Tag Archives: trading

Stock Trading

Options Trading: The Basics

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Being the best investor requires you have knowledge of all your trading options in order to make the most informed decisions. There are a number of options available to you and one of them could make you great returns if you use it properly despite the fact that it is so often misunderstood and that is option trading. Options trading is not a traditional investment in the same vein as stocks and bonds, so you truly need to understand options before you begin investing in them.

The potential for volatility is the biggest issue with options trading. However, it pays to realize that the volatility is actually in direct proportion to how much speculation the investor is willing to engage in. For example, someone who is used to trading in commodities and other similar securities will have little trouble employing the same types of speculative strategies in options trading. You should also be aware that speculation is not always necessary. Those who don’t find it very comfortable to speculate can actually afford to be more reserved when they deal with options.

Options and What They Are

When it comes to options, you are actually buying the right to purchase stocks or shares at a price that both you and the seller have agreed on. This contract is purchased by you from the seller and your goal should be to exercise your right to buy at a later date. This type of transaction is considered an option for two reasons. The first reason is that you are not under any obligation to buy the asset despite the fact that you have paid for the right to buy it. Second, acquiring the asset is something that will take place in the future – should you choose to exercise the option. Either way, you will pay for the contract whether or not you acquire the asset.

Thinking about purchasing the car of your dreams might help you to understand it more. You might pay the owner $5,000 for an option contract which allows you to purchase the car for $25,000 anytime within the next 90 days. During that time you have the ability to raise the cash, do a little more investigation on the vehicle, and decide whether or not it is an appropriate investment. If you decide to go through with the deal, you give the owner the $25,000 and he surrenders the car to you. If you decide not to go through with it, the owner keeps your original $5,000 and is free to sell the vehicle to someone else.

The Various Types of Options

Not only can you trade options in two different ways, there are two different types of options that you can trade. Let’s We will first look at the ways of trading.

The two ways to trade options are known as “calls” and “puts”~The two different ways of trading options are referred to as ‘puts’ and ‘calls’~’Calls’ and ‘Puts’ are what the two different ways to trade options are known as. A call is when you purchase an option which will allow you to buy an asset within a certain time for a certain price; a put is when you sell the option. There are both advantages and disadvantages to these and they are very similar. In order for calls to be profitable the price needs to be on the rise; falling prices are a benefit to those dealing in puts.

The two types of options that are available are American and European. When you buy an American option, you have to make your decision to exercise your option within the time period you have agreed. With a European option, it cannot be exercised until that term has expired. Just like calls and puts, both types of options have their advantages and disadvantages.

This article is only the tip of the iceberg in terms of options trading. However all you need to know now is that it can be done for a profit if you know what you are doing. If you’d like to try, but don’t know what you’re doing, there are plenty of online resources available for your learning.

Click here to find out more information on option trading and other aspects of investing on the stock market.

Forex Trading

Iron Condor – When To Take Profits

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When I first began trading the Iron Condor , my game plan was to leave the trade on all the way to the bitter end.

Then – if everything went well and the trade stayed beneath my profit tent – I’d just them expire worthless and keep all that sold premium in my account.

Back then I believed this was the best way to play the trade, because not only would I not have to pay my broker to take the trades off – I would also be able to keep the entire amount.

But I’ve changed my game plan since then.

After spending far too many nights worrying and not being able to fall asleep – along with a lot of expiration day close calls – painful ulcers – and a near hernia or two – I’ve altered the way I manage my iron condor trades.

Here’s what I do now: Right after I put on my iron condor, I tell my options broker (through the use of automatic contingent orders) to buy back both the put credit spread and the call credit as soon as I make the bulk of available profit in each spread.

As an example – if I received a credit of a dollar (let’s say about fifty cents each side) when I put an iron condor trade on – I would immediately ask my broker to set up an order to buy the vertical spreads on each side back when the price on them has been reduced to about ten cents or so.

After I place the trade, I would set up two contingent orders with my broker. One would be to buy back the upper half spread of the iron condor for ten cents – and the other to buy back the lower half spread of the condor for five or ten cents.

Crazy?

Personally I don’t think so.

Sure I might make less than if I tried to milk them all the way through to the very end.

But as you will see – that’s not necessarily correct.

Let’s take a second look at the amount of money we are talking about here. Ten cents per side – or twenty cents total. Okay – sure – it’s nothing to sneeze at – but when you step back, get a broader look, and start to take a few other things into consideration – it can actually start to look quite miniscule.

