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Options trading: The Protected Covered Call Ratio

Michael Thomsett

The ratio write consists of writing a combination of covered and uncovered calls. The uncovered portion is at risk, but the strategy is not as high-risk as just writing uncovered calls. The combination of time decay and implied volatility makes a well-timed ratio write a safe strategy, assuming all of the right elements are in place. For those seeking more protection than what is provided by time decay, you can protected the uncovered portion with a higher-strike long call.

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By Michael C. ThomsettJanuary 19, 2012
Topics: Finance & Investing

Options Trading: Four Techniques to Reduce Risk in Covered Call Ratio Writing

Michael Thomsett

The “ratio write” is a variation of the well-known covered call. It increases market risk but, properly put together, those risks are manageable for moderate investors and in some formations, even for conservatives. If you like the covered call, you might also like the ratio write.

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By Michael C. ThomsettJanuary 12, 2012
Topics: Finance & Investing

Candlesticks: Inside or Outside

Michael Thomsett

Among the complex patterns you see in candlesticks -- involving three sessions -- two of the more subtle are the inside and outside formations. These consist of two parts: inside patterns begin with a two-session harami and a third decisive day; outside patterns start with a two-session engulfing formation and then a third, decisive day.

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By Michael C. ThomsettJanuary 5, 2012
Topics: Finance & Investing

Options Trading: 7 Straddles Every Trader Needs

Michael Thomsett

The straddle is an options strategy that in its most basic form involves opening options on the same strike. However, there are many variations to this strategy and some straddles resemble spreads as hybrids. It helps to clarify the strategy by defining the 7 basic straddles every trader needs to know -- not only in terms of how they are constructed, but also for risk levels.

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By Michael C. ThomsettDecember 29, 2011
Topics: Finance & Investing

Options Trading: A Christmas Visit

Michael Thomsett

Is there a Santa Claus in the optinos market?

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Options Trading: Five Reasons to Use Synthetic Positions for Swing Trading

Michael Thomsett

Synthetic stock -- created with options -- vastly reduces swing trading risk. It makes more sense to create synthetics than either of the two alternatives (buying/selling stock or swing trading with options alone).

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By Michael C. ThomsettDecember 15, 2011
Topics: Finance & Investing

Options Trading: Synthetic Short Sales

Michael Thomsett

Shorting stock is a high-risk strategy worth avoiding for most traders. It requires borrowing stock from your brokerage firm, selling it, and hoping the price falls. You have to maintain margin and pay interest on the borrowed stock; and if the stock price rises, margin requirements grow and you could end up losing. You can duplicate the potential profits without all of that risk, by creating a synthetic short sale with options.

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By Michael C. ThomsettDecember 8, 2011
Topics: Finance & Investing

Options Trading: Three Options-based Tax Planning Ideas for Carryover Losses

Michael Thomsett

After the disastrous markets of the last two years, many investors and traders find themselves with huge carryover capital losses. Under current rules, you can deduct only $3,000 maximum per year, meaning that the excess could last for many years into the future. However, this situation presents opportunities involving options. Three goods ideas are among these opportunities.

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By Michael C. ThomsettNovember 30, 2011
Topics: Finance & Investing

Options trading: The Protected Covered Call Ratio

Michael Thomsett

The ratio write consists of writing a combination of covered and uncovered calls. The uncovered portion is at risk, but the strategy is not as high-risk as just writing uncovered calls. The combination of time decay and implied volatility makes a well-timed ratio write a safe strategy, assuming all of the right elements are in place. For those seeking more protection than what is provided by time decay, you can protected the uncovered portion with a higher-strike long call.

Continue reading...

By Michael C. ThomsettNovember 23, 2011
Topics: Finance & Investing

Options trading: Four Ways to Reduce Covered Call Ratio Risks

Michael Thomsett

The ratio write is a variation of the covered call. It increases market risk but, properly structured, those risks are manageable for moderate investors and in some formations, even for conservatives. If you like the covered call, you will probably also like the ratio write.

Continue reading...

By Michael C. ThomsettNovember 17, 2011
Topics: Finance & Investing

Candlestick Charting - thrusting lines and separating lines

Michael Thomsett

Candlestick formations often are described with aggressive imagery. For example, the thrusting lines and separating lines are two kinds of double-session candlestick formations that foreshadow trend reversal. The thrusting lines is especially strong because it consists of two long candlesticks with a flip in the direction. The separating lines formation has a significant but invisible gap, making it equally strong as a sign of coming price reversal.

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By Michael C. ThomsettNovember 10, 2011
Topics: Finance & Investing

Candlestick Charting - meeting and piercing lines

Michael Thomsett

Many candlestick formations have graphic and descriptive names. This helps to keep the dozens of candlestick indicators clear in your mind. Among these are several two-session patterns including the meeting lines and piercing lines patterns. These serve as great confirmation signals at the end of a trend, signaling potential reversal. For day traders and swing traders, these kinds of subtle for informative signals are quite valuable.

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By Michael C. ThomsettNovember 3, 2011
Topics: Finance & Investing

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