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.
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.
Calendars and butterfly strategies may look similar but they have their differences. Why would you choose one over the other?
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.
The recent rise in volatility means it could be time to talk about strategies designed to capitalize on elevated volatility levels.
Learn the thinkorswim platform's Order Entry tool and how multi-leg trades, or option spreads, can make sense for qualified traders during earnings season.
Return on capital when trading options is different than return on capital when managing investments. Here’s what return on capital means to an options trader.
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.
Maybe volatility is low and you believe a breakout is about to happen. But you don’t know which direction price will move. Or maybe you believe the markets are high and you don’t know when they might fall. What options strategies could you trade?
The VIX often makes explosive moves. What do these types of moves mean?
Learn the differences between equity options and options on futures contracts, and how experienced options traders can use futures options to enhance their trading.
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.
What is volatility skew and how to use it.
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.
When trading options on futures contracts, you need to understand what you are trading. Know the contract specifications, know how the futures options are priced, and the differences in expiration between the futures and options.
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.
Making profitable adjustments to your stock portfolio can be tough. Learn more about three important metrics you can use to manage your investments.
Consider these options strategies designed to increase your overall odds.
Learn how adjusting an options collar strategy—a covered call and a protective put—can help you manage stock risk.
Learn how adjusting a collar strategy—a covered call with a protective put—can help you manage stock risk.
Learn how to turn a long butterfly spread—typically initiated with a debit—into a credit spread by adjusting one of the wings, aka a “broken wing butterfly.”
Traders and investors often use limit orders as a way of buying stock at their chosen entry point. Put spreads can be used to pursue similar objectives.
Options on futures are quite similar to their equity option cousins, but a few differences do exist.
Are you an option looking for a strategy designed for a lower-volatility environment?
Are you effectively investing your money? Millennials are among the smartest investors, but not all of them follow this important process.
Core positions are treated differently among investors and traders. Learn more about leveraging your trading portfolio and managing core positions.
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.
Some option traders dynamically hedge positions, but doing so requires a basic understanding of synthetic positions and put-call parity.
Don’t confuse a global portfolio with a well-diversified one. Learn the difference.
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.
Learn about “black swan” events and how you can attempt to protect yourself and your portfolio from adverse shocks.
Learn how to spot potential trade candidates by assessing straddle price versus average earnings moves.
Learn the basics of put ratio spreads and how they can help you pursue your objectives.
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.
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.
Looking for opportunities amid a low volatility trading environment? Learn about calendar spreads.
Learn how a collar strategy—a covered call and a protective put—might be a cost-effective way to manage stock risk.
An option's value tends to decay as expiration approaches. Learn how to incorporate time decay ("theta") into a trading strategy.
How to tweak a butterfly when you have strong directional bias, time to expiration is short and you want to squeeze as much as you can out of your position.
How using Kurtosis to study abnormal market behavior—in particular how it explains the price behavior of options—can aid in your strategy selection.
Can you calculate fear? Certain market measures help traders determine when the market seems “fearful.” Learn to do this for yourself to better evaluate risk.
Ready for a more advanced options trading strategy? We explain vertical spreads (credit and debit).
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.
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.
If you’ve got a losing trade, deal with it and move on—here's a recovery process designed to get you back on track if you make any one of four big mistakes.
Investors and traders alike can benefit from options by learning how they work and how to apply this knowledge to meet their investing goals.
Laddering price, volatility, and time can take covered calls to a new level—look to collect more premium and diversify across vol and time.
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.
These strategies to help you sleep at night by reducing your losses, reducing your effective cost, and reducing the possibility of assignment.
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?
Can you use call options as a substitute for long stock? Learn the benefits and risks of this strategy.
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.
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.
When will a stock trend end? There are a few stock chart indicators that make spotting trend reversal warning signs a little easier.
Income-focused option trades succeed when the market doesn’t move that much. Learn how to recognize income opportunity.
Three of the most popular options strategies on how to exit a winning or losing trade: long options, vertical spreads, and calendar spreads.
Learn to recognize divergences between chart indicators and price action. It’s the first step toward confirming trends.
Consider option delta as one way to narrow the mathematical range when choosing an iron condor strike price.
Looking for a hedge? Consider short-term long put options or volatility trades aimed at protecting stocks from unexpected economic results.
Margin trading has been around forever. But qualified traders, there’s another category—portfolio margin—that could take your leverage to new heights.
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.
Explore extreme stock volatility lows for potential opportunities to buy put options for short-term protection or speculative bearish trades to hedge a bullis
Looking to supplement returns? Consider selling out-of-the-money options. Unless there are large price swings, these options don’t change much.
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.
The principles of successful trading are also rooted in the professional side of the card table rather than pure luck. The trick isn’t just knowing when to hold 'em, or fold 'em, but why.
Shorting a stock you no longer like isn't an easy decision. In fact, it can be an expensive decision. Instead, you might turn to the options market and take a closer look at short vertical spreads.
Liquidity, cost, and overall tradability turn options strategies that are similar on paper into real-life scenarios that look quite different.
Investors seeking protection from market volatility have contributed to extreme “SKEW” levels in options markets.
Picking months and strikes are big decisions for options traders. Do probabilities matter? We think so.
When ETFs lose more than the market they're tracking, you might be holding an inverse or leveraged ETF. If you don't know what you're doing, think jeans around the ankles.
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.
Once you've learned the foundational option spreads—verticals and calendars—and what makes them tick, the next step is knowing when to use them.
Volatility has become easy shorthand for trading talk. But just below the surface, volatility can be confusing. Yet, when you look at it through different lenses, a few basic truths start to clear things up.
Trading earnings announcements can be a fool's game. When volatility is high, trends can break after a company announces. Consider a few volatility tricks.
Anything can happen in one trade. But over a large number of options trades, high probabilities are what matter most.
The calendar spread is another building block for spread traders. Though it's designed to profit when a stock goes nowhere, there's more to them.
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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.
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