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.
When a company goes public, employees and insiders are often restricted from selling their ownership stakes for a certain amount of time. But when the restriction—called a lockup period—is lifted, share prices sometimes take a hit. Here's what you need to know.
Should you switch from trading long options strategies to short options strategies when volatility levels are high? Sometimes prices are high for a reason.
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.
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.
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.
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.
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 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.
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.
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.
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.
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.
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).
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 have a futures account and understand VIX, you might be ready for a covered call in volatility—long /VX futures and short VIX calls.
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.
These strategies to help you sleep at night by reducing your losses, reducing your effective cost, and reducing the possibility of assignment.
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.
Options collars offer an affordable stock hedge with reasonable upside, which can help you build a larger stock position with much less money.
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.
When will a stock trend end? There are a few stock chart indicators that make spotting trend reversal warning signs a little easier.
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.
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.
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.
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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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