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.
Reading as much as we can about trading always helps us to improve and become better traders. I'm pleased to share some of the best trading articles, podcasts and videos from some of my favorite traders, bloggers and educators. If you came across an interesting article please share it in the comments section.
The CBOE Volatility Index® (VIX® Index®) is a key measure of market expectations of near-term volatility conveyed by S&P 500 stock index option prices. Since its introduction in 1993, the VIX Index has been considered by many to be the world's premier barometer of investor sentiment and market volatility.
Momentum is a phenomenon that tends to leave academics scratching their heads as it shouldn't really exist in a world of perfectly efficient markets. Yet for 100 years a simple rules based, quantitative approach would have provided the opportunity to earn increased returns with reduced volatility and drawdowns vs. a buy and hold approach.
A while ago I discussed a simple strategy that beats most traders which consists of simply being long SPY to obtain market-like returns plus dividends. If 90 - 95% of traders lose money, then following an index with a positive return guarantees you beat a huge % of that population.
Reading as much as we can about trading always helps us to improve and become better traders. I'm pleased to share some of the best trading articles, podcasts and videos from some of my favorite traders, bloggers and educators. If you came across an interesting article please share it in the comments section.
There are about 72 options trading strategies. The following infographic describes the top 10 options trading strategies: Covered Call, Protective Put, Long Call, Long Call Spread, Long Put, Long Put Spread, Long Straddle, Long Strangle, Collar and Iron Condor.
A question from a reader: "I sell straddles, usually 30-45 days prior to expiration on the SPX index at the current market price. What do you think is the best option strategy to offset large moves up/ down? Would buying a straight put (or a put spread) be best? It's an expensive route to take and just wondering if you have another solution?"
The more I talk with traders, read articles and listen to commentators the more everyone seems to be talking about what is the “most probable”. Certainly we all like the thought of being on the right side of a trade and assessing probabilities can play a large part.
