Options strategies and mentoring to put volatility to work for you
Education & Strategy
As discussed last week, when using the Stock Replacement Strategy to replace a stock position to trade direction, we want to use an option that has very similar characteristics to the stock. We talked about using the deep in-the-money, 80 to 85 delta option that is similar in the Greeks and has relatively little extrinsic value which tends to work against us in stock directional trading.
Using Options For Income
Jon Najarian and Adam Mesh of Options Wealth Machine discuss a detailed strategy utilizing credit spreads to generate income, and how any level of trader can use this simple trading technique.
HOW CAN I ENROLL IN optionMONSTER ADVANCED EDUCATION?
As market makers, Jon ('DRJ') and Pete Najarian schooled countless young professionals. Now optionMONSTER offers a unique education program designed and led by our co-founders.
- Learn at your speed, one-on-one
- Gain from strategies and the Greeks
- Cut out common mistakes
- Identify and refine your trading style
To get started now, help us understand your investing goals. optionMONSTER will follow up with a private phone interview.
In consideration of your time, we'll send the first two chapters of Jon and Pete's latest book, How We Trade Options.
Review basic strategies, the Greeks, and volatility with our education chapters.
Trading stocks is reasonably easy, at least in theory. If you think a stock is going up, buy it. If you think it is going down, sell it; or sell it short if you are a real risk-taker.
As one top hedge fund manager said, "the only way most people really do well in the markets is to be long and leveraged". Buying calls is the best way to be "long and leveraged".
Use covered calls to generate income in your account. It is highly conservative and therefore widely popular. In fact, many stock traders begin trading options this way.
Have some insurance for your portfolio - or any stock position - by using put options. Buying puts is a limited risk way to protect your positions.
Many retail traders use this conservative strategy to generate income in their accounts. Short puts can be an excellent way to acquire stock or generate income in your account.
Lower your exposure to high premiums and implied volatility while increasing your probability to profit by using vertical spreads.
Long calendar spreads provide a limited-risk way to take advantage of time decay inherent in different expiration dates.
Butterflies and Condors involve buying two options, at a net debit, to establish a position which profits if the underlying stays within a given range. Learn how to take advantage of high implied volatility.
By using long "straddles" and "strangles", you'll have a strategy to profit from big moves in a stock - no matter what the direction.
Various factors - including implied volatility and time decay - help influence an options price. Understand all the factors to reduce risk while increasing your probability to profit.
The option "greeks" come from the pricing model that gives us implied volatility and quantifies factors such as directional shifts, volatility, time decay and changes in interest rates.
Volatility is the key factor both in option pricing and in the profitability of any options trade. Thus, it is crucial to understand volatility data to be a successful options trader.