I invite everyone to check out my options books ... these are written to provide useful education and strategic information on a range of strategies.
The curiously-named "iron butterfly" is a complex strategy offering limited losses and limited profits.
It is an expanded version of the basic butterfly (two separate spreads offsetting one another). The "iron" version is a combined straddle consisting of four options instead of the butterfly's three.
How do you calculate returns from writing covered calls? At first glance, this seems like an easy question; return is return, right? But in fact, calculating return can be done in several different ways.
Even the most experienced option trader can benefit with an occasional reminder: The most basic strategies often are the best, all depending on the situation and what you hope to accomplish with the option position.
The president has identified "speculation" as the cause for high oil prices. But as an economic observation (and not a political one) I challenge anyone to explain how that works.
Anyone interested in trading options has to be qualified by their broker to trade. This demands a separate options agreement in which you have to state your experience and knowledge.
The call bear spread is a two-part strategy best used when you believe the underlying price will decline. It consists of a long call plus a lower-strike short call.
Options are odd devices in many ways; but one potential risk many traders are completely unaware of is the tax risk involved. Taxation for options is complicated and illogical in many respects. Know where you stand before closing out positions to avoid having an unpleasant tax surprise.
The two major synthetics -- long stock and short stock -- involve options but mirror price movement in 100 shares of stock. These may reduce market risks while setting up positions with zero cost - the best leverage of all.
Options traders are always hungry for new, valuable sources for information. If you are a conservative investor who wants to learn how to create appropriate trades within your risk profile, and how to use options as a portfolio management tool, here are four suggestions for you:
Market risk exists whether you own shares of stock or use options to anticipate market-wide movement. In that sense, options are not higher-risk than stocks. In fact, because one option lets you control 100 shares of stock, they are far less risky. If you can benefit from stock price movement for about 5% of the cost of those shares, your risks are lower.
Most “swing traders” -- those moving in and out of positions in two- to five-day short-term price swings -- use shares of stock for their strategy. But options can vastly expand your swing trading program with less risk and greater leverage. Here are five ways this can work for you.
Other Things You Might Like
- Inner Voice of Trading, The: Eliminate the Noise, and Profit from the Strategies That Are Right for You (paperback)