Some options strategies have similar risk profiles. When deciding between out-of-the-money (OTM) put verticals and in-the-money (ITM) call verticals, consider liquidity and price.
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.
Option traders know volatility can increase leading up to a company’s earnings report. But it can also dive quickly after an earnings announcement. Know what to keep an eye on before making those earnings trades.
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?
Have you ever seen implied volatility drop so quickly that it killed your trade? Try these risk management ideas to manage volatility crush.
Trading options? Sometimes the bid/ask spread is nice and tight, and sometimes it’s not. Here’s what traders and investors should know about order types and slippage.
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 about “black swan” events and how you can attempt to protect yourself and your portfolio from adverse shocks.
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
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.
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.
The value of an option tends to decay as expiration approaches. Learn about three options trading strategies that target time decay (“theta”).
When a company goes public, insiders are often restricted from selling their ownership stakes for a certain amount of time called a “lockup period.” But when the restriction is lifted, share prices sometimes take a hit. Here’s what you need to know.
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.
When faced with high volatility, many options traders turn to these five strategies designed to capitalize on elevated volatility levels.
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.
How can skew offer insight into market sentiment? Implied volatility between out-of-the-money put and call options is almost always skewed depending on whether there’s panic to the downside or upside.
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.
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.
Options data can be difficult to understand, especially if you’re a newbie. But a feature on the thinkorswim® platform from TD Ameritrade allows you to chart options prices to visualize if premium is expensive, cheap, or fair.
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.
With Micro E-mini options on futures, option traders can participate in the futures market with less capital and with streamlined risk management.
Volatility is a popular topic among option traders. But it can be confusing. Looking at volatility from the perspective of trading capital, past activity, and probability may help clear things up.
Suppose you buy a call option at a given strike price. Now what? The Theo 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 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.
There's no way to predict bear markets. Each one is different from the next. But these options trading strategies can prepare you for unexpected market events.
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.
Trading options in an IRA is possible but has its caveats. For those who qualify, here are some options trading strategy ideas that could open up some possibilities you never thought existed.
Selling covered calls is a neutral to bullish trading strategy that can help you make money if the stock price doesn't move.
The time to learn about options exercise and assignment is before taking a position, not afterward. This guide can help you navigate the dynamics of options expiration.
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.
Selling naked strangles can be a risky options strategy no matter what strikes you choose. But there may be ways to choose your short strikes without chasing probabilities.
When ETFs lose (or make) more than the market they’re tracking, you might be holding an inverse or leveraged ETF.
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.
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.
There are many volatility products that are derived from or correlated to the VIX. Understanding the relationship between these products can help identify their pros, cons, and risks.
Vertical spreads are a common choice for options traders looking for a flexible defined-risk strategy. But how do you choose among strategies? Here's a handy checklist to follow.
Margin trading has been around forever. But qualified traders, there’s another category—portfolio margin—that could take your leverage to new heights.
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.
Volatility affects options prices to some extent but avoid focusing on it to map your strategies.
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.
One of the benefits of joining an investment club is it's a fun way to learn to buy and sell stocks.
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.
There are different ways to determine the size of your options trade. You may want to risk a certain percentage per trade or you may consider total portfolio risk. When you are ready to increase your risk tolerance, you could increase the number of trades, the amount you put into each trade, or the risk level for each trade.
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.
Volatility skew has to do with the difference between put and call volatility. Sudden changes in volatility skew levels can indicate what the market may be anticipating.
Learn how a collar strategy—a covered call and a protective put—might be a way to manage stock risk.
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.
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?
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.
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.
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?
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.
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 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.
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.
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?
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.
Are you effectively investing your money? Millennials are among the smartest investors, but not all of them follow this important process.
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 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.
Can't decide how long you want to commit to a position? Understanding strategy mechanics can help you align trade duration with your attraction.
Know what you're getting into before putting on that option trade—avoid surprises by educating yourself about the risks and oddities of assignment.
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.
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.
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Content intended for educational/informational purposes only. Not investment advice, or a recommendation of any security, strategy, or account type.
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