Traders focused in stocks, ETFs, and mutual funds may avoid options for several reasons: Perception of high risk, complexity of the market, dizzying levels of specialized jargon. These concerns are part of the learning curve and can be overcome – if traders look at options trading as science and not just gambling.
A couple of months ago, I wrote and article for Steady Options titled – There’s Volatility To Be Found …. In Turkey. At the time, implied volatility had sky rocketed to 45% amid political turmoil and a falling currency. That level of volatility was a 12-month high, with vol previously being as low as 19%.
It is axiomatic that the largest investment returns typically come from investing in private companies. Peter Thiel initially invested $500,000.00 in Facebook, which was worth over $1b when he cashed out. Eric Lefkofsky turned an investment of $546 (that’s not a typo) into $386m in cashed out payments.
Options expiration dates and strikes are among the most important parameters options traders must consider. Today we have the well-known weekly, monthly, cyclical, and LEAPS options. A lot of choices. But is that as far as we can go? The realm of possibilities could be endless. Consider some of these possible expansions:
“Income” trading has become wildly popular for option traders since the global financial crisis. This style involves selling out-of-the-money options to a hedger and collecting the full premium payment at expiry — assuming the underlying doesn’t trend too hard in one direction.
Is QE money printing or is it something else that appears to be money printing? Search the internet for “QE and money printing”, and you will see countless articles explaining why Quantitative Easing (QE) is or is not money printing. Here are a few articles that we found:
I've written about writing naked puts on multiple occasions, as I find it to be an attractive way to gain long exposure to the underlying asset class. It doesn't have to be a decision of one vs. the other (meaning, is it better to sell puts or own the underlying asset directly?), as there are advantages and disadvantages to both.
Do you feel you don't have time to trade options? This is one of the most common objections I hear from potential traders. In this article I'll give you 10 actionable tips to trade options like a pro while you balance life's other commitments.
Risk all too often is defined by the attributes of a strategy, and nothing more. However, the circumstances under which a position is opened is a better indicator of actual risk. Why? Because risk is not fixed but varies based on proximity of price to strike, and of strike to resistance or support.
Stoking the Embers of Inflation is one of the more important articles we have written. The Monetary Equation Identity discussed in the article provides a counterintuitive way to think about inflation. It took us a long time to accept that this identity lays out a real case for stagflation.
Academic research refers to the persistent phenomenon of ex-post implied volatility (IV) exceeding realized volatility (HV) as the Volatility Risk Premium (VRP). As it applies to option premiums, this leads to a positive expected return for being a systematic option seller.
As we enter the third week of June, sentiment has steadily gotten more optimistic, with sentiment polls like Investors Intelligence having risen now for the 5th straight week, while Bears have dropped down under 18%. The net plurality now stands at 35%, which is worrisome given that Equity put/call data has also dipped down to levels last seen in late January when equities peaked.