What’s more important (at least for me) – is that by closing my iron condor trade early, I have LOCKED IN FOREVER the majority of the gains on that side of the trade. And no matter what happens going forward – those gains that I’ve just banked CAN’T be taken away from me.

I have also lessened my exposure.

AND – I also now have the ability to generate ADDITIONAL profits from this iron condor position – more than what was possible when I originally placed the trade. And I can generate this additional profit in the trade WITHOUT an increase in the trades original risk.

Let me show you what I am talking about here:

Option premiums can decay quickly. Really quickly. As a matter of fact, I’ve seen them almost drain completely over the course of just a few days.

Going back to our example – let’s pretend that I put an iron condor on about 40 days until expiration. For the trade I receive around a 1.00 credit. Fifty cents for each credit spread on either end of the position.

The day after I place the trade, our stock – XYZ – all of a sudden turns south – and proceeds to move down over the next 3 or 4 days.

Four days after I initiated the trade, I discover that I can now purchase the call credit spread of the position for just ten cents.

If I do nothing, I am choosing to risk that CALL spread margin for the next 36 DAYS for a measly $10.00 of remaining profit (per spread).

But – if I instead just spend the ten measly bucks to pull off that upper credit spread – I will LOCK IN the majority of the profit that was available in that spread – and earn a great return on investment in just four days.

Then, if XYZ bounces back up – which it will often do after a drop – I no longer have any risk on the upside.

And – for icing on the cake – if it DOES head back up we have the opportunity to ‘resell’ those identical credit spreads – the same ones we just bought back for ten cents – for potentially the same amount of credit we originally sold them for – or perhaps even more. Doing this it’s possible to wind up with an even greater ROI then were were hoping for when we first initialized the iron condor trade.

But of course I don’t have to resell any spreads. Let’s just say I repurchase them at ten cent to take off whole iron condor trade. What have I done? I’ve diminished my risk – I’ve freed up my trading capital – I’ve increased my ‘return on investment’ over number of days in the trade – and I’ve exited the market much sooner than I would have had I stayed in the trade all the way to expiry. And to me, all of these things are GOOD things.

This allows me to totally get away from trading for a few days – or weeks (or however long until the next expiration cycle starts) – and enjoy the other things in my life without having to always be wondering what’s happening to my trade – or the market – or worrying about the next big crash.

And being able to temporarily take some time to ‘get away’ from the game – from the iron condor and ‘option trading’ and ‘vega’ and ‘adjustments’ and ‘theta decay’ – to be able to go out and do other things during market hours without always feeling the need to check quotes on my phone to see what the market is doing – and just having the opportunity to fall into bed at night and sleep like a baby without a care or worry about whether or not there will be a huge gap tomorrow morning at the open…

That’s priceless.

Or – at the very least, it’s DEFINITELY worth the.20 or so it costs me to exit early out of the trade…for what is STILL a remarkable monthly profit.

Ted ‘Spread’ Nino is an option selling wild man – exceptionally enthusiastic about trading the iron condor . Go to his iron condor Site to find out more about his easy paint by the numbers system for riding this strategy for dependable returns.

Stock Trading

Some Stock Tips to Look At If You Are Starting To Trade The Markets

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Trading stocks isn’t as easy as simply following business people around and seeing what stocks they recommend. If you want to be successful as a trader you are going to have to learn as much as you can about how the market works and create a trading plan based off of what you learned.

The stock market is simply a place where you can buy and sell shares of a company with other traders from around the world.

If you want to learn stock trading then here are a few stock tips that should help you out with that.

1. Create a Trading Strategy

One common characteristic of great traders is that they all have their own trading plan that they stick with. You won’t see a long term investor suddenly start trading stock options. They don’t specialize in that and it would probably end up losing them money.

Likewise you won’t see professional option traders invest into something that has the potential to make a slow and steady return.

Anybody who has been successful in the stock market has found out what kind of a trader they are and then approached the markets from that perspective. If you would like to be good at it you need to do the same.

2. Paper Trade

Just because you have a strategy doesn’t mean it works. It could be that your trading strategy loses you money. In which case you want to know right away so that you stop using it.

That is why it is generally recommended that you paper trade your strategy for at least a few months before diving into the market with real money.

3. You Don’t Always Have to Be Right

A lot of people have the misconception that if you want to be a successful trader you have to be right all the time and never make any mistakes. Nothing can be further from the truth. Most traders are wrong on a consistent basis. The difference is they manage their risk and let their winners grow.

