correct, your potential for big profits is great. But it can be difficult to be ...

Volatility Update: Will Election Day Bring Conviction to VIX?
October 27, 2016

Volatility Update: Will Election Day Bring Conviction to VIX?

If there’s one thing recently lacking on Wall Street, it seems to be conviction. The S&P 500 has spent the first few weeks of October chopping around somewhat ...

DIY Guide to Options Trading: Options, Puts, and Calls Explained
October 25, 2016

DIY Guide to Options Trading: Options, Puts, and Calls Explained

Options give traders, well, options. But options aren’t just for traders; they can give investors options, too. Many investors use them to reduce risk and ...

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Volatility Update: Earnings, Elections, and the Economy
October 20, 2016

Volatility Update: Earnings, Elections, and the Economy

The first two weeks of October proved to be somewhat choppy for the financial markets as investors mulled the potential outcomes of U.S. elections and braced for a ...

Volatility Update: ’Tis the Season for Earnings, October Surprises
October 13, 2016

Volatility Update: ’Tis the Season for Earnings, October Surprises

The month of October during an election year isn’t always bullish for the stock market. In fact, according to the Stock Trader’s Almanac, the average change in the ...

Trying to Buy Stocks for Less and Potentially Selling Higher
October 11, 2016

Trying to Buy Stocks for Less and Potentially Selling Higher

Stocks don’t usually move in one direction. There’s generally some price action back and forth, higher and lower. That’s just the natural rhythm of the market...

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Volatility Update: 3rd Quarter Winners and Losers
October 6, 2016

Volatility Update: 3rd Quarter Winners and Losers

Overall levels of market volatility picked up a bit in September, but finished well below the levels seen at the end of the second quarter. Of course, financial ...

Volatility Update: VIX Dips Back to 12 as Fear Subsides
September 29, 2016

Volatility Update: VIX Dips Back to 12 as Fear Subsides

In life, there’s perception and then there’s reality. For instance, you might perceive yourself to be the same athletic superstar that you were in your youth. But ...

Volatility Update: September Market Volatility Sizzles
September 22, 2016

Volatility Update: September Market Volatility Sizzles

You probably noticed that levels of volatility in the first two weeks of September stand in stark contrast to the pattern during July and August. For instance, through ...

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Volatility Update: Volumes Slump as Volatility Drops
September 8, 2016

Volatility Update: Volumes Slump as Volatility Drops

After several weeks of relatively quiet trading, many measures of market volatility were back at low levels in the early days of September. Indeed, the S&P 500...

Volatility Update: VIX Creeps Higher from Recent 52-Week Low
September 1, 2016

Volatility Update: VIX Creeps Higher from Recent 52-Week Low

Labor Day is dedicated to the social and economic achievements of American workers. Celebrated on the first Monday of September, the holiday is a tribute to ...

Volatility Update: Home on the Average True Range in S&P 500
August 25, 2016

Volatility Update: Home on the Average True Range in S&P 500

There’s more than one way to skin a cat. That familiar (and somewhat troubling) adage is used when somebody wants to say that there’s more than one ...

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Income Options: Selling Covered Calls, Selecting Strategic Strikes
August 24, 2016

Income Options: Selling Covered Calls, Selecting Strategic Strikes

Selling covered calls is a staple strategy for investors who are looking to generate income from long stocks. But there are some basics about this strategy that you ...

Volatility Update: At About 12, Is It Possible VIX Is Too … High?
August 18, 2016

Volatility Update: At About 12, Is It Possible VIX Is Too … High?

Investors are navigating the summer doldrums in quiet fashion as the S&P 500 has been setting a series of record highs through mid-August. The large-cap index ...

Options for Risk Management: How to Protect a Stock with a Put
August 17, 2016

Options for Risk Management: How to Protect a Stock with a Put

Few things are as beautiful as learning new ideas. Especially when it’s a stock that gets hitched to a put option, creating the “married put.” Of all the benefits...

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Volatility Update: VIX Dips, Volumes Slip, Stocks Rip Higher
August 11, 2016

Volatility Update: VIX Dips, Volumes Slip, Stocks Rip Higher

It’s interesting to note some of the similarities between early August 2016 and one year ago before a major spike in volatility. For instance, the CBOE Volatility ...

More than Meets the Eye: Reading Put/Call Options Ratios
August 9, 2016

More than Meets the Eye: Reading Put/Call Options Ratios

The put/call ratio (p/c ratio) is probably one of the most recognizable option statistics among traders and investors, even by those who don’t regularly trade ...

Portfolio Margin: How It Works and What You Need to Know
August 5, 2016

Portfolio Margin: How It Works and What You Need to Know

Portfolio margin is available to TD Ameritrade clients who currently have a margin account and meet requirements like a certain equity level and options...

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Volatility Update: Tales of a Mixed Tape and Dropping Correlations
August 4, 2016

Volatility Update: Tales of a Mixed Tape and Dropping Correlations

The S&P 500 recorded gains in July and finished the month setting record highs. The rally in the last two weeks of the month was slow and methodical.

