Selecting the right broker is one of the most important things for options traders. It becomes even more important if you are an active trader and trade hundreds or thousands contracts every month. Select the wrong broker - and your chances to make money are going down dramatically.
Some ideas are simple at first glance but contain risks that mightnot be entirely obvious. Binary options are an example. Some traders love them, just as some roulette players are attracted to the appeal of “red or black” as a 50/50 proposition(or close to it, a 47.4% chance of winning due to the ‘0’ and ‘00’ possibilities).
One of the greatest benefits to trading options is that you can make money in an up, down, or sideways market. For example: In a bull market you can buy calls, or purchase bull call spreads and bull risk reversals. In a bear market you can profit buying puts, bear put spreads and selling bear call spreads.
Nothing impacts stocks prices more than company earnings reports. There are many way to trade those earnings announcements. You can take a directional bet if you believe the stock will move (higher or lower). Or you can play it with some of the non directional strategies.
All traders begin with an introduction to call and put options. However, it's rare (apart from short puts) that an experienced trader would use these contracts by themselves. Instead, we primarily trade options spreads. There are many benefits to spreads. The variety of spreads are targeted to various market criteria and market environments.
Almost all passive investment strategies are based on the assumption that younger investors should hold more equities as a percentage of their total portfolio. Likewise, as they age and get closer to retirement, the allocation to fixed income assets should grow while equity holdings shrink.
Options traders do not have to act as gamblers … even though many do. There may be a thin line between trading and gambling, and that line is obscured when it comes to weekly options. If you utilize options to reduce risk, it is smart trading. But if you treat options trading like a bet on red or black in a roulette game, then you’re not hedging; you’re gambling.
Many of SteadyOptions members are using the CML TradeMachine backtester. The Trade Machine allows to identify patterns that have repeatedly turned a profit over and over again, then see those results with no room for confusion or doubt. This is how traders profit from the option market — it’s preparation, not luck.
Last week Facebook (NASDAQ:FB) had the biggest one day drop of market cap in history for a single stock. It erased $120 billion in market value. Of course, the odds of a such a big move are pretty small, but the result can be devastating. We saw that with Facebook. As options traders, what can we learn from this event?
Last week Apple Inc (NASDAQ:AAPL) stock reached a one Trillion dollar valuation. A remarkable achievement. Of course there is nothing wrong with just buying the stock and holding it "forever". Today I would like to describe a different way to trade Apple using its options. It will also provide some insights into our trading process.
Over the past two months, we have been working on developing a put selling strategy to implement through Steady Options, using Anchor as a partial hedge against market decline. However, back testing has been quite a pain, at least until I was directed to ORATS Wheel software.
What is the real benefit of diversification? Sometimes it's not completely intuitive to investors. Let me provide an example, using historical data of 2 Vanguard mutual funds, VFINX (S&P 500) and VUSTX (Long term treasuries). For fun, we'll compare the end result to Warren Buffett's performance as well, just to further drive the point.