Your risk-management strategy could decide whether you survive the next market turn. If you don’t have a trading plan in place, here are some ideas to help you get started.
Looking to get long volatility with a theta kicker using options? Consider a calendar spread. But if you also want to spread your risk across the price range of a stock, you might scale the twin peaks of a double calendar.
If you’re thinking of legging in to options spread strategies, know the pros and cons before diving in.
When stock prices keep going up, at some point they tend to fall. But you don’t know when. If you’re trading stocks that have gone up in price, you might want to consider options strategies such as time strangles, back/ratio spreads, and rolling collars as a potential protective measure.
Diversification isn’t just about stocks, bonds, and cash. When hedging risk for an options portfolio, think price, time, and volatility.
When trading options, it can be helpful to assess the probabilities before making a decision to enter a trade.
When a trend is bullish or bearish, a reversal may be near. There may be no way of identifying the end of a trend, but you may be able to analyze the crowd’s behavior by looking at charts.
Synthetics are the building blocks of the options trading world. Consider getting to know them, because you might be able to incorporate them as part of an overall options trading strategy.
The thinkBack™ tool in thinkorswim® can help backtest options strategies. Compare strategies, run entry and exit scenarios, and become a more informed option trader.
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).
The next time you find yourself in a winning trade and think you can squeeze a little more, consider a few strategies to reduce your risks without giving up on more.
Have a single-leg option? Consider using a vertical spread to turn it into a defined-risk spread to lower the margin requirements and free up capital at the same time.
Learn how options delta calculations and the options Probability ITM (in the money) feature can help gauge the risk in an options position.
Short selling, short interest, naked short selling are among terms some investors had scarcely paid attention to. But a flurry of apparent short squeezes in 2021 called attention to shorting. Here are some of the top questions answered.
Three options strategies on how to exit a winning or losing trade: long options, vertical spreads, and calendar spreads.
When a stock suddenly enters a hyperbolic rally without clear fundamental reasons, it could be a classic short squeeze. And when it involves options, a so-called 'gamma squeeze' can exacerbate the moves—up and down.
When trading vertical options spreads, the maximum risk and profit potential are defined and relatively straightforward to calculate. Here’s how to assess the risk parameters on vertical spreads.
Traders tend to equate high volatility with fear. But volatility can also mean possible trading opportunities. So, instead of avoiding high volatility, learn to use it in your options trading.
When deciding between trading credit spreads or debit spreads, it can be helpful to align the options strike prices and expirations with the level and direction of implied volatility.
When a relationship between a pair of stocks, futures, or options gets out of line, pairs trading may offer potential opportunities. Here’s how some investors choose among many combinations of bullish and bearish positions.
With Micro E-mini options on futures, option traders can participate in the futures market with less capital and with streamlined risk management.
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.
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.
The stock markets care about who wins the 2020 U.S. presidential elections. Stock traders look for potential trading opportunities regardless of who wins the elections. Look for clues within each of the party lines so you can be better prepared to face the election results.
Some vertical spreads have the same looking risk profile. There's a reason why that may be the case. Here's an example of a vertical debit and credit spread options trade.
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.
The global foreign exchange (FX) market is deep, liquid, and traded virtually around the clock. If you’re an option trader in search of a new asset class to trade, consider options on currency futures.
thinkorswim Web is the TD Ameritrade streamlined, web-based options trading platform that lets you trade wherever you have an internet connection.
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.
Once you’ve mastered the basics of margin trading, you might want to learn how different trader and investor types use it. It can depend on your objectives, risk tolerance, and the products you trade.
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.
Vega can show you how much the dollar value of an option changes for every one percentage point change in volatility. But traders often confuse vega with volatility. Knowing the right way to use vega can help you come up with an options trading strategy.
Explore options statistics on thinkorswim—implied & historical vol and percentiles, the Sizzle Index, and the put/call ratio. Learn how options stats can help traders and investors make more informed decisions.
When volatility falls, many option traders turn to these five strategies designed to capitalize on depressed volatility levels.
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.
Treasury bonds are boring, right? Wrong. For traders, they represent a market that can be bigger than stocks.
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.
Selling vertical credit spreads, and how it may be a high-probability strategy.
Learn about butterfly option spreads and how they differ from iron condors, plus an explanation of a butterfly option strategy.
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.
Learn how vertical spreads can be a more cost-effective way to speculate on direction, versus buying single legged options like a long call or long put.
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.
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.
Ready for a more advanced options trading strategy? We explain vertical spreads (credit and debit).
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.
Volatility’s tendency to level out after a spike can present strategy opportunities, especially selling strategies found with strangles and iron condors.
Maximizing the risk/reward of a defined-risk trade—how to increase the risk-to-reward profile in short vertical spreads.
Use volatility to pick an options strategy to speculate on a given direction, rather than to replace fundamental analysis and charts to determine potential.
Choose adjustments for losing trades that are true to your market outlook, risk tolerance, and trading style.
Learn to recognize divergences between chart indicators and price action. It’s the first step toward confirming trends.
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.
For options speculators with less of an appetite for risk, these vertical spreads offer up a savory solution.
Anything can happen in one trade. But over a large number of options trades, high probabilities are what matter most.
Yes, you can have a derivative on a derivative. But don’t let that scare you. Options on futures may be easier to understand than you think.
Because an options spread has more than one "leg," does it make sense to enter one leg at a time if you can get a better price on a different exchange? Maybe.
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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.
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