Trading options means thinking (and acting) with the inner quant brain. Once you get into the mindset, that analytical thinking might show up as you assess other investments—and other life decisions.
When trading options, it can be helpful to assess the probabilities before making a decision to enter a trade.
Are those open positions in your account keeping you from sleep? Or do you need to pop in and do some premarket trading? Here are things that keep traders up at night.
Learn how the Risk Profile tool in the thinkorswim platform can help options traders visualize different scenarios and make trading decisions a little simpler.
Synthetics are the building blocks of the options trading world. Consider getting to know them, because you might be able to incorporate them as part of an overall options trading strategy.
With many options trading strategies to choose from, how do you find the right one? Consider a three-step process to help with your decision.
Volatility and options greeks can be perplexing even to the pros. But if you focus on a few data points, you may gain more insight into the options market.
Trying to decide which options strategy, strike price, or expiration date to trade? If capital efficiency is one of your criteria, consider return on capital (ROC).
Options straddles and strangles are a way for advanced traders to get long or short exposure to volatility (vega), but the volatility needs to be weighted against time decay (theta). Here are the basics.
Do the headwinds of time decay turn you off from buying single options on volatile stocks? Find out how you may be able to turn the headwinds into tailwinds by trading those stock moves.
We often hear about traders selling options. But why (or when) might a trader buy options?
Traders can use the beta-weighting tool on the thinkorswim® platform to view the overall risk of all their positions as a whole instead of looking at risks of individual assets.
Learn how options delta calculations and the options Probability ITM (in the money) feature can help gauge the risk in an options position.
Short selling, short interest, naked short selling are among terms some investors had scarcely paid attention to. But a flurry of apparent short squeezes in 2021 called attention to shorting. Here are some of the top questions answered.
Learn how weekly stock options can help you target your exposure to market events such as earnings releases or economic events.
When a stock suddenly enters a hyperbolic rally without clear fundamental reasons, it could be a classic short squeeze. And when it involves options, a so-called 'gamma squeeze' can exacerbate the moves—up and down.
When trading options you will need to consider price, time, and volatility at the same time. That means understanding the interplay of a few options greeks and how they play off one another.
Implied volatility and vega both measure volatility but they have some differences. Here’s some insight from an education coach at TD Ameritrade.
The value of an option tends to decay as expiration approaches. Learn about three options trading strategies that target time decay (“theta”).
Keep an eye on the “big fish” that are trading with the TD Ameritrade trade scanner, Trade Flash. Learn what the professionals are trading.
Vertical spreads are fairly versatile when taking a directional stance. But what if you're stuck in a range-bound market? Consider the iron condor.
If an options position isn’t going the way you thought it would, you might consider rolling it using the thinkorswim Strategy Roller®. It could take out some of the guesswork for when and how to roll options positions.
Arbitrage helps keep financial markets efficient, often with the aid of complex algorithms, pricing models, and lots of capital. Here’s a look at three types—index arbitrage, volatility arbitrage, and bond arbitrage.
When a relationship between a pair of stocks, futures, or options gets out of line, pairs trading may offer potential opportunities. Here’s how some investors choose among many combinations of bullish and bearish positions.
With Micro E-mini options on futures, option traders can participate in the futures market with less capital and with streamlined risk management.
How do you know when a consolidating market is about to trend? Consider using the TTM Squeeze indicator to help you decide if a market is going to switch.
S&P 500 Index futures can provide investors and traders with exposure to the individual companies that make up the S&P 500 Index. But trading futures is different from trading equities. Understand how they work and how you can trade them.
Apple announced a 4-for-1 stock split effective August 31, 2020. Find out what a stock split means for your outstanding stock and options positions from TD Ameritrade.
When market volatility happens, immediate access is key for traders. Learn how new tools on the thinkorswim Mobile app from TD Ameritrade can let you chart, analyze, trade, and perform portfolio analysis on the go.
Selling covered calls is a neutral to bullish trading strategy that can help you make money if the stock price doesn't move.
