On July 21, 2018, an introductory article was published about trading the foreign exchange market (Forex, or FX). That article can be found here: Introduction to Forex Today we will continue this educational series with a bit of information to help those unfamiliar with the Forex market understand how the pricing works, as well as touch … [Read more...] about Forex 101: How to Understand Forex Pricing; and the Difference Between Currency Futures and Spot Forex
Diversifying your portfolio can help reduce some of the risks in trading, as well as help to maximize your returns. Most professional investment advisors will agree that while diversification certainly does not provide any guarantee to prevent losses, it can be a very important element in reaching longer-range income goals while … [Read more...] about Diversification; Why it is Important for Traders
Gamma, one of the options "Greeks", is often referred to as the Delta of the Delta. Gamma is the rate of change in the delta of an option per a one-point move in the underlying instrument. It is important for traders to understand the effect Gamma can have on their positions. As Gamma increases, it can dramatically affect a position in … [Read more...] about Gamma; How it Can Affect Your Options Positions
Because trends are composed of a series of price swings, momentum can play a key role in determining the strength of the trend. It is important to know when a trend may be slowing down, as it may be indicative of a reversal. How can a trader assess the strength of a trend? Using momentum, along with rate of change and momentum divergence, … [Read more...] about Momentum, Rate of Change, and Divergence … What They Mean to Traders
Intrinsic and extrinsic option values are two components of an option chain which can be very important to an options trader. Knowing the intrinsic and extrinsic option values can help you as an options trader choose a good option candidate with its’ corresponding strike price and expiration. This can be a key factor in laying a … [Read more...] about What Are Intrinsic and Extrinsic Option Values?
In February, 2011, CBOE introduced the S & P 500 SKEW Index, as another means for investors to gauge market volatility and the potential risk of a "black swan" type of event. The SKEW Index is an option-based indicator that measures the perceived tail risk of the distribution of S & P 500 returns in the next 30 days. "Tail risk" … [Read more...] about What does the SKEW Index Mean to Options Traders?
Many investors consider the foreign exchange market (also referred to as Forex or FX) to be one of the most intriguing and exciting markets in the world. The foreign currency market is an extensive subject; and too vast to cover in one article. Today we will cover the basic elements of the Forex, and some important considerations for … [Read more...] about Forex 101: Some Basics on Understanding the Foreign Currency Market
Exchange Traded Funds (ETFs) are funds that track indexes such as the S&P 500, Nasdaq 100, Dow Jones Industrial Average, Russell 2000, etc. When an investor buys shares of an ETF, they are actually buying shares of a portfolio that tracks the yield and return of the related index. By purchasing an ETF, investors get the … [Read more...] about Inverse ETFs; Are They for You? Understanding the Plus’s and Minus’s
The ratio backspread is a strategy used by traders to create a position with a limited loss and varying degrees of profit. If the trade goes against you and the position is setup correctly, it can help guard against a large loss. This can be useful, especially when there is major news or a “black swan” event. The ratio backspread can be … [Read more...] about What is a Bull Call Ratio Backspread Option Strategy?
Those new to options trading may not fully understand the different prices quoted on options contracts. Today we will discuss the basic prices which can appear in the option chain for an option: bid, ask, mark, and last. I will outline each price, as well as what the bid/ask spread means for options traders. Below is an example showing … [Read more...] about Bid/Ask and “Spread” Prices … How They Can Affect Your Options Trading