On a personal level, one part of the options business that truly bothers me is that it its filled with people who want to take your money. I politely refer to them as hypesters, but a better term is swindler. Swindle: Use deception to deprive (someone) of money or possessions. (source: Google search)
There are hundreds of options trading "gurus" promising you all kinds of ridiculous returns like "5% per week". What most traders don't realize are the risks that come with those returns. I would like to share with you an email I got from one of those options "gurus".
When I work with individual investors or write blog posts and books, my objective is for the reader to learn something he/she does not already know. That includes providing enough details that the clouds disappear and the reader gains a better understanding of the topic under discussion.
If you've ever seen a stop rip off of earnings and wondered if that was a signal for a trade, or if the momentum would continue, then this is exactly the back-test you are after. We call it "star gazing" when a stock rips and we're stuck -- with no idea what to expect next.
Monetary Velocity, an oft-misunderstood metric that quantifies the pace at which money is spent, has recently shown signs of rising after trending lower for the better part of the last decade. Since increasing velocity is frequently associated with inflation, it comes as no surprise the Federal Reserve (Fed) has upped their vigilance towards inflation.
At 5:35 EST on Friday afternoon, Palo Alto networks announced market moving news and broke the golden rule of good governance -- they buried the news in a late Friday afternoon release so the media couldn't cover the story and the market couldn't react until the weekend was over.
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.
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