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  3. Pat Crawley

    Market Orders vs. Limit Orders

    Limit Orders Market Orders Stop Orders Stop Limit Orders While the type of order you use might seem like a trivial detail, it can actually make or break a trade’s profitability. What is a Limit Order? In a nutshell, a limit order is a way to buy or sell a stock at your limit price or better. A limit buy order for $2.25 means you're willing to purchase the option contract at any price up to $2.25. If someone will sell it to you for $2.20, your order will execute at $2.20. It works the same way on the sell side. A limit sell order for $1.50 means that $1.50 is the lowest price you’ll accept for your contract. Typically, option traders should only use limit orders and different variants of them, as market orders can Limit orders are the building blocks of financial markets. At their core, exchanges are big databases of limit order books with matching algorithms. What is a Market Order? Market orders are orders you send to the market for immediate execution. This means accepting the best available price based on the best bid or offer. Using market orders is a very aggressive strategy and generally only reserved for those emergencies when you need to exit a market in a panic due to a mistake. Below are the bid/ask spreads for a series of Tesla (TSLA) options: Submitting a market order to buy, for example, the 870 call in this series, would most often result in you paying $43.00 per contract. ‘No problem,’ you say, ‘I’m willing to pay $43.00 for those contracts.’ The problem is that market orders are like blank checks to the market. You're telling the market, "I will take any price you give me for this order." It's like going to a real estate agent and saying, "I want to buy this house, even if the seller revises his price upward between now and when you give him the offer." Not so fast, because there are four problems with using market orders. Stale Quotes Market orders have no mechanism to protect you from high-frequency market makers who change their quotes at the speed of light. See this 2011 case where a retail trader submitted a market order to buy an ETF trading at $26, only to see his order executed at $35 due to market illiquidity. This issue of market illiquidity is only compounded in the options market. Liquidity is fragmented across a series of options contracts. While there are thousands of stocks to trade in the stock market, each stock can have dozens or hundreds of different contracts. Few traders are willing to take the other side of your trades in a specific option contract at any given time. For this reason, you should never use a market order in options trading. While it's generally advisable not to use them when stock trading, it's far less risky. If you're trading a liquid stock like Apple (AAPL), you might lose a few cents if the quote you rely on goes stale after sending a market order. But order books are very thin in the options market, ensuring significant slippage if the quote goes stale. Aim For the Midpoint With a Limit Order The ‘midpoint’ in options trading is the midpoint between the bid and ask prices. If the bid/ask is $4.00/$6.00, the midpoint of that quote is $5.00. If the option has sufficient liquidity, the midpoint can often act as an approximation of its theoretical or “fair” value. And as a result, market makers or other traders are frequently happy to trade with you at the midpoint, especially if you’re willing to be patient. The difference between hitting a bid or offer and taking liquidity from the market makes a huge difference in a trader's career. It can be the difference between long-term profitability and breaking even. While you won’t be able to get the midpoint 100% of the time, you can get it often enough that you should make a habit out of pricing your orders at or near the midpoint unless you have a compelling reason not to. Wide Bid/Ask Spreads The bid/ask spread is the difference between the best bid price and the best offer/asking price. In highly liquid stocks like Apple (AAPL) or Microsoft (MSFT), the bid/ask spread can often be as small as a penny when just trading the stock. This isn't exactly true for the options market. Not all options trade in penny increments. In fact, the minimum pricing increment for many options is $0.05 or $0.10. According to TD Ameritrade, here are the current minimum price increments in the US options market: Contract Price Range Price Increment $0.10 - $3.00 $0.01 or $0.05 $3.00+ $0.05 or $0.10 Consider that even for an option priced <$3.00 having an $0.01 increment, a penny is still a significantly larger percentage of the price than it is for a share of stock like Apple (AAPL) priced above $100. Option Bids and Asks Are Bad Prices The best bid price is generally well below an option’s theoretical value, and the best ask above it’s theoretical value. So sending a market order to the market almost always means that you’ll be overpaying for your options or not getting enough when you sell them. What To Use Instead of a Market Order: Marketable Limit Order Perhaps submitting a limit order at the midpoint and patiently waiting to be filled isn’t an option. Maybe you’re making an event-driven trade and you need to get in/out now, or maybe you forgot to close your trades and the market closes in 30 seconds. Sometimes you require instant liquidity. So if market orders aren’t an option, what do you use when you need instant execution? Marketable limit orders. A marketable limit order carries all the benefits of a market order without any of the risks of insane slippage. Marketable limit orders aren't a special option in your trading platform. You can create one with just a simple limit order ticket. You only need to price the order at the bid or ask, and the order becomes eligible for instant execution. For example, let's say you want to submit a market order to buy an option with a bid/ask of $4.50/$4.55. To submit the equivalent marketable limit order, you would send a limit order to buy the option one tick above the asking price, in this case, $4.60. In this case, if the quote you're relying on goes stale, then the worst that could happen is that you get filled one tick above your expected price. Summary Seasoned options traders never use market orders for four reasons: The quote you’re relying on might be ‘stale' when your order makes it to the market, meaning you might end up paying more than you expect. Generally, a market maker will fill you if you submit a limit order at or near the midpoint. Bid/ask spreads are much higher in the options market than in the equity market. The asking (bid) price for any option is generally well above (below) the theoretical value of the option contract. It isn't easy to be a profitable trader if you consistently pay too much or receive too little for options.
  4. Last week
  5. Djtux

