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Trend Following: An 88 Year look at S&P 500

Many investors have become interested in trend following strategies in recent years due to the scars of living through two major bear markets since 2000. In my firm, we also believe in trend following as a sustainable method for managing the downside risk of investing in risky assets like equity index funds and ETF's. 

Leverage With A Poor Man’s Covered Call

Diversification can be an issue for traders with smaller account sizes. It can be incredible difficult to trade covered calls and create a diversified portfolio. For example, an investor with a $25,000 account would use up over half his capital doing one covered call on AAPL stock.

 

Are you a Hedger Or a Speculator?

Many options traders seem to have a problem defining themselves. Repeatedly, we see traders describe themselves as conservative, using options primarily to hedge market risk. But … are they staying true to this definition.

Investor Discipline Is The Key To Success

Nothing can impact an investor’s success more than discipline. Warren Buffett noted that “the stock market is a device for transferring money from the impatient to the patient.” In studying the returns of various asset classes, JP Morgan made the startling conclusion that the average investor is the worst performing class:

Buy High, Sell Low: Why Investors Fail

While investing in financial markets over the long-term is an excellent path to wealth, it’s not unusual to experience occasional losses as investment values go up and down. So if the markets go up over time, why is it that most investors lose money in the stock market?

Using OTM Directional Calendar Spreads

Most traders are familiar with calendar spreads as a directionless trade that benefits from accelerated time decay for the near-term expiry position vs. the longer-dated option and benefits from volatility expansion. A "long calendar" spread is created when we sell the front month and buy the back month, getting a debit.

Assignment Risks to Avoid

I've had few emails from 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.

Process versus Outcome

A good trade is one where you followed your process regardless of whether you made money or not. A bad trade is one where you didn’t follow your process regardless of whether you lost money or not. Amateur traders make one big mistake at the beginning.

Are Bonds Still A Good Hedge?

Investing in bonds is considered a conservative way to hedge your falling stock trades.. Analyst and long-time market commentator Mark Hulbert noted this week that despite this past month’s price action, bonds are still a hedge against stock market losses. 

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