SteadyOptions Trading Blog

Among the many options strategies, one of the most interesting is synthetic long stock.  This combines a long call and a short put opened at the same strike and expiration. The name “synthetic” is derived from the fact that the two positions change in value dollar for dollar with changes in 100 shares of stock.

During earnings season I get asked all the time about big earnings losers. “Should I buy stock XYZ? It’s down 10% and is surely going to bounce back!” My answer is simple … When a stock blows up, Don’t Buy Today!

My Cabot Options Traders have had some monster winners trading options in 2018, with huge paydays in Cisco (CSCO)—a gain of 565%, Nutanix (NTNX)—a gain of 307%, Union Pacific (UNP)—a gain of 227% and most recently Axon Enterprise (AAXN)—a gain of 175%. It’s been a lot of fun.

Since the correction in US markets from February to April, things have really quietened down since. Volatility is back to a 12 handle, stocks are rallying and all seems well with the world. The falling volatility is great for long term investors, but as options traders, we love high volatility and it’s becoming increasingly hard to find once again.

Options are used in 3 main ways: Premium selling, where you are being paid to assume risk; Speculation to leverage movements in price; and Hedging where you pay a premium to reduce/take risk off. It’s easy as traders to focus solely on speculation and premium selling – we’re probably most focused on making a profit.

An investment strategy should meet the following criteria for consideration:

In our last article on the Anchor Strategy, we discussed what the strategy is and what it is not, as well as attempting to set expectations for investors. In this piece we’ll examine the possibility of “boosting” performance through the use of additional options to gain leverage.

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?

Options traders continually seek the elusive “sure thing” reversal signal. Of course, there is no such thing. But there are ways to use combined signals to identify likely reversal points. Add in strong confirming signals, and you have a reliable system for entering and exiting options trades.

Most options traders realize that annualizing returns does not reflect what you can expect to earn consistently. It is, however, a way to make relevant comparisons between outcomes of different holding periods.The first big question is, What is the basis for calculating a net return?

When trading options, one of the hardest concepts for beginner traders to learn is volatility, and specifically HOW TO TRADE VOLATILITY. After receiving numerous emails from people regarding this topic, I wanted to take an in depth look at option volatility.

Most traders have heard of the efficient market hypothesis (EMH) and most believe they know what it means. In a nutshell, it is a belief that the market is “efficient” and that the current price of shares is a reflection of efficiency. Right? Wrong.