    volatilityhq.com Official Thread

    Data has been imported now.
  6. FrankTheTank

    volatilityhq.com Official Thread

    Sorry more feature requests. Happy to pay more if you need to increase the cost of this or pay directly for special reports if you have time/interest Could you list the actual date+time when the ER date was announced instead of "2 weeks ago", etc. It makes it hard to figure out exactly when the press release came out. I realize this is a big ask and happy to share my research with you but I think there is a lot of value in wider double calendars such as 25 delta put and 25 delta call calendars. Ideally all the same calendar features could stay in there such as being able to change the short from Before to After earnings and the ability to change calendar time widths (1 week, 2 week, 3 week, etc.). Many thanks !
  7. This back-test on the Earnings Chart page is outdated - should have been removed. Use the one under the "BACKTEST" link on the main page
  8. Is anyone else seeing only two results for the return matrix under the "historical straddle performance" area? Here's an example:
  9. Djtux

    volatilityhq.com Official Thread

    The data import failed yesterday evening. I'm trying to figure out why and fix it. Sorry about that.
  10. Earlier
  11. Djtux

    volatilityhq.com Official Thread

    I’m unable to disclose more.
  12. Kim

    SteadyOptions Hall of Fame

    Losses are part and parcel of the game. I know that they may feel like a little knife in the ribs at times, but rest assured, that in this case, it wasn't cos you did anything wrong.(I'm sure in the future, at some point you will screw up a trade just like the rest of us!). Just think of it as a tax you need to pay on the winning trades which can, and will, come later on. I think this is where position sizing is paramount - the failure of one trade shouldn't make a big dent on our equity curve, and like likewise, the success of any other trade shouldn't have us ordering a lambo. In fact, I hate to say it. but really, for me trading works best when I make it almost mechanical and non-emotional. (That reminds me of one of my previous relationships, but that's another story.) Happy trading. @zxcv64
  13. Good question, it uses the Tradier API so you would still need to trade 4+1. But once filled you can add the individual leg to the 4 legged spread combo to correctly follow its performance. I am working on a function where you can build the 5 legged spread that we are trading now and the app would automatically seperate it in two orders. Once filled they combine in the portfolio. Same for closing. But this still needs a bit of testing so I’m sure it’s stable and working as intended.
  14. Super. Can it handle the 5 legged combo trade as a single order?
  15. That's great, thank you @Bull3t007 And here are the details of our deal with Tradier if anyone is still not aware - https://steadyoptions.com/forums/forum/topic/3318-tradier-brokerage-special-offer/
  16. Hi All, I have been a Steady Options member for around 6 years now, making a steady income by incorporating the SO strategies into my own trading. However, I don’t always have access to a computer, and that has created some difficulties with following trades. I think a lot of you can emphasize. For this reason, I decided to build my own mobile trading software on par with current desktop platforms. I partnered up with Tradier to develop an iOS app for their subscribers: Spreadable. It will be released in 2 weeks & listed on their website as one of the officially supported platforms. Supported devices include: iPhone, iPad, Mac (Apple Silicon), Apple Watch. Spreadable perfectly supports