SteadyOptions Trading Blog

The US is currently stuck in a low interest environment, with rates at historic lows.  Portions of ECB countries even have "negative" interest rates.  The theory behind this is that it promotes spending over savings and spending should be beneficial to the economy by driving money back into the economy.

I've encountered a group of questions and comments from traders that tells me that traders have a certain way of viewing the world.  These each represent part of the Trader's Mindset.  Today I'll tackle one of those questions: How much can I expect to earn when using options?

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.

Many options "gurus" want you to believe that 80% of Options Expire Worthless. They use it as a reason why you should be a seller of options, and buy their trading system that has "90% success ratio". This is why you need to pay thousands to learn how to write options instead of buying options. But what is the reality?

Can equity market experts, whether self-proclaimed or endorsed by others (such as publications), reliably provide stock market timing guidance? Do some experts clearly show better market timing intuition than others? My guess is that if anyone could really predict what the markets will do next, he would be retired by now and not brag about it on Twitter.

Bernie Schaeffer, from Schaeffer's Investment Research, long-time options analyst and trader offers his comments on why an investor should be trading options in today's market. After reading the piece (quoted below), I tried to communicate with him via his website. I wrote that I was going to offer contrary opinions and asked if he wanted to discuss the issues.  I received no response.

Here’s one of the most perplexing risk evaluations I ever heard (read) from a seller of naked options: "I was never in any danger. The stock was always higher than the strike price of the puts I am short." This person was convinced that the only time risk must be considered occurs when short options move into the money.

Recently there has been much discussion in the media about the new "fiduciary rule" Obama imposed through SEC regulations.  Despite the industry outcry, this actually is a great thing for consumers and could go to end many of the practices that I find deplorable which are common in the investment advisory industry.

There is a subset of option traders who seldom, if ever, are willing to pay cash.  All  initial trades, all adjustments, all rolls – must be made at a net cost of zero or less.  The only exception occurs when exiting a trade and collecting a profit. Can it always work? 

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.

Options are instruments that are ideal for traders who prefer to trade with limited risk but want to enjoy the luxury of unlimited profits. Though this prospect seems unreal at first glance, options do indeed provide you with that luxury though things aren’t so straight with this instrument.

A butterfly spread options strategy is a combination of a bull spread and a bear spread. It is a limited profit, limited risk options strategy. There are 3 striking prices involved in a butterfly spread and it can be constructed using calls or puts, which are virtually equivalent if using same strikes and expiration.