SteadyOptions Trading Blog

There is more than one way to look at every situation. My individual perception may be different from yours. Part of the time there may be room for interpretation because the ‘facts’ are soft and may be considered from different points of view. At other times, the facts are undisputed, but people have different interpretations. Here is one example.

Margin trading is a way to magnify your buying power by borrowing money from your broker. The amount that can be borrowed varies over time, but the current number is 50% when trading stock. Translation: When a trader buys shares of stock that qualify for margin, she may borrow a maximum of one-half of the cost from her broker.

Steve Burns has been investing in the stock market successfully for over 20 years and has been an active trader for over 14 years. He is the author of six books all published by BN Publishing. I have been following Steve for years, and would like to bring some of his gems to SteadyOptions readers.

According to CBOE, The CBOE Volatility Index® (VIX® Index®) is a key measure of market expectations of near-term volatility conveyed by S&P 500 stock index option prices. Since its introduction in 1993, the VIX Index has been considered by many to be the world's premier barometer of investor sentiment and market volatility. 

I came into excellent article by Peter Brandt on Drawdowns and Scammers. Peter explains why most long-term profitable traders spend the vast majority of their trading careers either in a drawdown or recovering from a drawdown. Any slick promoter who tells you different is not dealing from a full deck.  

As Rookies, one of the most basic concepts we learn is that: An option gives its owner the right, but not the obligation to exercise the option at any time before the option expires. Eventually we learn that this applies only to American style options and that European options may only be exercised only when expiration arrives.

Every premium seller faces a situation in which it is clear that getting out of a risky situation is the best move. Sometimes we make a clean exit. At other times the position has become too large because imminent risk has increased. At those times we can return to a comfortable situation by exiting a portion of the trade.

An options trader said on CNBC to buy OTM call spread before AAPL earnings. The headline was Here's how I plan to quickly make 317% on Apple. Nice headline and nice way to attract viewers. But was it a good way to trade earnings or was it a pure gamble? We are about to find out.

Options can be risky, even very risky, but they don't have to be. There are a lot of myths and misconceptions about options trading. Here is one of them: you should aim for at least 100% gain in each option trade, otherwise it is not worth the risk. Is it true?

On CNBC's Mad Money, Jim Cramer has a segment called "Am I Diversified?". A caller tells Jim about five stocks in his or her portfolio and Jim has to decide if the caller's portfolio is "diversified." So for the retail investors out there, Cramer is sharing his top tips on how to manage your own portfolio.

One of the more difficult aspects of options trading is knowing when to take a profit. No one likes to ‘leave money on the table.’ However, I also hope that no one likes to lose thousand of dollars trying to earn another $50 to $100. There is a compromise somewhere.

NFLX is scheduled to report earnings on Monday July 19, 2016. I was asked the following question on one of the online forums: "What option to trade to protect NFLX shares being held thru earnings on Monday"? My answer was: "That depends what level of protection you want".