the type of trading we do here; I haven’t needed to touch the desktop software since starting to use it ˜3 months ago. Almost all of Steady Options strategies are automatically detected and can be traded as one spread from opening to closing. I’m now turning to the SO community to offer a free trial period and ask for your invaluable feedback regarding any usage problems or functionalities you’d like to see (more details are provided below). To use the app, send me a message with your email and I will provide you with an invitation link and your demo login credentials. You will need to download the Apple TestFlight app and then you’re all set. Some of the key features: - Automatic Authentication Refresh: I partnered with Tradier to incorporate their automatic refresh function. You will only need to login with your Tradier account when installing the Application for the first time or other major logout events. After that refreshes are done automatically. - Spread management: Building options with the interactive option chain is fast and intuitive. Spreads are automatically detected and once filled they are displayed in your portfolio as the spread you created. Alternatively: if you bought legs individually or want to create your own spreads you can easily do this in the portfolio page. - Quick ordering: Intuitive spread builder and one click spread closing in your portfolio. The order screen is one page where everything is optimized for your fingers, like Steve Jobs always wanted J. - Detailed performance overview: The portfolio page already shows all the details of your positions but by tapping it you can find other info such as the estimated earnings date, open orders and performance history graph. The grouped spreads have the exact same feature. - Earnings Alert: Displays estimated and confirmed upcoming company earnings. Still in beta but will get it more accurate with different sources. Coming soon: - Apple Silicon Mac (Coming in 2 weeks) - Apple Watch App: View all your positions, close your positions, update orders, cancel orders, check earnings and stock prices. (Coming in 3 weeks) - Notifications: Get notified when position profit/loss target is reached, order is filled, earnings is confirmed. (TBA) - Full Trade Performance History: View your performance per option strategy, equity and single legs. Video Tour: https://www.youtube.com/watch?v=bU3rftrbde8 Beta: free use until the official release The app is now fully functional, and I would love to get your feedback. You can use it for free until its official release. After login, you can use your Tradier account to start trading. If you encounter any bugs/crashes, layout issues with your particular iPhone size, or you’d like to see other features incorporated, leave a post in this topic or use the messaging function in the app. All functionality is also working on iPad but UI elements will be significantly improved in the full release. Pricing and Steady Options Discount I will be pricing the app at 39.95 USD a month. SO members receive a 25% discount, so only 29.95. The app is used in addition with Tradier services so you will need to be a Tradier customer first. Tradier offers 10$ a month unlimited option and stock trading with their web dashboard. If you want to use the Spreadable app you would therefore be paying 29.95$ + 10$ = 39.95$ for the use of this app with unlimited stock and options trading. Around 20$ less than the TradeHawk Package.
  17. TrustyJules

    volatilityhq.com Official Thread

    For reference could you say which source is which on VolHQ I noticed one is earningswhispers which seems the most available but what other sources do #1=6 stand for?
  18. Djtux