Volatility Update: Looking Ahead With the VIX Curve
July 28, 2016

Volatility Update: Looking Ahead With the VIX Curve

The CBOE Volatility Index (VIX) notched 2016 lows last week after falling below 12 for the first time since August 2015. The market’s so-called “fear gauge” is now ...

Can Long Call Options Substitute for Stock? Getting In the Money
July 25, 2016

Can Long Call Options Substitute for Stock? Getting In the Money

Nothing’s better than the feeling of riding a stock market rally. And nothing’s worse than having to watch it from the sidelines because of limited funds. Stocks can be ...

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Volatility Update: VIX Trades From One Extreme To Another
July 21, 2016

Volatility Update: VIX Trades From One Extreme To Another

What a difference a few weeks can make! In late June, CBOE Volatility Index (VIX) rallied to the mid-20s and its best levels in months. Indeed, the market’s...

Events and Options: Are Long Straddles Risky Around Earnings?
July 19, 2016

Events and Options: Are Long Straddles Risky Around Earnings?

If a stock’s going to make a move—perhaps because of an earnings announcement or other upcoming event—then why not buy a call option in case it goes up and a ...

Got Leverage? Portfolio Margin versus Regulation T Margin
July 12, 2016

Got Leverage? Portfolio Margin versus Regulation T Margin

How can an individual trader get risk-based margins like a market maker without owning (or leasing) a seat or trading on the exchange floor? Portfolio margin ...

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Options Trading Game Plan for Earnings and Elections
July 11, 2016

Options Trading Game Plan for Earnings and Elections

Last quarter we wrote an article ahead of Q1 earnings season and discussed how to use risk-defined option strategies during earnings. We want to expand on ...

Volatility Update: The Highs and Lows in VIX Year-to-Date
July 8, 2016

Volatility Update: The Highs and Lows in VIX Year-to-Date

The U.S. stock market ended the second quarter in dramatic fashion after the S&P 500 (SPX) staged an impressive three-day rally amounting to about 4.9%. ...

Reversion to the Mean: Taking Volatility to a New Level
July 7, 2016

Reversion to the Mean: Taking Volatility to a New Level

You’ve probably heard that volatility is mean-reverting, which is trader-speak for “it goes back to where it usually is.” But what does that really mean? And how ...

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Noise and Sound: Deciphering the Intent of Unusual Option Volume
June 30, 2016

Noise and Sound: Deciphering the Intent of Unusual Option Volume

Market watchers sometimes look to trading volumes in stocks and options as possible indications of market sentiment. For instance, relatively high volume ...

Volatility Update: VIX Jumps After Brexit Vote; VXEFA Spikes, Too
June 30, 2016

Volatility Update: VIX Jumps After Brexit Vote; VXEFA Spikes, Too

The CBOE Volatility Index (VIX) reached four-month highs late last week. As stocks across the globe faced a day of heavy selling pressure, currencies gyrated ...

Trading Options by the Calendar: Time Can Be a Trader’s Friend
June 27, 2016

Trading Options by the Calendar: Time Can Be a Trader’s Friend

The calendar spread is one of the most common income generating trades. Perhaps it’s because calendars may be easily adjusted. Or maybe it’s because calendars ...

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Volatility Update: Implied Volatility Breaks Out
June 23, 2016

Volatility Update: Implied Volatility Breaks Out

CBOE Volatility Index (VIX) moved above 20 last week for the first time since February. VIX wasn’t the only implied volatility index moving higher ...

Volatility and the Risk of Options Skew in Calendar Spreads
June 22, 2016

Volatility and the Risk of Options Skew in Calendar Spreads

There’s an important concept that options traders who trade calendar spreads should understand. It's called skew. Skew is used in a few different ways, but in this ...

Implied Volatility: Spotting High Vol and Aligning Your Options
June 16, 2016

Implied Volatility: Spotting High Vol and Aligning Your Options

Implied volatility is like gravity. You can’t directly observe it, but you know it’s there and it’s measurable. And it’s pretty important, too. Just as gravity impacts ...

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Volatility Update: O Vol: Where Art Thou?
June 16, 2016

Volatility Update: O Vol: Where Art Thou?

The recent grind higher in the S&P 500 has been slow and methodical, leaving volatility traders in a tight spot. Might a pick-up in volatility be right around the ...

Volatility Update: Correlations Drop and Markets Meander
June 9, 2016

Volatility Update: Correlations Drop and Markets Meander

Many measures of market volatility are near lows for the year despite recent rounds of murky economic data, uncertainty on the interest rate front, and ...

Understanding the Rule of 16, Options Volatility Skew, and VIX
June 7, 2016

Understanding the Rule of 16, Options Volatility Skew, and VIX

Modern investors get frequent updates on where the CBOE Market Volatility Index (VIX) is trading. Some even refer to the VIX as the “fear index” because it ...

