Trading Options for Profit

Limited risk, uncapped earnings and being paid when markets move sideways. These are just a few of the reasons trading options is so appealing to retail investors.

Options enable investors the opportunity to make bets on rising and falling markets without having to provide the full capital upfront to buy/sell shares....



Compare Stock vs Option Payoff

Education

Start here if you're new to options trading. You will learn what option contracts are, why you should trade them and understand the mechanics of what makes up option prices.

Options101 »

Iron Condor Option Strategy

Strategies

Here is where you will learn how to combine calls and puts to construct specific price outcomes for stocks/futures.

Option strategies provide the flexibility to profit from rising, falling and also directionless markets.

Option Strategies »

Option Scanner Screen

Option Scanner

Go ahead and jump straight to the Option Scanner. This software will show you volume spikes in contracts that often precede large price movements in stock prices. Many refer to these volume buys as being the result of inside information. You be the judge!

Option Scanner »

CEO Files for $20m Share Purchase

Option Scanner Results

The CEO of Energy Transfer Partners (ETP), Warren Kelcy, has filed a SEC Insider Form 4 declaring his purchase of $20 million additional shares of the company. Kelcy bought 1 million shares on the 6th July for $20.33. FYI, I just discovered a great site for finding insider transactions called Open Insider.

Now, taking a look at the Option Scanner, a company called Energy Transfer Equity (ETE), which owns equity interests in ETP (above), looks to have seen a massive $18/$19 call spread trade during Thursday's trade. Approximatley 29,000 spreads went through over only 2,582 in open interest. This volume spike together with ETP's CEO share purchase is a strong bullish sign for both stocks.

I placed an order for the $18/$19 call spread @ 0.35, which was the midpoint from the closing prices.

The Most Important Option Greek

Call and Put Delta vs Changes in the Underlying Price

The Delta of an option does more than approximate the price move compared to the underlying; it also describes your directional bias, serves as a proxy position for the underlying instrument and estimates the probability that the option will expire in-the-money.

Delta isn't static though; it changes constantly with other pricing factors and it's important to know what they are.

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Make Time Decay work for you

Time Decay Graph - shows the erosion of value accelerates past the 30 days mark

As options approach their expiration date, their value can erode quickly. If you're long out of the money options then this effect can be quite dramatic; you can lose money even when the market moves in the right direction.

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HRB Move an Inside Job?

HRB Stock tanked on Wednesday the 27th after the company reported a disappointing tax season. Outlook remains bleak for the stock and their next report is due out in June.

However, it appears someone knew of the pending downward move in the stock.

Option scanning tools showed that the $23 put option had significant volume trade the day before the stock plummeted. 19k options traded through one strike, which saw the puts outnumber the calls traded by 5 to 1. The next day, HRB drops 13.56%.

The Puts rose 386%

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