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.
Diversification isn’t just about stocks, bonds, and cash. When hedging risk for an options portfolio, think price, time, and volatility.
Trading options means thinking (and acting) with the inner quant brain. Once you get into the mindset, that analytical thinking might show up as you assess other investments—and other life decisions.
When trading options, it can be helpful to assess the probabilities before making a decision to enter a trade.
Are those open positions in your account keeping you from sleep? Or do you need to pop in and do some premarket trading? Here are things that keep traders up at night.
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.
Investors caught between whether to buy a stock or a short-term options contract might consider LEAPS®—Long-Term Equity AnticiPation Securities.
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.
Protective puts are one way to hedge stocks against a significant price drop. But investors should consider factors such as time decay and volatility.
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?
Learn how weekly stock options can help you target your exposure to market events such as earnings releases or economic events.
When you’re looking for critical information about your trading accounts, account positions, and how your positions are doing, you want to have the key data points at your fingertips. The Monitor tab on thinkorswim® allows you to access this information.
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.
Implied volatility and vega both measure volatility but they have some differences. Here’s some insight from an education coach at TD Ameritrade.
Trading stocks and options can play tricks on your mind. Control as much as you can to reduce the risks you can't control. Avoid these four trading mistakes.
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.
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.
Apple announced a 4-for-1 stock split effective August 31, 2020. Find out what a stock split means for your outstanding stock and options positions from TD Ameritrade.
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.
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.
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.
Theta can indicate many things but you can only depend on it after you have closed your trade.
Delta contains information that matters most when you are looking for a profit. But there is more to delta.
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.
When volatility falls, many option traders turn to these five strategies designed to capitalize on depressed volatility levels.
Can straddles be used in an options strategy around earnings announcements or other market-moving events? Yes, but there are risks and other considerations.
Learn how a long calendar spread can be effective in a low-volatility trading environment.
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.
Useful thinkorswim tools you can use are the Heat Map, volatility calculation and Mobile Trader. Find out which stocks are moving, different ways to calculate volatility and share charts on Mobile Trader.
Calendars and butterfly strategies may look similar but they have their differences. Why would you choose one over the other?
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.
TDA Network from Trader TV on thinkorswim® may give you many strategy ideas during the trading day. Watch and listen to learn about making a trading plan, analyze trades, paper trade, and then consider making a trade.
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.
The sensitivity of option prices to changes in time, volatility, and the price of the underlying are commonly referred to as “Greeks.” As you prepare for earnings season, here's an overview.
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.
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.
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.
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 about gamma, which some traders consider the positive side of negative theta.
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.
Instead of hyper-focusing on one position at a time, look at your entire portfolio and try to figure out a better hedge—here's some tools and tweaks to help.
Some economic indicators create more noise than others—learn to create trading strategies based on how markets might react to economic data.
Looking for opportunities amid a low volatility trading environment? Learn about calendar spreads.
Overtrading can be a killer to your P/L. The trick is to trade
consistently and always know what the markets—and your positions—are doing.
Part of our series on portfolio margin, the greeks—theoretical metrics describing how things like stock price, time, and volatility can impact option price.
Learn how to increase the flexibility of your existing options strategies with weeklys: options that move quickly and live for about a week.
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.
Weeklys on SPX: Now options traders have even more toys to play with... and more to chew on. Find out about them before changing your trading strategy.
The calendar trade is a strategy that belongs in every trader’s arsenal, partly because calendars are easily adjusted, and also handy for weekly options.
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?
With an understanding of terms and definitions involved in synthetic options, how do traders begin applying synthetic options in the most efficient way?
Learn how synthetic options strategies can help traders potentially lower transaction costs, improve price discovery, and more efficiently use capital.
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.
Want to participate in the potential upside of a stock while using only a fraction of the buying power? Here’s how to do it with a long-dated call option.
Industry data shows options trading numbers are growing. But many stock traders remain hungry for options trading basics. Here’s how to get started.
Income-focused option trades succeed when the market doesn’t move that much. Learn how to recognize income opportunity.
Volatility’s tendency to level out after a spike can present strategy opportunities, especially selling strategies found with strangles and iron condors.
Tackle the sticker shock of a lofty stock market with an options play. Consider lowering your cost basis by selling puts.
Check out short-term options pricing to gain a sense of how the underlying stock could move around an earnings release. You can track straddles or use the TD
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.
Buying calls and puts is
how most traders jump into the options
market. Despite their siren songs, you can still
attempt to protect yourself.
The first step to overcoming any fear is understanding what you're dealing with. With short-naked puts, that means understanding the strategy and the risks.
Options greeks can help measure how much an option might gain or lose—and help you decide how much risk you’re willing to take.
We know stocks move up and down. But much of the time, they're range-bound. The calendar spread takes advantage of that at a fraction of the stock price.
A guide to weeklys: Volume is swelling, and traders are using weekly options to speculate on very short-term moves, or simply as a hedge.
Before buying or selling call and put options, check the alternatives. The vertical spread is a simple solution to the problems short naked options pose.
Diversification approaches for active traders to hedge non-systematic risk across spreads, including directional risk and time and vol.
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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.
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.
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