    volatilityhq.com Official Thread

    For today it is an error, i have reported the error to the provider. For the previous may earning it seems that uber announced at the last minute that they moved from AMC to BMO their announcement: https://investor.uber.com/news-events/news/press-release-details/2022/Uber-Reschedules-First-Quarter-2022-Earnings-Call-to-Wednesday-May-4-at-500-a.m.-P.T/default.aspx
  19. If you learn to predict the future of stock and identify the best one as per your budget then the chance of winning the money becomes higher. So, doing research on the stock market before investing your hard-earned money should be the main chant for the traders. You should set your own strategies and believe in your prediction. Let us check some vital steps to improve trading and know how to become a trader from the following part of the article. Useful steps to improve performance in the trading market Investing in the trading market means buying and selling financial commodities to earn a profit. Though traders invest in the trading market with the hope of making more money, the reality may not be as you want always. The stock market is not a place where you can predict the future 100% right because none knows when the value of a stock may go down or rise up. The outcome of the investment depends on your prediction and prompt action in the trading market. The traders can increase the chance of winning the stock by following some essential steps. 1. Make a trading plan Proper preparation takes your performance to the next level in any field. When it comes to investing in the stock market, then you need to prepare a plan beforehand depending on your budget and timeline for investment. The traders should check the detail of every rule for buying the stock of a company. You should check the tested and successful trading strategies before setting up your own plan. 2. Invest in learning There is no end to learning and in the case of the share market, it is so vast that one can not be master of every part of it. So, you can opt for any particular type of stock market investment learning. You should collect the information from authenticated sources and verify it. Different stock types and the rules of investing in those should be clear to you. You can also invest in the trading classes and understand the guidelines before making a plan. For example, if you want to become a day trader, then you can learn different rules of successful day trading. On the other hand, if you want to take more risks and wait for a few days before selling off your stock then you should know how to recognize the right time of making the best profit. 3. Avoid following others in trading You may get to know about the top stock bought by the majority of the trading community. The traders may feel safe following them. But Following the activities of the traders without analyzing the real value of the stock and taking a similar step in the trading market can be risky for you. You may not know their planning for trading with the financial commodities so you should not be blind to follow the steps. Rather you should do a fundamental analysis of the stock and understand whether the stock is really that valuable or not. If you predict that investing in the stock is really fruitful after checking the history of the company and the future of the service and products of the company then you should invest in it. 4.Clear your mind and focus Before opening a trading application on your mobile phone or computer, you need to feel confident, focused, attentive, and relaxed. Keeping your mind clear and focused is essential to take the right decision at the right time. A minor mistake may lead to a great loss in trading. So, the trader should be very conscious while buying or selling a financial commodity. Developing trading fear is common among the new performers in the market. But you should build up your confidence by gathering information, learning the process of analyzing the stocks, and checking the performance of the company. Every day, you need to give some time to your mind for preparation and focusing on trading before stating the deal. A disturbed mind may not be able to identify the right stock. 5. Use the affordable amount in trading People invest in trading when they want to make some extra money using their assets. There is always a risk of financial loss when you invest in buying financial instruments. So, using money that you don’t need to meet the basic requirements is always safe in trading. If you lose the amount then also you can run your days comfortably without that asset. It is also suggested to start with a small amount of money in trading. You may not know when to sell a stock to make the highest profit in the beginning. Investing more means increasing the risk. So, you should be conscious of the amount for buying the stock and the timeline for keeping it invested. 6. Lessons from practice Learning different trading strategies and applying those in the practical field are different. After gathering information and learning the trading strategies, you need to learn lessons from the practical applications of those strategies. You may lose or win in the trading market but you definitely learn from it. You should make a note of your trading strategy and check how it is working. In the later days, you can check those strategies. So, if you want to take trading practice to a professional level then you should check the strategies used in the previous deals and what was the result. This can be a practical guideline for you in the coming days to prevent you from making the wrong decision in the trading market. 7. Take technical benefits In the digital era, technical use in trading is expanding rapidly in the market. The use of technical applications has made the investment process in the trading market easy and time-saving. Now the traders can easily check the trading market whenever they want on their mobile phone or the screen of the system. They can check the value of the stocks and their availability in an easy manner as well. Moreover, they can follow the top stock, fundamental and analytical results of the stocks, and previous performances of the company. So, investing in the right stock under proper guidelines is possible with the help of such applications. But you should not follow the technical suggestions blindly. Before investing in the stock market you need to set your own strategy using all the information. Final words Trading performance generally improves with time when the investors gather practical experiences and learn from their mistakes. Building up confidence is very important to perform confidently on the trading platform and the traders should have a clear concept of trading for that. The traders need to select the right type of trading as per their interests and available resource. Different trading types have several pros and cons and you should know about those in detail before choosing one. So, the traders need to understand the above-mentioned steps to improve their trading skills and follow those. This is a contributed post.
  20. Yowster

