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Options Articles

 

Going Delta Neutral with DX and SPY by Josip Causic

This week's article takes note of the inverse relationship of the U.S. Dollar, and the equity market and how you could use both to make a delta neutral trade... READ MORE

 

Some Thoughts About Trading and Other Answers by Josip Causic

In this article, I will comment on several emails that I have received from students on various topics relating to option trading. This is not really just a question and answer newsletter, but rather a clarification of the correct ways to think when looking at trading, and a clarifying look at weekly options... READ MORE

 

Overly Aggressive Trades on the Weeklies

Recently, I received an email asking me to comment about the selection of weekly credit spreads. One glance at it made me realize that there was so much more to this than meets the eye. Here is the actual email that was sent to me on Friday, November 12, 2010... READ MORE

 

Being in a Wrong Trade by Josip Causic

The name of this newsletter comes from an email that I received just the other day. The subject line of the email read: Please help. I gave my attention to it right away for I knew that it was an Online Trading Academy student that I had given my email to recently. She basically asked me to analyze her trade. She knew that something went wrong but could not figure why and how... READ MORE

 

Iron Condor trade Analysis by Josip Causic

The last week's article, Getting a Better Fill, addressed the topic of complex spread order execution. Yet, according to the emails that I have received, not everyone understood the actual trade. The point of the previous newsletter was not necessarily to teach the strategy, but to explain how sometimes splitting the execution of an iron condor into two short verticals can produce a more desirable fill... READ MORE

 

Getting a Better Fill by Josip Causic

Ever since the inception of weekly options on the major ETFs, I have been trading them consistently, though I have only written about them sporadically. In this article, I will go over a lesson about complex spread execution on the weeklies. I love to enter my short verticals, or Iron Condors, just before the bell on Friday afternoon... READ MORE

 

Pitching a Covered Call with TradeStation by Josip Causic

Back in March and April of this year, I wrote a couple of articles on the topic of Covered Calls, Which Covered Call to Sell and When? and Covered Call: Part II, and was under the impression that I had done justice to explaining this simple option strategy. The other day I received an email from a reader who had taken time to read both of the above mentioned articles. The email stated a great disappointment for not providing an example of how to execute a Buy-Write Covered Call strategy on TradeStation; hence, this article... READ MORE

 

What Just Hit Me? VZ! by Josip Causic

The name for this article is due to a losing trade which a student emailed me to analyze. She knew that she was losing money on it yet when she was assigned almost two full weeks before expiry, she needed some explanation. After emailing me back and forth several times, I asked her for permission to share her painful lesson with our readers. Permission was granted under the condition of anonymity... READ MORE

 

A Repair Strategy (Debits) by Josip Causic

In one of my most recent option classes in Overland Park, Kansas, we were working on a vertical debit spread. I have covered in these newsletters the topic of debit, as well as credit spreads in great detail. However, I have not dabbled into the repair aspect of a trade and that is exactly what Curtis, a Kansas option student, asked me to do. In order to lay out a clear and concise case, I will first start by explaining the trade and then in part two, I will proceed to an adjustment... READ MORE

 

50 Cent Strikes Spreads?!? by Josip Causic

Recently, I was teaching an option class in Overland Park, Kansas, and we were looking at placing a short vertical (Bear Call) on JPM. We noticed that the underlying did not trade over 42 for awhile, hence, we selected the 42 zone as the correct place to sell the short call... READ MORE

 

Derivatives of the Derivatives by Josip Causic

In this article, I will look at the E-minis, which are a derivative of the S&P Cash Index, and at the options on the E-minis, which would in turn be a derivative of the derivative. I will explain how they each work in isolation, which will help demystify how the other one functions as well... READ MORE

 

Importance of the Financials by Josip Causic

This article will elaborate once again on the crucial importance of the Financials. In order to lay down my case, I will break the article into three segments and each will build on the previous one. Every one of these segments is going to address something that may not be transparent to the eye of the beholder. A clear pattern will emerge at the end... READ MORE

 

Delta Part 2: Delta as an Approximate Measure of Probability by Josip Causic

In this article, I will continue discussing the Delta, one of the Greek option components. I also will provide an example of using Delta as an Approximate Measure of Probability. Online Trading Academy offers a two day Option course in which the five Greek options components are discussed in depth. One of the slides in the Introduction Option Curriculum is called Three Views of Delta. Each of the three points is defined in the following way... READ MORE

 

Delta as a Hedge by Jospi Causic

In this article, I will discuss a concept that is somewhat vague to many novice traders. First, I will define Delta in the most traditional way, and then I will provide an example of using Delta as a hedge... READ MORE

 

Stop Losses by Josip Causic

Recently, I was invited to be on Power Trading Radio for a brief discussion on the topic of options, Focus on Options, July 7, 2010. During the show, I was asked a question about option trading and the placing of stops. Although I answered that question right there and then, I felt that the topic of stop losses and options needed to be explained in more detail. In this article, I will share one of my anonymous current long trades... READ MORE

