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.
Trading success doesn't mean "going for broke," or searching for the next big thing. It's more like pacing yourself at the hippest restaurant in town.
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.
Learn how the VIX, VIX futures, VIX options and the VVIX work together to help traders increase market awareness and make more informed option trading decisions.
Learn about butterfly option spreads and how they differ from iron condors, plus an explanation of a butterfly option strategy.
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.
You have a losing trade but don’t want to sell. Here are four option strategies you could use to fix your losing trades.
Learn how option delta calculations and the Probability ITM (in the money) feature can help gauge the risk in an option position. Let TD Ameritrade guide you through the math to aid your decision making.
Options expiration day can be a time of volatility, opportunity and peril. Trading and selling options on expiration day requires an understanding of the process, here are a few things you need to know.
If options and other derivatives are a part of your portfolio, you should learn about the nuances of taxes on options trading, from the Ticker Tape by TD Ameritrade.
Learn how adjusting an options collar strategy—a covered call and a protective put—can help you manage stock risk.
As the front-month leg of a calendar options spread approaches expiration, a decision must be made: close the spread or roll it.
Though some option strategies are quite complex, options education begins with the basics of calls and puts.
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.
Corporate actions such as stock splits, special dividends, mergers and acquisitions are quite common, but what happens with unexpired options?
An option's value tends to decay as expiration approaches. Learn how to incorporate time decay ("theta") into a trading strategy.
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.
Investors and traders alike can benefit from options by learning how they work and how to apply this knowledge to meet their investing goals.
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.
Can you use call options as a substitute for long stock? Learn the benefits and risks of this strategy.
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.
Explore rolling options “losers” to extend duration for covered calls, naked calls or puts, one side of a short strangle, and select other trades.
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.
Monitor strong spurts of volume and inflated premiums for potential option trading opportunities. TD Ameritrade tools can help.
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.
Liquidity, cost, and overall tradability turn options strategies that are similar on paper into real-life scenarios that look quite different.
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?
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...
Just when you though you've heard it all about covered calls, along comes a new reason for traders to rethink this old dog.
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.
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.
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.
A favorite hedge among options traders, SPX options have one major blemish: they settle the day after trading. Say goodbye to the old, and say hello to SPXpm.
Whatever your time frame, if you’re hedging with options here's a few tricks about how to size things up.
for thinkMoney ®
Financial Communications Society 2016
for Ticker Tape
Content Marketing Awards 2016
Market volatility, volume, and system availability may delay account access and trade executions.
Past performance of a security or strategy does not guarantee future results or success.
Options are not suitable for all investors as the special risks inherent to options trading may expose investors to potentially rapid and substantial losses. Options trading subject to TD Ameritrade review and approval. Please read Characteristics and Risks of Standardized Options before investing in options.
Supporting documentation for any claims, comparisons, statistics, or other technical data will be supplied upon request.
The information is not intended to be investment advice or construed as a recommendation or endorsement of any particular investment or investment strategy, and is for illustrative purposes only. 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.
This is not an offer or solicitation in any jurisdiction where we are not authorized to do business or where such offer or solicitation would be contrary to the local laws and regulations of that jurisdiction, including, but not limited to persons residing in Australia, Canada, Hong Kong, Japan, Saudi Arabia, Singapore, UK, and the countries of the European Union.
TD Ameritrade, Inc., member FINRA/SIPC. TD Ameritrade is a trademark jointly owned by TD Ameritrade IP Company, Inc. and The Toronto-Dominion Bank. © 2019 TD Ameritrade.