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...]
Who thinks Covered Writes Should be Illegal?
Dan Sheridan posted an article yesterday "Why should Covered Writes be Illegal?" A covered write is more commonly known as a covered call. Dan has an example of XYZ stock (I love XYZ stock...) +100 XYZ stock @ 90.00 -1 Aug 95 Call @ 1.00 Dan made a few statements that I need to comment on: - Dan says that he sells in-the-money … [Read more...]
What is a Bull Call Ratio Backspread Option Strategy?
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 … [Read more...]
Bid/Ask and “Spread” Prices … How They Can Affect Your Options Trading
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...]
Learn from the Best!
When I was about six years old, I played a game of chess with my dad after dinner. I always lost. That started changing when I was around ten years old when I started reading chess books. At some point, I started winning every game and my dad stopped playing chess with me. I learned that educating yourself with books shortcuts … [Read more...]
The Combination Trade
I've been bullish on the U.S. markets for some time but I primarily trade a market neutral strategy called the Road Trip Trade. Here's a sample of what a typical Road Trip Trade looks like: If I was correct with the bullish market direction opinion, I wanted to participate in the rally. The accounts I trade are in a Commodity … [Read more...]
Trading Curb – Market Circuit Breakers
If you remember Black Monday on October 19, 1987, you recall the market declined 22.68% in one day. This was the largest one-day percentage decline in the DJIA. It took until early 1989 for the market to recover to its previous high set in August 1987. In the aftermath of Black Monday, regulators changed protocols and created new … [Read more...]
The Reverse Harvey
Dan Harvey is a well known options trader who specialized in Iron Condor trading for many years. Dan had an article published about him in SFO magazine in 2008. Over time, Dan noticed several problems with Iron Condors so he modified them to address their shortcomings. The new version was a weird looking Iron Condor so Dan called it … [Read more...]