 

Covered Call Options Trading in a Bear Market by Owen Trimball
You would normally think of covered call options trading as something you would be inclined to do in a bull market. But can you still consider covered call options trading when the market is in a primary downtrend? Yes you can! ..READ MORE


Trading Covered Calls For Monthly Compounding Income by Owen Trimball
Covered call writing strategies are ideally suited to stocks which have good fundamentals and are also on the rise. Let's assume you have adopted a strategy to write "out of the money" call options immediately after purchasing multiples of 100 of any U.S... READ MORE


Covered Calls - Extra Income Or Insurance on Stocks You Own? by Owen Trimball
Covered Calls is a name for an option strategy that is flexible enough so that it can be adapted to different market conditions. Is your focus simply earning extra income on stocks you already own, or protecting the value of your shares? What you are about to read will show you how... READ MORE

 

Ratio Spreads - Huge Profit Potential From Minimal Risk by Owen Trimball
Ratio spreads have been identified as one of the safest and potentially profitable option trading strategies for traders who want a trading edge over the markets. In this article we wish to discuss a variation of the concept to demonstrate how these trade setups can not only be safe, but given the right conditions, provide a huge return on investment... READ MORE


Bull Call Spreads - 12 Step Action Guide by Owen Trimball
Being a vertical debit spread, the bull call spread will enable you to enter a position much cheaper than simply going long the call options, as well as allowing greater flexibility if the underlying share price should not proceed in the anticipated direction. To implement a bull call spread make sure you can tick this checklist... READ MORE

 

What is Option Trading? by Owen Trimball
They are called "derivatives" because their price action is derived from the price action of another "underlying" financial instrument. The most commonly known of these is stocks (shares) but you can also have options on currencies, commodities and real estate... READ MORE

 

Using Options to Buy Stocks at Wholesale Price by Owen Trimball
Owning shares is a dream most people have shared at some time or other. But many people also fear the perceived risk in doing so and for this reason, hesitate... READ MORE

Option Trading Systems - Stick With What Works by Owen Trimball
You may have heard the expression "do one thing, do it well". This was never so true as it is when it comes to the matter of trading the markets. There are many option trading systems out there and the developers of these systems will always tell you that theirs is the one that will solve your financial problems and give you the freedom you've dreamed about... READ MORE

Options Spread Trading - Some Big Advantages by Owen Trimball
Options spread trading provides the trader with some powerful advantages over simply 'going long' on an option contract. If you understand how to use these, there is a tremendous amount of money that can be made... READ MORE

Risk Free Option Trading - Using Arbitrage by Owen Trimball
People are always wondering if there is a way that you can invest in the stock market totally risk free. Is there a way that, once you enter your position, there is 100 percent certainty that you will make a profit? The answer is 'yes'... READ MORE

The Long Condor Spread - A Highly Profitable Range Trading Strategy by Owen Trimball
[Investing:Day-Trading] They come up with some interesting names when it comes to option trading strategies. The Long Condor is a setup that is attractive because, although you pay a bit more in brokerage, the risk to reward potential can be quite outstanding... READ MORE

 

Using CFDs to Hedge Your Share Portfolio by Owen Trimball
In recent years, Contracts for Difference, or CFDs for short, have become increasingly popular due to their liquidity, ease of trading and leverage. Companies have even emerged, offering recommendation services promising attractive cashflow results... READ MORE

 

Option Trading - Delta Neutral Trades - The Straddle by Owen Trimball
Straddle option trading is one of the safest and most stable option trading strategies available, because you've eliminated the need to predict market direction. But it has its risks, so there are some things you must be aware of... READ MORE

 

Weeklies on the GLD by Josip Caausic

In this article, I will share with the readers some great news: The weeklies have finally arrived on the GLD (SPDR Gold Trust Shares). By the time this article gets published, the trade that I have placed will be completed. I am going to walk the readers through my thinking process for placing a Bull Put (short vertical) spread on the GLD using the newly listed weekly options... READ MORE

 

Why am I Losing Money on this Trade? by Josip Causic

I have received many different emails from students with their trades, yet seldom do I share their painful lessons with the general reading audience. In the last three years, I have done that only twice... READ MORE

 

Newly Listed Weekly Options: Part II by Josip Causic

It has been a while since I have shared some of my trades with the general reading audience, so this time, due to the fact that the new weeklies on SPY, DIA, QQQQ, and IWM are in the game, I will oblige that request. Here we go... READ MORE

 

Systematic Steps for Option Trading: Part II

I often get emails from our students asking me to comment on their trades. In this newsletter, I will comment on one of the most recent emails and give my take on it... READ MORE

 

Newly Listed Weekly Options on the SPA, DIA, IWM & QQQQ by Josip Causic

Back in 2008, I wrote an article on the weeklies, Weak Weekly Options, in which I pointed out what little interest the weekly options had generated in the USA since their inception. I had also expressed the hope that "someday," things might change. The day of that change came on Friday, June 4, 2010, the same day the Dow tanked 323.33 or 3.15%... READ MORE