The effect of interest rates on options prices—rho—is sometimes considered the forgotten greek. But interest rates matter, especially when deciding when to exercise options positions.
Even your best trading plans can change because options greeks such as delta, theta, and vega are constantly changing. if you have a portfolio with many positions, managing trades can be difficult. These guidelines can help keep you on track.
When your stock options trading strategies aren't working as expected, it could mean you have to revisit the strategy, change your trade position sizes, or tweak a few strategy parameters. Here are some ways to fix the problem.
As stock options get closer to their expiration date, options prices can change quickly. Understanding options gamma could help you manage your stock options positions better.
Delta contains information that matters most when you are looking for a profit. But there is more to delta.
If the markets are crashing, do you close your positions or do you take advantage of opportunities? Whether you are a stock investor, volatility trader, or speculator, there may be a strategy worth pursuing.
Pairs trading is a trading strategy that involves two stocks in the same sector. There are different ways to create a pairs trade, whether you are pairing two stocks, stocks and ETFs, stocks and options, or options and options.
Learn how futures contracts can help experienced traders and investors manage portfolio risk with a beta-weighted hedging strategy.
Thinking of futures as just another asset class, let's start with the basics: how to use capital efficiently, speculate, and hedge with futures.
Learn how a long calendar spread can be effective in a low-volatility trading environment.
Useful thinkorswim tools you can use are the Heat Map, volatility calculation and Mobile Trader. Find out which stocks are moving, different ways to calculate volatility and share charts on Mobile Trader.
Big changes in stock prices can happen anytime, which is why option traders need a risk management strategy in place to withstand persistent rallies and potentially profit if and when a selloff happens.
Calendars and butterfly strategies may look similar but they have their differences. Why would you choose one over the other?
Traders sometimes talk glowingly about thrilling options trading strategies without considering the risks. There are some alternative strategies such as short out-of-the-money verticals that you could consider to better manage your risks.
You may be able to trade options in an IRA. Learn more about IRA options trading in this article.
Losses can creep up on you quickly. As time passes gamma could grow more than deltas, which is why you should keep an eye on gamma and delta. Find out about gamma scalping and managing a position’s gamma.
The sensitivity of option prices to changes in time, volatility, and the price of the underlying are commonly referred to as “Greeks.” As you prepare for earnings season, here's an overview.
Making profitable adjustments to your stock portfolio can be tough. Learn more about three important metrics you can use to manage your investments.
Options on futures are quite similar to their equity option cousins, but a few differences do exist.
Are you getting the most out of your iron condor stock trades? Double diagonals could help you do just that. Learn more about options trading.
Learn how to dynamically hedge changes in an option position’s delta in a process known as “gamma scalping.”
Some option traders dynamically hedge positions, but doing so requires a basic understanding of synthetic positions and put-call parity.
Learn about gamma, which some traders consider the positive side of negative theta.
Learn how to structure a trade designed for uncapped profit potential.
If you have a directional view on a stock price, buying a vertical spread might be for you. But deciding on strikes and strike widths requires some thought.
Some economic indicators create more noise than others—learn to create trading strategies based on how markets might react to economic data.
Instead of hyper-focusing on one position at a time, look at your entire portfolio and try to figure out a better hedge—here's some tools and tweaks to help.
Looking for opportunities amid a low volatility trading environment? Learn about calendar spreads.
Learn how synthetic option positions can be made by certain combinations of calls, puts and the underlying stock.
The size of your position can be a tough choice, and using formulas can help, but don't let theory fool you—stick to what's relevant and what you can control.
Part of our series on portfolio margin, the greeks—theoretical metrics describing how things like stock price, time, and volatility can impact option price.
Managing risk variables you didn’t know you could control—lessons learned in 2016 about direction, time, and vol, and what mistakes to avoid this year.
Learn how to increase the flexibility of your existing options strategies with weeklys: options that move quickly and live for about a week.