    volatilityhq.com Official Thread

    @Djtux UBER reported earnings this morning and the company's investor relations website had it listed as before open today, but VolHQ had it as after the close today. Do you know what could have caused this discrepancy? The prior two cycles have large T-0 declines on the straddle RV chart, so it looks like the same reporting glitch may have happened there.
  21. mccoyb53

    Member of the Month

    Well done @FrankTheTank. Great contributions and you made me some money on numerous occasions. Many Thanks
  22. FrankTheTank

    Member of the Month

    Wow. Thank you all. I am on vacation this week so this was a nice surprise to see in my account.
  23. Welcome to the ORATS earnings report where we scan for companies with upcoming earnings announcements, check out historical earnings information, and find a potential options trade. Consumer Discretionary (XLY) has been the best sector since the market’s bottom on June 16. Not all stocks have participated, though. Those with a global footprint, with particular exposure to China, have struggled to weather that nation’s strict Covid policies. After good numbers from McDonald’s (MCD) and a positive stock reaction from Yum China (YUMC), all eyes are now on Starbucks (SBUX) for the latest clues on the state of both the American consumer and those globally. Discretionary Leads From the June 16 Market Low According to Bank of America Global Research, Starbucks is the world's leading coffee retailer, with more than 29,000 locations (with total units split roughly half company-owned and half licensed). The company purchases and roasts high-quality whole bean coffees and sells them, along with fresh, rich-brewed coffees, Italian-style espressos, teas, cold-blended beverages, and complementary foods. Starbucks has recently expanded beyond its core retail business into consumer products leveraging the strength of its brand equity. The Seattle-based $97 billion market cap Consumer Discretionary stock, listed on both the Nasdaq 100 (QQQ) and S&P 500 (SPY), features a P/E ratio near 25.4 times last year’s earnings, according to ORATS, which is 46.4% under the average for the last twelve earnings observations. Robust EPS growth through 2024 may warrant an above-market earnings multiple. BofA sees profits rising more than 35% next year after a big 2022 drop. The stock yields 2.3%, according to The Wall Street Journal. SBUX: Earnings, Valuation, Dividends As a result of this year’s expected earnings decline, Starbucks’ forward P/E ratio is lofty near 25 times. That’s actually on par with other restaurant stocks. Above-Market Earnings Multiples in the Restaurants Industry ORATS shows a $0.75 consensus earnings estimate for Starbucks’ reporting date confirmed for Tuesday, August 2, AMC. That would be a whopping 26% year-on-year net income per share drop. Higher labor costs and certainly the Covid-related shutdowns in China weigh on firm profits. Since the May quarterly report, there have been four analyst downgrades of the stock with just a single upgrade. On the upside, SBUX has beaten analysts’ estimates in seven of the past eight earnings reports, according to ORATS data. Starbucks Earnings Date Options Color The options market expects a move of 4.9% in either direction. This move was breached in 4 out of the last 12 earnings. Historical Implied Moves vs Actuals During that time, the post-earnings move was outside of the implied range 4 times. In those cases, long straddles were profitable. The rest of the earnings moves likely yielded profitable short straddles. The Technical Take SBUX recently broke above key resistance in the low $80s to climb near $85 late last week. Next resistance comes into play around $93 – the late March peak (and an old gap fill) before shares plunged below $70 during the worst of China’s Covid lockdowns. That high $60s range was important from late 2018 through mid-2020 (sans the Covid Crash). Keep these price levels in mind around Tuesday night’s earnings announcement and stock price reaction. SBUX Resistance Near $93 Caps Upside The Options Angle ORATS quantitative analysis finds that the highest ranked trade is a Long Put Calendar with strikes at 85, expiring on Friday, September 9th and Friday, August 19th, for a debit of $0.78. This is a play on the stock indeed finding resistance in the low $90s and pulling back to the $85 strike. Long Put Calendar Play By pulling up the trade on the ORATS dashboard, we can