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Volatility Update: Five Indicators to Watch Right Now
June 2, 2016

Volatility Update: Five Indicators to Watch Right Now

The “summer doldrums” refers to a sometimes seasonally slow period on Wall Street when the weather outside warms and volumes slow as traders ...

Volatility Update: Are Traders Bracing for Higher Volatility?
May 26, 2016

Volatility Update: Are Traders Bracing for Higher Volatility?

While equities churn rather quietly from one day to the next, there’s not a lot of directional movement. Will volatility continue falling?

Volatility Update: Can Brazil Win Volatility Gold?
May 19, 2016

Volatility Update: Can Brazil Win Volatility Gold?

Many measures of market volatility are ticking a bit higher after falling to 2016 lows a month ago. The trend is not limited to the S&P 500, but is being seen...

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Fake It ’Til You Make It: Synthetic Options Strategies, Pt 3
May 12, 2016

Fake It ’Til You Make It: Synthetic Options Strategies, Pt 3

Now that you know the basic terms and definitions involved in synthetic options, let’s take this discussion to the application stage. How do traders begin applying ...

Volatility Update: How Low Can VIX Go? Historical and Implied Vol
May 12, 2016

Volatility Update: How Low Can VIX Go? Historical and Implied Vol

Sometimes the equities market can sink into a low-volatility funk that can last for many months or even years. One example from recent history is a two-year ...

Long Stock versus Long Call: Exploring Your Options
May 11, 2016

Long Stock versus Long Call: Exploring Your Options

Some retail investors have a simple investment strategy: Buy stock in a good company with attractive earnings, growth, or dividend yield potential. These investors ...

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Volatility Update: Late-April Showers on Wall Street
May 5, 2016

Volatility Update: Late-April Showers on Wall Street

Market volatility picked up in the final two days of April, but it was an otherwise quiet month on Wall Street. The S&P 500 finished nearly unchanged for the month ...

Looking for Option Strikes? How Delta Can Help Balance Risk
April 28, 2016

Looking for Option Strikes? How Delta Can Help Balance Risk

Delta is best known among option traders for estimating how much an option’s price moves compared to the underlying stock. But delta is much more than a one ...

Volatility Update: Then and Now as the S&P Eyes Record Highs
April 28, 2016

Volatility Update: Then and Now as the S&P Eyes Record Highs

The S&P 500 was at record highs 11 months ago and, since then, the daily chart of the index has taken on a decidedly W-shaped formation. That’s because, a few ...

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Not So Artificial: Understanding Synthetic Options Strategies
April 22, 2016

Not So Artificial: Understanding Synthetic Options Strategies

In our last look at synthetics, we reviewed a list of options trades compared to their “synthetic” counterparts—different sets of trades that equate to ...

Volatility Update: VIX Slips and the S&P Eyes New Highs
April 21, 2016

Volatility Update: VIX Slips and the S&P Eyes New Highs

Market volatility picked up a bit during the first week of April, but underlying investor sentiment seems to have turned generally unworried once again. On the one ...

Really Pretty Real: Understanding Synthetic Options Strategies, Pt 1
April 18, 2016

Really Pretty Real: Understanding Synthetic Options Strategies, Pt 1

Back before option pricing models and mathematical greeks—we’re talking delta, gamma, theta, vega, and rho), not the ancient Greeks (Socrates, Aristotle, Plato)...

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Volatility Update: Sizing Up the Small Caps
April 14, 2016

Volatility Update: Sizing Up the Small Caps

The market action during the first week of April seemed to reflect a growing sense of investor uncertainty on the macroeconomic front. In the equities market, for ...

Know Your Risk Profile: Selecting and Culling Option Strikes
April 7, 2016

Know Your Risk Profile: Selecting and Culling Option Strikes

Have you ever felt a little intimidated when looking at an option chain? There’s a tremendous amount of information available. Not only are there many ...

Volatility Update: Sizing Up Volatility Spikes
April 7, 2016

Volatility Update: Sizing Up Volatility Spikes

The S&P 500 eked out a small gain of less than 1% during the first quarter of 2016, but the modest advance masks an otherwise up and down quarter...

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Navigating Earnings Season with Weeklys Option Strategies
March 31, 2016

Navigating Earnings Season with Weeklys Option Strategies

Spring is finally in the air after another long dark winter. April ushers in several great traditions: the Final Four, the opening of Major League Baseball, the Masters...

Volatility Update: First Quarter Wraps Up in Mixed Fashion
March 31, 2016

Volatility Update: First Quarter Wraps Up in Mixed Fashion

The underlying market tone, in terms of volatility, has certainly changed a lot during the first three months of this year. Although the S&P 500 finished the first ...

Volatility Update: Fear Gauge Taps on the Brakes
March 24, 2016

Volatility Update: Fear Gauge Taps on the Brakes

The roller coaster ride continues after the S&P 500 rebounded sharply from its February 11 lows and has now tiptoed back into positive territory for 2016.

