How To Trade Risk Reversals

Every card in the scanner carries a block called How expensive is this entry? It compares what you would pay today against what the same setup cost on the same ticker at the same point in past cycles. I built that block in August. It reads well. But a reading that looks sensible and a reading that predicts something are different things, and until last week I had only the first.

By Romuald, 5 hours ago

LEAPS stands for Long-Term Equity Anticipation Security. Which is just a long-dated option, typically referring to those with expirations more than a year out. There’s no technical difference between LEAPS and shorter-term options other than the expiration date. They’re traded on the same exchanges and have the same rules surrounding margin and whatnot.

By Pat Crawley, 12 hours ago

A trader looks at a pre-earnings straddle and asks whether it is expensive. It is the right instinct and the wrong question, because the word carries no meaning on its own. Expensive against what? A $12 straddle on a $200 stock is not expensive or cheap. It is $12.

By Romuald, Tuesday at 08:15 PM

Options education almost always begins with structures. Traders learn vertical spreads, calendars, butterflies, condors, covered calls and straddles, study the expiration diagrams, work out maximum profit and loss, and build a sense of the conditions each structure is supposed to suit. That foundation is necessary and there is no way around it.

By Kim, July 25

Both SPX and SPY options give you exposure to the S&P 500. They track the same 500 stocks, move nearly tick-for-tick, and offer the same core strategies — credit spreads, iron condors, butterflies, and 0DTE trades. Yet the two products settle differently, are taxed differently, and carry very different assignment risks.

By krisbee, July 7

Loyal readers of this blog will recall my post from 2019 “Pinning Down the ‘Option Pinning’”. If you have not heard of pinning have a look at that article as – spoiler – everything in it as well as Jeff Augen’s observations in his books which are referenced is still valid.

By TrustyJules, July 6

This is a reprint of my Seeking Alpha article from 2013. If you have SA subscription, you can read the full article including hundreds of comments here. For the record, the strategy implementation has changed since then, but the principle remains the same. You can read more here. 

By Kim, June 6

Trading the financial markets can be rewarding, but it also offers its fair share of complexities and obstacles. When faced with thousands of financial instruments, fluctuating markets, and a range of platforms at their disposal, traders can feel overwhelmed.

By Kim, May 25

Investing your money is arguably the most effective way to build wealth, but it’s not some magic get-rich-quick scheme. It comes with risk. If you jump into investing, especially if you’re considering investing in cryptocurrency and treat it like gambling, the chances are that you’ll see the same results as gambling.

By Kim, May 22

Whilst the Palantir CEO is carping on about the fact that the iPhone is the crowning achievement of civilization and nothing has changed our lives more, us investors are left wondering if all the money that is going into the future grand vista of Big Tech really is the proverbial land of milk and honey.

By TrustyJules, April 25