see the theoretical values in more detail. The distribution edge, found by the expected value of the payoff picture on the stock's historical distribution, has an edge of 26.3%. The forecast edge, which is derived from historical volatility, has an edge of 10.0%. Lastly, the smoothed edge, which is calculated by drawing a best fit curve through the monthly implied volatilities, has an edge of 1.3%. The edge is relative to the mid-market price of the trade. Greater positive edges are a theoretical benefit to the trader. We can also look at the payoff graph. The reward to risk divides the max gain by the max loss. Here 2.3:1 is the ratio of the max gain of $187 to the max loss of $-80. There are two break evens for this Long Put Calendar at $80.95 and $89.55. Options Valuation Over the last month, the stock price rose 10.3%, while the thirty-day implied volatility rose 1.5%. The average slope of the trendlines is negative. The heatmap on the right side of the graph is green where volatility and slope are undervalued, and red where they are overvalued. In this case, short-term implied volatility and slope are neutral, while the long-term is slightly undervalued. Monthly Implied Volatility Slopes The Bottom Line Starbucks looks to rebound from a dismal 52 weeks. Down 31% from this time in 2021, the stock recently broke above resistance and might look to continue the uptrend after its earnings report Tuesday. But gains may be capped at $93 leading to an eventual retreat. ORATS finds that a long put calendar spread at the $85 strike using the (short) August and (long) September expirations is the optimal trade. You can watch our full Starbucks earnings preview here. For any questions or issues with the article, please contact otto@orats.com. To subscribe to the dashboard, please visit https://orats.com/dashboard Disclaimer: The opinions and ideas presented herein are for informational and educational purposes only and should not be construed to represent trading or investment advice tailored to your investment objectives. You should not rely solely on any content herein and we strongly encourage you to discuss any trades or investments with your broker or investment adviser, prior to execution. None of the information contained herein constitutes a recommendation that any particular security, portfolio, transaction, or investment strategy is suitable for any specific person. Options trading and investing involves risk and is not suitable for all investors. About the Author: Matt Amberson, Principal and Founder of Option Research & Technology Services. ORATS was born out of a need by traders to get access to more accurate and realistic option research. Matt started ORATS to support his options market making firm where he would hire statistically minded individuals, put them on the floor, and develop research to aid in trading options. He is heavily involved with product design and quantitative research. ORATS offers data and backtesting on a subscription basis at www.orats.com. Matt has a Master’s degree from Kellogg School of Business.
  24. ParadigmAU

    Member of the Month

    Congrats @FrankTheTank. A well deserved award.
  25. Ringandpinion

    Member of the Month

    Frank's wife comes into the bar and there Frank is, slumped over the bar, plastered. His wife, in a fit of rage stomps over and spins his barstool around and screams "I thought you promised you would have only one drink a day for the rest of your life". Frank hiccups and calmly replies, "yep, and I'm working on February 23rd 2037". Thanks for all the trades, advice and help @FrankTheTank. I owe you at least one good drunk and I'll try to explain it to your wife.
  26. Optrader

    Member of the Month

    Congratulations @FrankTheTank . Keep coming up with great trade ideas.
  27. TrustyJules

    Member of the Month

    @FrankTheTank is the man, though sometimes we may feel a little like the below before strapping on the helmet and going in for the trade: via GIPHY
  28. t'pee

    Member of the Month

    I missed a few of the latest members of the month but it’s good to see the community has expanded with some really smart people, kudos to all!. @FrankTheTank is of course a veteran and I still learn from his ideas and questions, very well deserved!
  29. Kim

    Member of the Month

    Member of the month award for July goes to @FrankTheTank for his continues stream of new trading ideas
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