Directional and non-directional are two variations of trading strategy. Directional trading strategy is simpler, but many traders are successfully using non-directional trading strategy. Non-directional trading strategy is the best option for traders who do not want to bet on the direction of the markets or individual stocks.
The CBOE PUT write index has caught a lot of attention in recent years, as it historically has produced higher risk-adjusted and absolute returns than the underlying S&P 500 index. Risk adjusted returns take into account both returns and volatility. CBOE describes the index as following:
Zero-sum is a situation in game theory in which one person’s gain is equivalent to another’s loss, so the net change in wealth or benefit is zero. A zero-sum game may have as few as two players, or millions of participants. Options trading is considered by many a zero sum game. But is it really a zero sum game?
We decided to investigate SPX calendar spreads from 2007 to present. More specifically, we wanted to know how frequently unmanaged SPX calendar spreads reached specific profit and loss levels relative to the initial debit paid. The results can be used for practical use of the calendar spread strategy.
Unless buying or selling options with a distant expiration date (LEAPS), each trader understands that the value of an option portfolio becomes increasingly volatile as the time to options expiration decreases. It is important to be aware of specific situations that may crush (or expand) the value of your positions.
Apple is a company that tends to surprise Wall Street every time it reports its quarterly AAPL earnings, usually on the upside, occasionally on the down. As a result, the stock often makes big moves the next day - sometimes as much as 7-8%. How can you leverage those moves?
2016 marks our firth year as a public service. We had a good year overall. We closed 127 trades in 2016. The model portfolio produced 40.1% compounded gain on the whole account based on 10% allocation. The winning ratio was pretty consistent around 66%. We had three losing months in 2016.
When you sell options, expiration is an anticipated event. When you own options, it's something to dread. There's much more to an options expiration, and if you are a newcomer to the options world, there are things you must know to avoid unpleasant surprises. Many investors come to the options world with little investing background.
The following infographic describes the facts about implied volatility, where does it come from and how to calculate implied volatility. Implied volatility is an estimated volatility of a security’s price. It is very helpful in calculating the probability and is used to adjust the risk control and trigger trades.
A risk reversal is a strategy that involves selling a put and buying a call with the same expiry month. This is also known as a bullish risk reversal. A bearish risk reversal would involve selling a call and buying a put. Today we’re going to examine the bullish risk reversal.
I'm often asked by novice options traders what is the best options strategy. The answer is that there is no such thing "the best options strategy". Each strategy has its pros and cons. Each strategy will work the best under certain market conditions, and no strategy will work under all market conditions.
Options inherently have been met with much speculation, and anyone who trades them knows this. Many bankers and financial advisors steer clear of options because of their potential risk. Are they correct in doing so? I don't believe they are. Options when used correctly can provide better annual returns than a traditional buy and hold method.
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