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Volatility Update: Sizing Up Volatility Spikes (and SPYIX)?
March 17, 2016

Volatility Update: Sizing Up Volatility Spikes (and SPYIX)?

By most measures, volatility is a lot lower than it was a month ago. That’s not too surprising given the four-week, 8.5% advance in the S&P 500 during that ...

Volatility Update: Return of Bullish Sentiment
March 10, 2016

Volatility Update: Return of Bullish Sentiment

The month of March was off to a strong start when, on "Super Tuesday" (March 1), the S&P 500 jumped 46 points and many measures of market volatility fell ...

You Asked, We Answered: Getting Started with Options
March 10, 2016

You Asked, We Answered: Getting Started with Options

Interest in listed stock options remains one of the fastest-growing trading segments, according to options industry data. But reports from the ground ...

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Volatility Update: Return to Normalcy in Market Volatility?
March 3, 2016

Volatility Update: Return to Normalcy in Market Volatility?

So far, 2016 is shaping up to be another year of roller-coaster action on Wall Street. After falling sharply in the first few weeks of January and stumbling again in early ...

Volatility Update: Yet Another Reason to Watch Oil and Gold
February 25, 2016

Volatility Update: Yet Another Reason to Watch Oil and Gold

Think things are looking a little explosive? Volatility has been higher across most asset classes so far in 2016. The stock-tracking CBOE Volatility Index (VIX) ...

Dissecting Synthetics: Don't Be Baffled by Iron Butterfly Spreads
February 23, 2016

Dissecting Synthetics: Don't Be Baffled by Iron Butterfly Spreads

What do a call option butterfly, a put option butterfly, and an iron butterfly have in common? Well, surprisingly, they all share a similar risk profile. That’s ...

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Volatility Update: Options Skew Requires Look Below the Surface
February 18, 2016

Volatility Update: Options Skew Requires Look Below the Surface

Volatility surged across financial markets through mid-February. Crude oil touched 12-year lows. The once high-flying U.S. dollar has pulled back. And gold has ...

Volatility Update: Could VIX Reading Be on Cusp of Change?
February 11, 2016

Volatility Update: Could VIX Reading Be on Cusp of Change?

Market conditions change often. One old adage tells us that “history rhymes rather than repeats,” which is certainly true of the markets. And that uncertainty can ...

Volatility Update: The Real Story on 2016 Volatility?
February 4, 2016

Volatility Update: The Real Story on 2016 Volatility?

The S&P 500 (SPX) fell to its lowest levels in more than a year last week, feeding a dramatic nearly 13% drop over the first three weeks of 2016 before a mild ...

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Volatility Update: Rising Jitters Spare Few Markets
January 28, 2016

Volatility Update: Rising Jitters Spare Few Markets

The S&P 500 (SPX) fell to its lowest levels in more than a year in the middle of last week before a recovery salvaged the first weekly winner so far in 2016 for this ...

Three Option Trading Hang-Ups You Can Dump in the New Year
January 21, 2016

Three Option Trading Hang-Ups You Can Dump in the New Year

Listed stock option converts are on the rise, according to Options Industry Council data. Have you considered joining this flock, but remain handcuffed by doubt?

Volatility Update: Bottom Picking is Way More Art than Science
January 21, 2016

Volatility Update: Bottom Picking is Way More Art than Science

The S&P 500 (SPX) blew through August 2015 lows last week, testing its chart near 1850, or the lowest level since October 2014. Recall that late August ...

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Volatility Update: Will Earnings Soothe or Scare?
January 14, 2016

Volatility Update: Will Earnings Soothe or Scare?

The seal is barely broken on 2016, and already the S&P 500 (SPX) is down 5% year to date. While SPX dropped, many measures of market volatility surged ...

Consider Calendar Spreads to Help Navigate Earnings Season
January 7, 2016

Consider Calendar Spreads to Help Navigate Earnings Season

Ask most option traders, and they’ll say that if the markets are trending distinctively in a given direction, long calls and puts might provide desirable returns ...

Volatility Update: Trading Records and Broken Records
January 7, 2016

Volatility Update: Trading Records and Broken Records

Wall Street whimpered into year-end, leaving the S&P 500 (SPX) down 15 points, or 0.7%, for all of 2015. Remember 2015? A year that featured record-high...

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Volatility Update: Year in Review Shows Familiar Theme
December 31, 2015

Volatility Update: Year in Review Shows Familiar Theme

The S&P 500 (SPX) is little changed year-to-date, but that doesn’t mean 2015 didn’t have its fair share of head-whipping action. More than a few bouts of stock ...

Volatility Update: Backwardation for Market’s Fear Gauge
December 17, 2015

Volatility Update: Backwardation for Market’s Fear Gauge

Volatility measures surged last week as the energy stock sector fell under the weight of tumbling crude oil prices. Energy weighed on the broader stock market, handing ...

