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Performance Reporting: The Myths and The Reality

It never stops to amaze me. I'm talking about the creativity of some options "guru" when it comes to presenting their track record. "Maximum profit potential", "Cumulative return", "90% winning ratio", "Annualized return" are just few of the tricks used in the industry to entice you into joining their website. This article describes some of the tricks used to make performance numbers much better than they are.

2012 - Year In Review

Happy New Year everyone! Wishing you and your families a lot of health and happiness in 2013. It's hard to believe that it has been a full year since SteadyOptions (SO) started as a public service. Overall, we had an excellent year. We did 271 trades which produced a $9,149 gain, based on fixed $1,000 allocation per trade (non-compounded). Assuming maximum of 6 trades open (the average number is much lower), that translates to 152.5% ROI.

Options Expiration Date And How It Influences The Price

To understand how the expiration date of an option influences the price, one first needs to understand how the price of an option is calculated in the first place. While the standard formula to calculate options prices, the Black-Scholes model, is very complex and requires advanced knowledge of statistics, for most traders it is sufficient to understand the basics involved.

November delivered 16.7% ROI to SteadyOptions subscribers

November was a good month for SteadyOptions. We closed 35 options trades in November, 20 winners and 15 losers. Total gain in November was $1,000 based on $1,000 allocation per trade. Assuming maximum of 6 trades open (the average number is much lower), that’s 16.7% non-compounded gain.

Debit Spreads Vs. Credit Spreads

 

There is a lot of confusion and misconception about debit and credit spreads. One of the most common misconceptions:

"One of the many drawbacks of a credit spread is that it will tie up so much capital."

Another misconseption:

“Selling credit spreads is like picking up pennies in front of a steam roller.”

 

The Use And The Abuse Of The Weekly Options

Options trading is becoming more and more popular every year. The options become more liquid and more traders use them for hedging, speculation, income etc. Weekly options, first introduced by CBOE in October 2005, are one-week options as opposed to traditional options that have a life of months or years before expiration.

Thank You Google, And See You Next Cycle

Google (GOOG) reported earnings on Thursday, July 19, 2012, after the market close. My favorite way to play Google earnings is by placing a reverse iron condor few days before earnings and selling it before the announcement when IV (Implied Volatility) spikes. This cycle the strategy played out especially well for Google.

Google Earnings Trade: Risk Vs. Reward

As we all know, risk and reward are directly related in trading. You must take more risk to get a larger return on the trade. There is a third parameter, which is related to a potential return: probability of success. A higher probability of success translates to lower potential return and vice versa.

Lessons From Earnings Plays

 

There are many ways to play earnings. Some people prefer to play them directionally, buying calls or puts. I think that earnings are unpredictable; hence I prefer to play them non-directionally. I decided to check how some of the popular high flying stocks performed this earnings cycle.

 

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