Trading Articles

An Effective Strategic Option Trading Plan Requires Flexibility 

Dan Passarelli, Market Taker Mentoring, Inc.

Sometimes the best move in executing your strategic option trading plan requires you to change course.

In battle, the generals never order an army to retreat. They simply order a "strategic withdrawal" of troops and resources, based on new information and conditions.

Semantic silliness, perhaps, but a valid strategy. [more]

The Power of Leverage: Purchasing Options Verses Owning Shares of Stock

Ross Barnett Terry, Contributor

Why would anyone want to risk capital trading derivatives in lieu of the actual physical underlying vehicle [option trading, option trading tips, Trade commentary, Commentary on Options]  they are based on? The advantages are based on the potential to leverage available capital and better position one’s self for greater profit with greatly reduced risk.

Buying one standardized option affords the owner a veritable safety net on the price of the underlying. The strike price coupled with the cost of the options...[more]

When Should You Take Advantage of the Early Exercise Right?

Dave Rodgers, Contributor

The early exercise feature for equity options contain fundamental changes in risk that need to be [options trading training, learn trading online, option trading, Trade commentary]  evaluated prior to making a decision. The most common reason to exercise a call early is to capture a dividend. By exercising a call option the day before a stock goes ex-dividend the option holder take delivery of the stock and captures said dividend. This is can be an easy decision if options are deep in the money but how do you evaluate  ...[more]

Playing Momentum Names in a Frothy Market

Joe Cusick, Vice President of Wealth and Asset Management at MoneyBlock

With markets just off of all-time highs, traders may find themselves in one of two camps – either they are [Trading Education, Trading Articles]  trying to convince themselves to stay properly valued in the market, or they want exposure to the high-flying, high-growth, momentum stocks, likeNetflix, Facebook or Tesla.

Because these stocks are also at frothy valuations, buying a full position may eat up an outsized portion of a trader’s portfolio – exposing them to high volatility and risk. However, traders can capture the same upside potential as outright stock ownership, while ... [more]

Correlations and Trade Timing

Craig Garbie, Market Taker Mentoring, Inc.

Capital markets and commodities are tied together through capital flows. Money moves in and out of asset classes in somewhat predictable ways. Part of the trading game involves figuring out what the current relationships consist of. Another part of trading is figuring out when those relationships break down or change.

There are many ways to track these correlations or non-correlations. Some traders or firms spend large sums of money tracking the way markets move [more]

Learn Options Trading with a Paper Trading Account First 

Dan Passarelli, Market Taker Mentoring, Inc.

At first glance, the work to learn options trading may be daunting to the individual investor. But you needn't worry. No one is a professional trader when they first start out. Everyone is inexperienced and needs to learn how to trade before they can master the market. The psychological impact of the fear of risk of loss can make the learning path particularly intimidating. But you can learn options trading without risk of loss. Quite the contrary.

In fact, you can learn options trading, developing and testing your own trading strategies in a real world environment [more]

Synthetics in a Low Volatility Environment

Ross Barnett Terry, Contributor

In a low volatility environment, creating synthetic call and put positions offers traders creative flexibility. Synthetic positions can allow traders a position in the underlying stock (long or short) with protection.  Synthetic long calls or puts afford traders the luxury of cheap protection while creating unlimited upside potential on calls: with the only limitation to the downside for puts is the zero mark.

A synthetic call is created when the trader buys stock and purchases a put contract for downside protection (the position can also be legged). A synthetic put is created by selling shares of stock while simultaneously purchasing a call for [more]