Ultimate Options Trading Strategies

I've had three emails in the past month on people being assigned on positions and receiving margin calls, and generally not knowing what happened. I advise everyone to completely research and become familiar with the exercise/assignment aspect of option trading. If you don't you can find your entire account blown out over a weekend.

By cwelsh, Wednesday at 02:35 AM

The trigger to this article was a discussion I had with someone on Reddit. There is a common misconception about calculating gains on trades that require margin, like credit spreads and short options (naked puts/calls, strangles or straddles). I believe it is important to explain how to do it properly.

By Kim, June 9

It does not matter how good your trading system is - you will not win 100% of the time! A fact! The way you deal with this fact will go a long way toward determining how big a winner you become. In fact, after so many years spent in the financial arena, I have absolutely no doubts in my  mind that one of the most essential keys to winning is learning how to lose.

By Kim, June 6

The wings of an iron condor options trading strategy consist of two vertical credit spreads; i.e., a bull put spread and a bear call spread. The process of "Legging In" offers the promise of higher yields and enhanced probabilities of options trade success, but the question is whether it is worth the risk.

By Kim, June 5

I'm sure most traders are familiar with this situation. You find a good setup, watch it for a while, then enter a trade, and it goes down right after you entered. Should you double down and add to your losing trade, or should you cut the loss and exit? That depends who you ask.

By Kim, June 5

There are a lot of myths and misconceptions about options trading. Many traders refrain from trading options because they consider it too risky. The only dangerous part of options trading is the risk-insensitive trader who buys and sells options with little or no understanding of just what can go wrong.

By Kim, May 21

Question from a reader: What is your opinion on a short strangle vs a short straddle? I understand the same unlimited risk will be there because you are trading naked options. I found that one strategy I have had some success with in paper trading is using short strangles around earnings to take advantage of large drops in volatility.

By MarkWolfinger, May 20

Trading is exciting. Trading is hard. Trading is extremely hard. Some say that it takes more than 10,000 hours to master. Others believe that trading is the way to quick riches. They might be both wrong. What is important to know that no matter how experienced you are, mistakes will be part of the trading process.

By Kim, April 5

Delta is one of the four main option greeks, and any serious trader needs to have a thorough understanding of this greek if they hope to have any chance of success in the trading options. If you’re a beginner, you can visit my blog to learn more about understanding option delta. 

By Kim, March 30

Oracle (ORCL) has been following a similar pattern in the last few years. They announce their earnings date on the first week of the third month of the quarter and report during the third week of the month. Yet many times the options market "assumes" earnings during the fourth week and under-prices the third week options.

By Kim, March 3