Choosing between in-the-money (ITM) vs. out-of-the-money (OTM) vertical spreads? Learn how to factor in liquidity and price to make an informed decision.
The Cboe Volatility Index (VIX) is often considered to be a gauge of investor uncertainty. Learn how to trade the VIX with tips found in this guide.
Understanding the difference between a debit spread versus a credit spread option can help you decide which one to use in a vertical spread strategy.
The calendar spread strategy can be effective during sideways markets and periods of low volatility. Learn how to set up and roll a calendar as well as the benefits and risks of this options strategy.
Explore rolling options “losers” to extend duration for covered calls, naked calls or puts, one side of a short strangle, and select other trades.
Are you planning on trading options? Here’s what traders and investors should know about the difference between the bid versus the ask spread, order types, and slippage.
Corporate actions such as stock splits, special dividends, mergers and acquisitions are quite common, but what happens with unexpired options?
There are different ways to use options as a hedging strategy in your portfolio. Learn how these strategies can offer some protection for most stock portfolios.
Trading and selling options on expiration day requires an understanding of the process. Here's an overview of things you should know about options expiration.
Learn about options exercise and options assignment before taking a position, not afterward. This guide can help you navigate the dynamics of options expiration.
Selling covered calls is a strategy that can help you potentially make money if the stock price doesn't move. Consider this options strategy for your portfolio.
The value of an option tends to decay as expiration approaches. Discover what is theta in options, and learn about three options trading strategies that target time decay, also known as theta decay.
Options volatility is a popular topic among traders. Looking at volatility from a trading capital, past activity, or probability lens may give you better insight.
You have a losing trade but don’t want to sell. Learn about rolling a losing call option and other strategies to save a losing trade.
If options and other derivatives are a part of your portfolio, you should learn about the nuances of taxes on options trading. Here are five tax options to consider when tax planning.
If you’re thinking of legging in to options spread strategies, know the pros and cons before diving in.
Some option traders stick to selling strategies only, but buying calls and puts have their place too. You just have to remember these five tips.
Suppose you buy a call option at a given strike price. Now what? The Theoretical Price tool on thinkorswim can help you assess what it could mean for your trade if the underlying stock reaches your price target by a certain date, if it goes the other way, if implied volatility changes, and more.
When stock prices keep going up, at some point they tend to fall. But you don’t know when. If you’re trading stocks that have gone up in price, you might want to consider options strategies such as time strangles, back/ratio spreads, and rolling collars as a potential protective measure.
A long butterfly spread is typically initiated with a debit. Learn how to turn it into a broken wing butterfly by adjusting one of the wings of the spread.
Considering options trading? Start with the basics of puts and calls and how to create single-leg strategies with call and put options.
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.
Learn about the different choices you have if your cash-secured put option goes in the money and when it makes sense to accumulate, liquidate, or roll your position.
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.
Can you use call options as a substitute for long stock? If you’re a qualified account owner, yes. Learn about buying stocks versus buying calls with the stock replacement strategy.
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?
Return on capital and liquidity mean specific things in finance. But they can mean something different to an option trader. Read this options trading terminology guide to find out.
Learn how options delta calculations and the options Probability ITM (in the money) feature can help gauge the risk in an options position.
Consider these six strategies for bite-sized trading
Taxes can be a drag. But they're necessary. And as a trader, there are some things you should know about taxes. Being aware of some important items at the start of the year can help make the process simpler and quicker.
Begin the new year with some reflection on investing. Think about what you learned from last year and consider setting New Year’s financial resolutions based on your values. Perhaps you want to invest based on a longer time frame, personal values, or becoming more adventurous.
Learn how the VIX, VIX futures, and VIX options work together to help traders increase market awareness, make more informed options trading decisions, and employ trading strategies.
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.
Traders tend to equate high volatility with fear. But volatility can also mean possible trading opportunities. So, instead of avoiding high volatility, learn to use it in your options trading.
When you've got trades on, you typically focus on your profits or losses. But you could lose more times than you win and still come out ahead. Learn how to use probabilities to manage your options positions.
A buy and hold strategy may be good for long-term investments. Bit when circumstances change, a long-term strategy may not be flexible enough. Laddering puts across price and time could help when stock markets are volatile.
If you're trying to figure out what strike prices to use for your options strategies you might want to try using Fibonacci retracement levels.
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.
Compared to covered calls and other basic options strategies, diagonal spreads don’t get a lot of love. But not only are they relatively straightforward, they’re also flexible and versatile. Here’s the story.