If you keep your losses small and your wins big then just a few big wins can last you throughout the year. This is one of the reasons it is important to manage your money wisely and keep your losses as small as possible.

For more tips for stock market traders visit Shaun’s site about the stock market basics. Unique version for reprint here: Some Stock Tips to Look At If You Are Starting To Trade The Markets.

Stock Trading

Butterfly Spread – Trading At Gun Point

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The butterfly spread is one of the most powerful and reliable option trading strategies around.

There really is not much you have to do in order to realize a profit when trading this strategy in calmer more docile months. They are what I like to refer to as a ‘lazy’ trade – one that quite quickly kicks off a profit – as long as the underlying – and the stock market in general – behaves itself and stays contained nicely in a range.

But, I guess the same thing could be said for our other bread and butter monthly income strategies as well – like the weekly options iron condor, the diagonal, the calendar and the double calendar. At least during those beautifully lazy, calm, quiet trading months.

But what is different about the butterfly spread – what makes this trade stand out from those others – is how it handles during the difficult months.

Most of the normal ‘bread and butter’ option income trades – like the iron condor, the calendar, and the diagonal – have been somewhat difficult to trade ever since the big crash in 2008. Can they still be traded – and can they still produce profits? Absolutely. However – in order to do so effectively one needs be on their toes – and there is just more management involved – and stress – and work.

However – the butterfly spread – has, and continues to work incredibly well – even with volatility levels going off the map. I’ve traded calendars, and condors, and diagonals – and a lot of other option strategies through this more wild time in the market – and I have to say the strategy that stands out head and shoulder above the others is the butterfly spread. It’s the most robust – the most consistent – the easiest to manage – it absorbs big moves the best. It’s the trade the has given me the least amount of problems – and the most amount of profits.

Sure, I still do like – and trade – the other strategies – like the iron condor, the credit spread, the calendar, etc…

I just prefer – in a big way – the butterfly spread.

Oh mamma.

I get all emotional and choked up just thinking about it.

Hold on one moment please. Allow me to get my composure here…

All right. Here’s the deal…

If a good for nothing, toothless, smelly, pants-on-the-ground, gansta kicked open the door to my trading room, shuffled in and demanded at gun point that I choose just 1 trading strategy to trade for the rest of my days – without blinking an eye I’d select the butterfly spread.

Weekly Options Butterfly Spread – I love you.

Oh man…where’s a tissue…

To be taught more about the iron condor scheme, click over to Ted Nino’s website on how to suitably place, take off, control and adjust the Weekly Options for steady gains.

Stock Trading

Weekly Options Gamma Trade – Calling The Market a ‘Sissy’

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With Weekly Options there is a little known option trading strategy that can provide consistent profits from markets that seem too wild and choppy to use the usual strategies like iron condors, calendars, and credit spreads. This strategy works best in crazy markets unlike the standard option income strategies such as the iron condor, the calendar spread, credit spread, etc.

One way to think of gamma scalping is to compare it to day trading – where the trader is looking to capture profits from quick little moves – however the difference here is that due to this strategy set up – most of the risk that is normally associated with day trading has been removed. Think of gamma scalping as a way to day trade without having to pick direction – taking away most of the risks that are normally associated with day trading.

When gamma scalping – the trader doesn’t care which way the market will be heading. Up or down, it doesn’t matter. We are properly set up to profit either way. And moves that are bigger make it better.

Once a profit is realized from a move either up or down, the trader locks in that gain using a super easy to implement adjustment method that not only captures that profit – but also re-sets the position to once again profit either way the underlying winds up going. This method allows the trader to continually grab – or ‘scalp’ – profits from the same trade position – and this can be done, over and over again on the same position.

How many times have you purchased a stock or option and wound up actually being right and seeing some profits – only to have the underlying immediately turn around and retreat back to it’s starting position wiping out all the profits?

Gamma Scalping eliminates this. And once again, using the method used to lock that profit in, positions the trade back to it’s starting point – where if the underlying continues moving in the same direction – or stops and returns back to where it came from – MORE profits can continue. This is a dynamic way to trade that can be low stress and even quite enjoyable.

For option income traders who are struggling in these especially volatile times trying to use the standard income trades like condors, credit spreads, and calendars, Gamma Trading is a good method to learn and consider using and adding to their collection of other option strategies.

And along with being profitable – trading this way using weekly options is actually quite an enjoyable way to trade too.

To be trained a much ‘better’ technique to trade the iron condor for monthly income, go over to this Weekly Options website for plain step-by-step blueprint on how to suitably place, manage, and ADJUST these trades.