Volatility Update: The Storm Before the Claus?
December 10, 2015

Volatility Update: The Storm Before the Claus?

Stock and option market volatility picked up in the early days of December after a notable lull in the second half of November. Anxiety levels are ticking higher along ...

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Volatility Update: Bracing for a 2016 Mood Spike?
December 3, 2015

Volatility Update: Bracing for a 2016 Mood Spike?

November wrapped up in mostly quiet fashion—typical for this time of year. The S&P 500 (SPX) logged a series of narrow daily trading ranges and, despite a bit of ...

Rethink Options: Aim for Income by Embracing Market Inaction
November 24, 2015

Rethink Options: Aim for Income by Embracing Market Inaction

Option income trading doesn’t have to involve a big stance on market direction. In fact, several option strategies bank on the fact that ...

Volatility Update: Rate Hike Anxiety Could Test Santa Rally
November 19, 2015

Volatility Update: Rate Hike Anxiety Could Test Santa Rally

The last month of the calendar year is sometimes a bullish stretch for the stock market, history has shown. In fact, a gain during the final week is often called a ...

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Volatility Update: Mood Measures Reflect Calm; Challenges Loom
November 12, 2015

Volatility Update: Mood Measures Reflect Calm; Challenges Loom

There are just 33 trading days until the stock roller coaster that was 2015 comes to an end. While the S&P 500 (SPX) has muscled back into positive territory for ...

Volatility Update: Upbeat Market May Drown Out Correlation Drop
November 5, 2015

Volatility Update: Upbeat Market May Drown Out Correlation Drop

Wall Street’s October was notable for a number of reasons. Obviously, a roughly 9% gain in the S&P 500 (SPX) is nothing to sneeze at.

Volatility Update: 40% Plunge for VIX = Market Vulnerability?
October 29, 2015

Volatility Update: 40% Plunge for VIX = Market Vulnerability?

The S&P 500 (SPX) staged a nearly 7% rally in the first three weeks of October—action that crushed several measures of stock and commodities market volatility.

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Option Calls Holders: Don’t Get Pinched By Ex-Dividend Risk
October 29, 2015

Option Calls Holders: Don’t Get Pinched By Ex-Dividend Risk

Dividend risk refers to the potential loss that traders face when they fail to exercise long calls on dividend-paying stocks. Collectively, traders who ...

Volatility Update: Fed Policy Decision Likely to Test Low VIX
October 22, 2015

Volatility Update: Fed Policy Decision Likely to Test Low VIX

It was about one year ago, on October 15, 2014, that stocks suffered steep losses and the CBOE Volatility Index (VIX) spiked to its highest level in years.

Volatility Update: Tug of Earnings Stress is Only Beginning
October 15, 2015

Volatility Update: Tug of Earnings Stress is Only Beginning

October isn’t yet living up to its reputation as a rocky month for Wall Street. In fact, the S&P 500 (SPX) has recovered year-to-date losses after a 4% rally that...

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Option Strategy Throw Down: Selling Strangles vs Iron Condors
October 8, 2015

Option Strategy Throw Down: Selling Strangles vs Iron Condors

High volatility can be a highly reactionary time for traders as their screens flash with big profit and loss swings. Many positions may have been put in place...

Volatility Update: Buckle Up for Potential Earnings-Driven Swings
October 8, 2015

Volatility Update: Buckle Up for Potential Earnings-Driven Swings

Earnings numbers could dictate levels of market volatility on Wall Street from now until at least mid-November. That means potentially little time to ...

Weather Turns Cool but Volatility Still Hot—Are You Covered?
October 1, 2015

Weather Turns Cool but Volatility Still Hot—Are You Covered?

October is known for color change, the risk of first frost, and the World Series chase. And, of course, October is a month when spooky things walk up and down ...

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Sophisticated Traders: Consider Futures Spreads to Manage Risk
September 24, 2015

Sophisticated Traders: Consider Futures Spreads to Manage Risk

The leverage and flexibility of the futures markets is a magnet for some traders. But large, directional moves are also in play. That leaves the unprepared at risk of ...

Volatility Update: A Short Story about Fat Tail Risk
September 24, 2015

Volatility Update: A Short Story about Fat Tail Risk

Fat tail risk? Yep, you heard that right. Tail risk refers to the possibility that an asset or portfolio moves outside of its typical, or expected, range.

Fine-Tuning: Option Adjustments for Losing Trades
September 17, 2015

Fine-Tuning: Option Adjustments for Losing Trades

Some trading lessons come fast and furious. The market isn’t always kind. Remember those option adjustments for potential winners that we introduced in part one?

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Volatility Update: Will Earnings Tip Toward Risk Aversion?
September 17, 2015

Volatility Update: Will Earnings Tip Toward Risk Aversion?

The final three-month stretch of 2015 could be a pivotal period on Wall Street, and it kicks off with a tough test buried in the next round of earnings reports. Yes, the ...

