Tuesday, March 26th, 2019

Selling Call Options without Owning Stock

Options traders often profit from selling call options without owning stock. In this variety of uncovered options trading the trader believes that the price of the equity underlying the options contract will remain the same or fall in price. The trader receives a premium for selling the call contract. This is [...]

Options, Dividends, and Volatility

There is an excellent discussion of specific options trades in the current online issue of Forbes (http://www.forbes.com/sites/stockoptionschannel/2013/11/11/interesting-april-2014-stock-options-for-cisco-systems/). The article discusses put and call options for April 2014 for Cisco (CSCO). At issue are the price of the put option or call option, the dividend paid by Cisco, and potential market volatility. [...]

The Leverage of Trading Options

The leverage of trading options is perhaps its greatest attraction. With the simple investment of a premium a trader can nail down a price at which he or she will be able to buy or sell an equity, no matter high or low the price may go. The leverage of buying  and [...]

Technical Analysis of Options

Technical analysis of options tells the trader what the options market will do next. Analysis of stock and market sector fundamentals will give the trader and investor an accurate picture of the long term prospects of the underlying equity. Investors and traders will often buy the underlying equity based upon [...]

Trading Interest Rate Options

US Treasury yields are inching up as traders expect the Federal Reserve to cut back on its quantitative easing program as soon as next month. The Fed has been buying $85 Billion worth of US Treasuries a month which has kept interest rates low and helped US industry, the housing market, and the economy in [...]

Trading Agricultural Futures Options

Producing and buying agricultural products can be risky. Prices can rise rapidly if there is a threat to supply and fall equally fast if there is an overabundance. People need to eat so there is a fairly constant demand. A constant concern for production is the weather. The threat of drought in the American Great Plains, the Ukraine, Brazil, or Argentina can drive up soybean, corn, wheat, and cattle prices. Excellent weather across North America is predictive of abundant harvests of wheat from Texas to Alberta and a fall in wheat prices. Trading agricultural futures options is a common way to hedge risk for both producers and buyers of agricultural products. A farm co-operative may buy calls on corn futures whereas a meat processor may buy calls on pork bellies. They both buy options to hedge risk .

Interest Rate Driven Oil Futures Options

Volatility has risen for options on oil futures. Usually this has to do with basic supply and demand issues and associated market uncertainty. This time it has to do with interest rate driven oil futures options. In short the Federal Reserve has been buying $85 Billion in treasury bills every month. This has served to keep interest rates low and help with the economic recovery in the USA. However, the Fed will now keep this up indefinitely. According to recent comments by Fed chairman Bernanke, the Fed will gradually ease off of this policy as the economy improves. As is often the case word or two by the Fed chairman can rile the markets. In order to make a profitable option trade , a trader needs a glimpse of the future. When we have interest rate driven oil futures options traders look to the Fed for a hint of where interest rates and the economy are going.

An Unconventional Guide to Options Trading

If you are new to trading options and are simply wondering how stock options work , here is an unconventional guide to options trading. We are not going to tell about how you earn tons of money trading options because many people do not. In fact, many people and institutions trade options in order [...]

Day Trading Options

The stock market had a strong month and corrected at the end allowing those day trading options to profit from both advances and retreats of the market. The constantly simmering European debt crisis continues to cast a pall over expectations. It is, to a degree, a lose-lose situation. If the wealthier members of the EU [...]

Day Trading Options

Day trading has opened up a lot of different ways to trade such as regular stocks, futures and now Options. It is common for day traders to trade one or even a combination of these assets. Since there are options in futures and stocks, options can still be traded nevertheless. An option is basically an [...]