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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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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...

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 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...

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