Stocks can be expensive, no doubt, but that doesn’t necessarily mean you can’t participate in rallies. Learn how call options can act as a substitute for stoc
Options collars offer an affordable stock hedge with reasonable upside, which can help you build a larger stock position with much less money.
The greeks option traders use are loved by many, but understood by few. Know the false “truths” about option greeks to better manage your trades.
Sometimes the options market can signal when it’s time to adjust a trade. But how long should options traders stick with an adjustment plan?
Delta is much more than a one-trick pony. Understanding some other tidbits of info delta provides can help a trader select option strikes.
Learn how synthetic options strategies can help traders potentially lower transaction costs, improve price discovery, and more efficiently use capital.
Want to participate in the potential upside of a stock while using only a fraction of the buying power? Here’s how to do it with a long-dated call option.
Industry data shows options trading numbers are growing. But many stock traders remain hungry for options trading basics. Here’s how to get started.
A trader's job can be easier than an average mutual fund manager's—A few reasons the playing field for traders is more than leveled.
There’s a way to generate “income” from dead investments, even if they aren’t optionable—how to hedge mutual funds with options.
Income-focused option trades succeed when the market doesn’t move that much. Learn how to recognize income opportunity.
Long call option traders avoid ex-dividend stock inequality by exercising the call and becoming a shareholder of record. Just watch timing and new stock risk.
Volatility’s tendency to level out after a spike can present strategy opportunities, especially selling strategies found with strangles and iron condors.
Consider option delta as one way to narrow the mathematical range when choosing an iron condor strike price.
Today’s obsession with the “short term” has created a new paradigm for “long-term” investing. It might help to put a trading spin on the long-term view.
Consider straddle/strangle swaps to better position for earnings. Use option strategies and charting tools to help navigate these vexing volatility events.
Out-of-the-money call options may be hard to trade when volatility is low, but there are good opportunities for cheaper options trades during market extremes.
Wide bid-to-ask spreads in options are part of the deal during volatile markets. The question to ask is, Why? Blame it on the market makers.
To gauge a stock trend, it's all in the charts. But what about its options? You may not be trading options, but ignore them, and you may be missing the bigger picture.
Traders often think of options in small denominations because that’s how the bid/ask quotes appear. But beginning investors in particular must remember to use a 100x multiplier to help determine correct position sizes.
Basic options strategies can help investors protect portfolios against inevitable market volatility and market crashes.
With IRAs, plenty of stop signs tell you what you can and can’t do with options. Are there workarounds?
I was happy when CBOE VIX futures were added to TD Ameritrade’s thinkorswim® platform. So, it’s not running with the bulls in Pamplona. But I’m a trader...
Vertical spreads and calendar spreads are designed to profit from a trend or the passage of time. Combining them can open up a whole new world for traders.
Buying calls and puts is great when the stars align. For the spread trader, anything is possible. And the vertical spread is all where it begins.
Option prices can speak louder about the state of a stock than most analysts. You just have to listen and understand what they're trying to say.
Options greeks can help measure how much an option might gain or lose—and help you decide how much risk you’re willing to take.
We know stocks move up and down. But much of the time, they're range-bound. The calendar spread takes advantage of that at a fraction of the stock price.
Whatever your time frame, if you’re hedging with options here's a few tricks about how to size things up.
A guide to weeklys: Volume is swelling, and traders are using weekly options to speculate on very short-term moves, or simply as a hedge.
Before buying or selling call and put options, check the alternatives. The vertical spread is a simple solution to the problems short naked options pose.
Diversification approaches for active traders to hedge non-systematic risk across spreads, including directional risk and time and vol.
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Content intended for educational/informational purposes only. Not investment advice, or a recommendation of any security, strategy, or account type.
Be sure to understand all risks involved with each strategy, including commission costs, before attempting to place any trade. Clients must consider all relevant risk factors, including their own personal financial situations, before trading.
Market volatility, volume, and system availability may delay account access and trade executions.
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