Fine-Tuning: Option Adjustments Aimed at Saving Winning Trades
September 10, 2015

Fine-Tuning: Option Adjustments Aimed at Saving Winning Trades

Have you ever kicked yourself for getting out of a trade too early? Or lamented your stubbornness for staying in too long? Everyone has. There are plenty of times ...

Volatility Update: Market Noise Stresses Perception vs. Reality
September 10, 2015

Volatility Update: Market Noise Stresses Perception vs. Reality

Ever had a nightmare so palpable that when you woke up, it took a few head shakes to separate fantasy from reality? On Wall Street, the fear of nightmare market ...

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Option Strategy: Slay Volatility with Weekly Double Calendars
September 9, 2015

Option Strategy: Slay Volatility with Weekly Double Calendars

Indulge me in a little role play. Setting: Low-volatility stock market. Scene: Experienced option trader sells iron condors. Inventory is plentiful. The underlying drops a ...

Volatility Update: High-Wire Act; Plus, Verticals for Direction Play
September 3, 2015

Volatility Update: High-Wire Act; Plus, Verticals for Direction Play

The U.S. Labor Day holiday celebrates American workers as well as their social and economic achievements. In a few days, market makers ...

Volatility Update: Record-Book Rewrite; Time for Iron Condors?
August 27, 2015

Volatility Update: Record-Book Rewrite; Time for Iron Condors?

An increase in investor risk perceptions is palpable. As the S&P 500 (SPX) suffered a four-day, 6.3% decline through the end of last week, trading volumes ...

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Volatility Update: Select Summer Sizzle; Plus, Check Your Calendars
August 20, 2015

Volatility Update: Select Summer Sizzle; Plus, Check Your Calendars

Sure, the S&P 500 (SPX) hasn’t made much headway in the past seven months and, just last week, was sitting unchanged year to date. But the aimless meanderings ...

Volatility Update: Weekly Options on VIX; Plus Low-Vol Calendars
August 13, 2015

Volatility Update: Weekly Options on VIX; Plus Low-Vol Calendars

The Chicago Board Options Exchange (CBOE) on October 8 will launch weekly options on the CBOE Volatility Index (VIX). It’s a new spin on ...

Trying Out Futures Options? Here are Key Differences vs. Equities
August 6, 2015

Trying Out Futures Options? Here are Key Differences vs. Equities

If you’re considering new ways to take advantage of market movement, futures options can provide your futures trading with much of the same flexibility and ...

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Rolling: The Art and Science of Extending a Trade's Duration
August 3, 2015

Rolling: The Art and Science of Extending a Trade's Duration

Expiration is approaching and you have an options position—let’s say a covered call or a long-dated calendar spread. So, you have a decision ...

Advanced Trading: Choosing Your Iron Condor Strike Price
July 23, 2015

Advanced Trading: Choosing Your Iron Condor Strike Price

Iron condors are advanced option trades designed as an income strategy. The objective is straightforward once you determine your desired strike price. But finding ...

Choosing Credit Spreads vs. Debit Spreads: Let Volatility Decide
July 16, 2015

Choosing Credit Spreads vs. Debit Spreads: Let Volatility Decide

Vertical spreads are among the first strategies that option traders learn because they’re relatively straightforward and have defined risk profiles. Vertical ...

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Short-Sighted on Purpose: Options to Hedge Jobs Report
July 2, 2015

Short-Sighted on Purpose: Options to Hedge Jobs Report

Some of the stock market’s biggest moves come after economic reports. One fan favorite is the non-farm payrolls and unemployment report, which is issued ...

Feeling Stock Market Sticker Shock? Options Might Help
June 25, 2015

Feeling Stock Market Sticker Shock? Options Might Help

High-priced stocks are more common now that stock splits have lost the popularity they boasted a few years ago. Examples are rampant among some of the most ...

Embrace the Quiet: Consider Low-Volatility Option Trades
June 18, 2015

Embrace the Quiet: Consider Low-Volatility Option Trades

Sometimes the road less traveled offers the best footing. The same might be said for the thinly trod, quiet opportunities that may be lurking in low-volatility ...

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All the Right Option Moves: Take the Improv Out of Earnings
June 11, 2015

All the Right Option Moves: Take the Improv Out of Earnings

The Lindy Hop, the Running Man, and the Macarena are all child’s play to an option trader who likes to stay a few steps ahead of the market, right? When it comes to ...

Keep Your Pants On: From a Naked Put Sale to a Call Purchase
June 4, 2015

Keep Your Pants On: From a Naked Put Sale to a Call Purchase

The naked put sale: It’s a mainstay of many option-trading veterans who are bullish, or at least not bearish and really don’t think a stock will move much lower ...

How to Sniff Out the Options Opportunity Under Your Nose
May 28, 2015

How to Sniff Out the Options Opportunity Under Your Nose

Looking for trade ideas can be time-consuming for option traders. With so many optionable stocks available, you can spend hours trying to find the right ...

