5 Ways Options Help You Trade More Effectively
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Show me more →Guaranteed Maximum Loss Strategies
Unlike stocks, when you buy an option contract all you can lose is the upfront premium you paid for the position. It doesn't matter how far the market falls, your losses are guaranteed to be no more than your initial investment.
AND, if you're the buyer of an option you have limitless gains as the market moves in your direction, just like buying stocks.
Each Way Directional Strategies
Not sure which way a stock is heading — just that it will make a large move up or down? Here is where you use options.
Combining a call and a put together means you profit from a movement in either direction.
Example strategies: Long Straddle and Long Strangle.
Profit When a Stock Goes Sideways
Imagine being able to make money if the stock does nothing!
This is a favourite strategy of those looking for regular monthly income — and the feature strategy used in the members area videos.
As long as the stock stays inside the strike levels, you're making money. Plus, you can set these up so that your losses are limited too.
Example strategies: Iron Condor and Double Calendar.
Get Paid for Limit Orders
Stock price just a little high, yet you're still interested in buying? You can use options to get paid to place a limit order below the market.
A short put option does this. If the stock stays above your strike price your profit is the premium received. If it drops below, you buy the stock anyway.
You can keep repeating this over and over — keeping the premium each time and applying unused capital to other trades.
Watch and learn how to trade options profitably in our members area
Learn more →Popular Options 101 Articles
Option Premium
Understand the two components that make up an option price — intrinsic value and extrinsic value.
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Calls vs Puts
Buy calls and profit when prices rise. Buy puts and profit when they fall. But what happens when you sell instead?
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Put Call Ratio
Discover how option volumes can help you forecast the direction of the underlying stock.
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106 Comments
damien December 17th, 2010 at 9:03am
Thanks for you quick response, I gone on to the Savi website but they do not appear to provide tutelage in options. My main interest is in options. Thank you
Peter December 16th, 2010 at 4:54pm
Hi Damien, if you're after practical training with a prop trading firm, then you could try getting in touch with Savi Trading - they are based in London [link removed as no longer valid].
If it's just some conversational type mentoring then you might want to try asking a few of the folks on Trading Coach Directory.
I'm not affiliated with either of the above so cannot comment on the quality of their material. Though if you try any of them let me know and I can pass on the feedback via the site. Good luck!
damien December 16th, 2010 at 11:43am
Please admin, I know nothing about share trading, futures and options, but I hold a masters degree in real estate finance and I am most willing to learnin particular options trading so I can make myself a better life, Please can you kindly recommend a good tutelage program or course for me so I can educate myself and make this life I dream about a reality. I am willing to devote total time, energy and al m y resources to tjhis as I have been advised by my sister in Canada to learn about options trading to make my income from there.
I reside in the UK...London to be precise and am really keen to know where to begin and for this knowledge. I know some background knowledge about options, futures and shares but that is all there is to it. Please kindly recommend me good tutelage or good program to educate me to the standard I want, Please. Thank you. My email address is [email protected] should you have further material for me I can use to educate myself on options trading. Please bear in mind I am a novice but a quick learner, I will like some practical and theoretical program to enable get myself this new career.
Many thanks
Peter November 29th, 2010 at 6:25pm
Can you please elaborate - is something not clear? I am open to suggestions on how to improve the content.
ARVIND TRIPATHI November 29th, 2010 at 5:46am
You should provide the basic definition first.
Ankit October 20th, 2010 at 7:33am
I don't understand the strategy so, i am not interested but, now I want to understand because of to earn money.
Peter October 4th, 2010 at 7:31pm
Have you had any success with such newsletters? I would be interested if you have...let me know.
AR October 4th, 2010 at 6:20pm
Your option strategies are not creating the doubling or tripling account values as some of your other news letter buddies claim in their sites.
AR
Peter September 6th, 2010 at 11:18pm
Hi Kam, yes, you can do whatever you want to the spreadsheet. The VBA code is not protected, so just open up the VB Editor and change the code all you like.
Implementing a Volatility Skew is a bit trickier though...you would need to be able to query a source of option market prices, download them into the spreadsheet and then calculate the Implied Volatilites for each. (You can use the Implied Volatility functions in the workbook for that).
Then, you would have to implement your own fitting logic to define a curve around these points. Once you have that, you can use each discrete point as your volatility input for your option model.
Kam September 6th, 2010 at 7:31pm
Hi, I just downloaded the excel spreadsheet. Excellent job! I have 2 questions: 1. Is it possible to modify the model from Black Scholes to Whaley (American Futures options)? 2. How can I give a skew to the volatility for OTM options and be able to manually shift it and modify the slope? -Thanks
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