When you make an options trade, you’re not typically locked into it until expiration. You can place an order to close it out most of the time. Here are three things to ask yourself when considering an options exit.
Traders should become very familiar with margin trading, especially since it comes in many forms. Learn about the different types of margin accounts and how you can climb up the margin ladder and make your way up to portfolio margin status.
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.
A small trading account shouldn’t stop you from trading like traders with large accounts. Here are three options trading strategies to let you trade lower-priced stocks with similar risk/return as more expensive stocks.
Should you switch from trading long options strategies to short options strategies when volatility levels are high? Sometimes prices are high for a reason.
Delta contains information that matters most when you are looking for a profit. But there is more to delta.
If you’ve got a losing trade, deal with it and move on—here's a recovery process designed to potentially get you back on track if you make any one of four big mistakes.
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.
Options have time decay, or theta, which is why as an option approaches expiration, it may lose extrinsic value. If you want to maintain a certain level of theta for a particular strategy, monitor your positions closely.
An index’s settlement can turn a winning position into a losing one. You may want to close your index positions before expiration.
Once you’ve learned to use the Risk Profile tool on the thinkorswim® platform for single-leg options, you may wish to use it for more complex trades.
Learn how a covered call options strategy can attempt to sell stock at a target price; collect premium and potentially dividends; and limit tax liability.
Calendars and butterfly strategies may look similar but they have their differences. Why would you choose one over the other?
Options traders with smaller accounts may be able to manage their portfolios like a portfolio manager. Long call verticals, short put verticals, and long call diagonals can help expand an option trader’s thinking beyond their trading account and look like a pro.
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.
When markets are volatile you may hear the media come up with different explanations. But how reliable is that information? There are four myths about volatility you may often hear and why they may not necessarily be true.
Do you follow the VIX as a volatility measure? Ever heard of the rule of 16? How about volatility skew? Learn how to apply these concepts to options trading.
Long call vertical spreads, short put vertical spreads, and call ratio backspreads are defined risk bullish option strategies with relatively low capital requirements that could offer upside potential.
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.
Implied volatility usually increases ahead of earnings announcements and then drops after the news release. If you know implied volatility is going to drop after earnings reports, here are three options trading strategies you could trade.
Learn how adjusting an options collar strategy—a covered call and a protective put—can help you manage stock risk.
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 how to structure a trade designed for uncapped profit potential.
Know what you're getting into before putting on that option trade—avoid surprises by educating yourself about the risks and oddities of assignment.
Can't decide how long you want to commit to a position? Understanding strategy mechanics can help you align trade duration with your attraction.
Part 3 of our series on portfolio margin covers profit, loss, and what happens at expiration—eventually your position will expire, know what to expect.
If you have a futures account and understand VIX, you might be ready for a covered call in volatility—long /VX futures and short VIX calls.
You can upgrade your trader status by expanding your leverage with portfolio margin, but first you must know synthetic equivalents—here's a primer.
Arbitrary entry and exit points in futures trading can be futile—learn how to place your trades using a price range based on volatility and probability.
Laddering price, volatility, and time can take covered calls to a new level—look to collect more premium and diversify across vol and time.
Covered calls are one way to earn income from stocks you own. Learn more about how to sell covered calls and strategically select strike prices.
The put/call ratio (p/c ratio) is probably one of the most recognizable option statistics. But how well is it understood?
These strategies to help you sleep at night by reducing your losses, reducing your effective cost, and reducing the possibility of assignment.
Adjustments can be an integral part of any option trade, but knowing when to adjust can be tricky.
Delta is much more than a one-trick pony. Understanding some other tidbits of info delta provides can help a trader select option strikes.
Potential strategies for a depressed VIX—When volatility is low, learn how to hedge a trader's version of "yield" by trading volatility as an asset class.
What’s a handy core options strategy that leverages time? The calendar spread. But there’s more to them than just buying and waiting.
Having trouble selecting a strike price for an options trade? Learn how the Risk Profile tool can help select options that align with your trading strategies.
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.
Look beyond options premium collection to additional stock hedging. Consider turning the cash from a naked put sale into an out-of-the-money call purchase.
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.
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?
Our chief market strategist breaks down the day's top business stories and offers insight on how they might impact your trading and investing.
Picking months and strikes are big decisions for options traders. Do probabilities matter? We think so.
Short options aren't as scary as you might think. The trick to being on the right side of a short trade starts with the right info.
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...
Anything can happen in one trade. But over a large number of options trades, high probabilities are what matter most.
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.
Hedging with synthetic options positions makes sense if you're a market maker. While retail traders don't have as much to gain, they can still learn a lot.
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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.
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