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Size Up Option Straddles for a Reading on Earnings Volatility
May 21, 2015

Size Up Option Straddles for a Reading on Earnings Volatility

Stock traders can use options pricing to sniff out how much an underlying stock might move around the company’s earnings releases—often shake-rattle ...

Far Out: Low Volatility Can Put Options Opps on the Horizon
May 14, 2015

Far Out: Low Volatility Can Put Options Opps on the Horizon

When most people think of extreme conditions in the stock market, they imagine sharp sell-offs and high volatility. But those aren’t the only possible extremes ...

Swim in the Deep End with Out-of-the-Money Options
May 14, 2015

Swim in the Deep End with Out-of-the-Money Options

Higher potential stock returns and lower volatility are swimming in the same pool. However, selling out-of-the-money options has the potential to put them in ...

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How “Out” is Out of the Money? Options for Fear and Volatility
April 30, 2015

How “Out” is Out of the Money? Options for Fear and Volatility

During extreme market conditions, put and call strikes for some stocks, commodities, and indices can trade at eye-opening levels—prices that seem highly unlikely ...

Crude Reality: Time to Think Longer-Term Options for Oil?
April 30, 2015

Crude Reality: Time to Think Longer-Term Options for Oil?

If you’ve been an owner of crude oil contracts for a while now, this sideways range between $42 and $55 since the start of the year has got to be welcome relief.

Crowded in Here? Options Market Finds Room for More Exchanges
April 23, 2015

Crowded in Here? Options Market Finds Room for More Exchanges

Nearly a dozen options exchanges—and counting—are elbowing for space in this growing market. As participants continue to apply, even the word ...

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Options Aren’t Dangerous, People Are: Debunking Four Myths
April 23, 2015

Options Aren’t Dangerous, People Are: Debunking Four Myths

Options are often misunderstood. According to the infomercials on Saturday morning television, there’s even a secret formula that Wall Street doesn’t want ...

Can't Commit to Selling? Think Short Vertical Option Spread
April 16, 2015

Can't Commit to Selling? Think Short Vertical Option Spread

One of the primary advantages of option trading is the chance to define and potentially limit risk right up front. One way to do that is with short vertical spreads.

Exploring Options: An Introduction to Multipliers
April 9, 2015

Exploring Options: An Introduction to Multipliers

Venturing into the options market for the first time might feel a bit like traveling to a foreign country without a translator. The terminology is sometimes so odd ...

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Options Liquidity: Why It Matters, Where to Find It
March 12, 2015

Options Liquidity: Why It Matters, Where to Find It

Let’s face it: investing is a bit of a popularity contest. Just as fashions come and go, investors tend to favor certain stocks, bonds, or futures contracts ...

Author James Cordier Offers His ABCs for Selling Options
March 5, 2015

Author James Cordier Offers His ABCs for Selling Options

Many investors have a basic understanding of buying puts and calls, but selling options is different, says Cordier.

Options Strategy: Golden Opportunity in Metal Market Volatility
February 27, 2015

Options Strategy: Golden Opportunity in Metal Market Volatility

The gold market's volatility presents opportunities to play support or resistance, or sell premium.

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Bye-Bye, Open Outcry. In Options, Human Touch Still Matters
February 19, 2015

Bye-Bye, Open Outcry. In Options, Human Touch Still Matters

Most trading is now conducted over computer screens. Yet, there’s still a role for real people on the trading floor.

Options Strategy: Extreme Volatility and Income
February 12, 2015

Options Strategy: Extreme Volatility and Income

The first month of 2015 witnessed an unusually high number of wide swings in the VIX. For options traders, this presents opportunities for short-term income...

Option Strategies to Help Protect Your Portfolio
February 5, 2015

Option Strategies to Help Protect Your Portfolio

Prophets predicting the end of mankind have been around since the beginning of, well, mankind ...

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Extreme Skew: What Options Traders Need to Know
February 5, 2015

Extreme Skew: What Options Traders Need to Know

In light of dramatic market slumps over recent decades, there’s a permanent demand for “plunge protection” that option traders call the “skew.”

Oil Rout Over, Options Traders? Low Doesn’t Mean “Cheap”
January 29, 2015

Oil Rout Over, Options Traders? Low Doesn’t Mean “Cheap”

It's tempting to call a bottom in oil prices, given the recent rout. But it's best to be careful ...

Options Insight: Put-Call Ratio, Bulls & Bears in Steel Cage Match
January 22, 2015

Options Insight: Put-Call Ratio, Bulls & Bears in Steel Cage Match

Worried the crowd is leaning too bullish or bearish? Try a favorite tool among many old-timers: the put-call ratio.

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Options Strategy: Last Year’s Volatility Lessons, 2015 Edition
January 15, 2015

Options Strategy: Last Year’s Volatility Lessons, 2015 Edition

The final days of 2014 foreshadowed key items to watch for the next few months of 2015: equity market volatility, oil market volatility, and volatility...

