The use of stock options in a downward moving market is an optimal time for them. In general, when equities are going downward they do so at a very quick pace This is exactly the best time to make use of the inherent properties that equity options have. The main problem of stock options is [...]
Writing Covered Calls are a “moderate” investor’s favourite strategy. It works particularly well when the stock in question doesn’t move dramatically up or down, but rather just trends sideways. Basically, it works for stocks that are deemed too “boring” for option plays.For writing Covered Calls, we need to take a look at the opposite side [...]
Stock options trading can be dangerous business–very dangerous. Of course, folk get entangled with it because it can also be very , very rewarding. With options, you leverage underlying assets for a certain time period. You don’t have to buy the assets, just pay a premium up front in order to have control over them [...]
Let’s face it, derivative trading is risky. Period.
Derivatives such as futures and options are leverage instruments and by virtue of being leverage instruments, derivatives inherently carry more risk and exposure than pure and simple stock trading. Leverage instruments are risky because leverage allows you to do more with the same amount of money than you [...]
Option sellers believe that if it’s not, it’s probably the closest an investor will ever get to the long sought Holy Grail of Investments or what is considered to be the ideal investment.
Let’s take a look and see what exactly is regarded as the ideal investment.
When asked to define what the ideal investment [...]
The Butterfly is an option position that is composed of 2 vertical spreads that have a common strike price. In other words, butterfly trading involves an opening position where options (either calls or puts) are bought (or sold) at 3 different strike prices. The way in which these options are created makes the butterfly a [...]
For option sellers it is disconcerting to hear people say that selling naked options is extremely risky because it carries the threat of âunlimited losesâ. Nothing is farther from the truth! Itâs a myth! Itâs about time we correct this misconception and put this fear to rest.
While theoretically the selling of naked options carries [...]
The 2008 recession and stock market crash is the worst financial and economic crisis since the great depression. By Feb 2009, the Dow has dropped almost 50%, erasing all its gains since 1998. In terms of absolute points, the Dow has dropped over 7000 points, which is more than the entire Dow index before 1998. [...]
You don’t need to be a trader or an investor to know that the higher the risk, the greater the reward. This concept is true in all aspects of life and business. The more risk you are willing to undertake in life, the more life returns to you. Indeed, risk and reward are directly proportional [...]