 

Importance of Open Interest and a Tight Bit and Ask Spread by Josip Causic

Often students share with me their open option positions, asking me for my opinion of their selections. I have noticed that there is a pattern in the type of mistakes that the novice option traders frequently make. They can be grouped into three areas. They are: (1) low open interest, (2) unwinnable bid and ask spreads, and (3) wide spread between the offered strike prices... READ MORE

 

Systematic Steps for Option trading by Josip Causic

Every successful trader must be very methodical and systematic in his or her trading approach. Josip has taught in past articles precisely how he walks through the system he uses before placing an option trade. In this article, he uses the steps in that system on a recent, specific trade that he made... READ MORE

 

Always Buy Back Your Obligation by Josip Causic

I n this article, Josip explains the reasons why you should buy back your options obligations on a credit spread during the expiry week for a nickel or less, ALWAYS... READ MORE

 

Comparing the Verticals by Josip Causic

In this article, Josip explains how to use either a short vertical or long vertical depending on our market forecast. For simplicity's sake, he will stick to the same option class; in this case to the call side. The verticals that will be addressed are also known as a Bear Call and Bull Call... READ MORE

 

Why was I Assigned?!? by Josip Causic

In this article, Josip explains how, even after the market close, an option could go against you and lead to an unwanted event - an assignment... READ MORE

 

Want Free Stock Insurance? by Josip Causic

In this article, Josip explains the low-risk option strategy that virtually provides free insurance on long stock... READ MORE

 

Covered Call: Part II by Josip Causic

With regards to one of the most popular option's strategies, Josip addresses the definitions of two terms (Buy-Write and Legging In) and a timing tool (MACD) that he uses... READ MORE

 

Which Covered Call to Sell and When? by Josip Causic

In this article on the topic of Covered Calls, the first question Josip will answer is Which Covered Call to Sell? The second one will deal with the timing issue (When to Sell a Covered Call?)… READ MORE

 

Butterflies: Part VI by Josip Causic

Josip discusses Butterflies and Greeks, specifically how price affects Theta in a butterfly trade. This is the final article in the series on the topic of Butterflies... READ MORE

 

How People Lose Their Shirts In Options Trading by Jason Ng

You must have heard horror stories surrounding options trading before. Stories such as how some people lose their whole account within a few days and even stories of options traders going bankrupt in express time. These stories have no doubt cast a shadow over options trading and there are even people who now tout that options trading is as risky as futures trading... READ MORE

 

Butterfly: Part V by Josip Causic

Butterflies are a great option strategy for when you don't anticipate huge movement in a stock. In Part Five of his continuing series on Butterflies, Josip presents the steps involved in placing a Put Butterfly on TradeStation. This is the second to last article in this series… READ MORE

 

Spell Out Your Trading Plan and Get a Trading Buddy by Josip Causic

In this article, Josip shares a story of an options student who was able to take Online Trading Academy teachings about options, apply them, get cash flow going, and supplement her regular annual income at first and then eventually embark on the full-time journey of just trading for a living. He will focus on two points of this example: Having a trading buddy and also a trading plan… READ MORE

 

Butterfly: Part IV by Josip Causic

At expiry, the price of an underlying on a Butterfly trade can end up anywhere. Josip presents just 5 of the possible outcomes on the call Butterfly trade he has been covering for this series on Butterflies… READ MORE

 

Creative Financing by Josip Causic

Josip demonstrates an example of creative financing. Namely how to use the credit received from selling a vertical spread to finance long directional premium… READ MORE

 

Butterfly: Part III by Josip Causic

To follow-up his previous two articles about the option strategy known as the Butterfly, Josip looks in greater detail at the intricacies of a specific Call Butterfly that was previously placed… READ MORE

 

Butterfly: Part II by Josip Causic

In his second installation to his series on Butterfly Spreads, Josip walks us through placing a Call Butterfly spread step by step using the TradeStation platform… READ MORE

 

Butterfly: Part I by Josip Causic

The first in a series of several articles that will address in greater detail the option strategies known as Butterflies. In this one, I am trying to introduce the basic concept of a Butterfly without providing any specific examples… READ MORE

 

How to create a Synthetic Put by Carley Garner

The term synthetic is often used to describe a manmade object designed to imitate or replicate some other object.  Futures and options traders can do the same thing by creating a trading vehicle through a combination of futures and options to replicate another trading instrument... READ MORE

 

How to Swing Trade with Options by Carley Garner

Being privy to the options and futures markets along with trial and error has nurtured a respect and an in depth understanding of the markets.  I hope that our readers will allow themselves to step out of the box when it comes to option trading and look toward the potential of trading aggressive option spreads... READ MORE

 

Introduction to Option Selling by Carley Garner

Options offer traders an unlimited number of strategies with various levels of risk and reward.  Unfortunately, many retail traders are stuck in a long option only "rut" and may not be aware of the potential flexibility offered by alternative option strategies... READ MORE