Options Strategy: A Par-3 Course on Puts and Calls
January 7, 2015

Options Strategy: A Par-3 Course on Puts and Calls

Drive for show, putt for dough—so goes a golfer’s mantra. It's a question of location and accuracy versus distance. A similar philosophy can be applied to the options markets.

Options Strategy: Planning For Panics and Volatility Spikes
December 30, 2014

Options Strategy: Planning For Panics and Volatility Spikes

How quickly we forget. It was just a couple months ago that the sky was falling – or so we thought – amid headlines noting “gut-wrenching” drops of 2% at the...

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Options Strategy: Escalator Still Going Up? Watch Volatility
December 30, 2014

Options Strategy: Escalator Still Going Up? Watch Volatility

Quite a bit of financial news recently has been focused on volatility (aka vol, in the vernacular of market types). Low vol, or the absence of it altogether, seemed...

Options: Collar Me Impressed
November 1, 2014

Options: Collar Me Impressed

It’s long been said that life is a series of trade-offs and you can’t always get what you want. Think of your investing strategy in similar terms. When it comes to...

Options: Got Ya Covered
October 1, 2014

Options: Got Ya Covered

The covered call is one of the most straightforward and widely used options-based strategies for investors aiming to diversify portfolios and enhance returns. Still...

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Options: A Marriage of Necessity
September 1, 2014

Options: A Marriage of Necessity

Portfolio diversification is typically explained as not putting all your eggs into one basket. The problem is, too often those “eggs” roll in the same direction, especially...

Out-of-the-Money Spreads: Potentially Expand Profit Options
January 13, 2014

Out-of-the-Money Spreads: Potentially Expand Profit Options

For options speculators with less of an appetite for risk, these vertical spread strategies may offer up a savory solution.

Options Lab Part 4: <br>Savvy Strategies to Hug a Bear
December 1, 2013

Options Lab Part 4:
Savvy Strategies to Hug a Bear

You don’t have to run from down markets. With proactive options, stand your ground and wrestle a few bears.

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Options Lab Part 3: Trading Hunches with Bullish Strategies
November 1, 2013

Options Lab Part 3: Trading Hunches with Bullish Strategies

Basic options moves can help you pay for that stock hunch. As you "Lab" readers know by now, options are incredibly flexible, customizable instruments...

When the Mystery Is Gone: Trade Like an Options Market Maker
October 13, 2013

When the Mystery Is Gone: Trade Like an Options Market Maker

Nah. Options market makers don’t hold the secret formula. They’re just doing their job. In The Wizard of Oz, Dorothy and her friends go to see the all-powerful...

Options Lab Part 2: Income Strategy for the Faint of Heart
October 1, 2013

Options Lab Part 2: Income Strategy for the Faint of Heart

This round, we’ll drill down on selling call options to potentially generate income on the stocks you hold. Selling call options using the stocks in your portfolio...

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Options Lab Part 1: <br>Why Options? Why Not?
September 1, 2013

Options Lab Part 1:
Why Options? Why Not?

Traders use options to try to earn the highest return possible, in the shortest time, using the least capital.

Did you Really Go There? High-Probability Options Trading
June 5, 2013

Did you Really Go There? High-Probability Options Trading

What if you focused on a price you think a stock won’t hit? It might seem counterintuitive until you see the numbers. When we were kids, our birthday was...

Trading on Time Decay: How to Approach Calendar Spreads
March 5, 2013

Trading on Time Decay: How to Approach Calendar Spreads

This installment in our options-spread series tackles turning time decay into potential profit. If you think there’s little trading opportunity in range-bound...

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Stretch Your Options Muscle with Vertical Spreads
December 24, 2012

Stretch Your Options Muscle with Vertical Spreads

Comfortable with calls and puts? Then maybe it’s time to bring on the spreads. I’ll admit it. Spreads are more complex than a single put or call purchase. But, they’re...

Option Trading 101: Looking Under the Hood of Covered Calls
July 15, 2012

Option Trading 101: Looking Under the Hood of Covered Calls

We shed some light on 3 features of this basic options strategy: selling stock, collecting dividends, and limiting taxes. What draws investors to a covered call options...

Decode the Greeks: Ancient Alphabet Helps You Trade Options
July 11, 2012

Decode the Greeks: Ancient Alphabet Helps You Trade Options

The greeks can help measure how much an option might gain or lose—and help you decide how much risk you’re willing to take. If you’ve been trading options, you’ve...

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Discovering LEAPS: Option Strategies for the Long-Term
March 15, 2012

Discovering LEAPS: Option Strategies for the Long-Term

Despite their short-term allure, you can use certain options to create longer-term mini “portfolios” within a portfolio. And there could be beneficial tax...

Big Eggs in Your Basket? How to Protect Your Stocks with Collars
January 15, 2012

Big Eggs in Your Basket? How to Protect Your Stocks with Collars

With more than a decade of lackluster performance behind us, some may be considering the options market as they attempt to charge up their stock portfolios.

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