If it isn't obvious yet, you have to understand delta to grasp gamma. You could probably go on to learn about the other two important "greeks," theta and vega. But you can't really "get gamma" unless you know delta.
Many times I receive interesting questions from our graduates in my email box, and occasionally, I like to share them with our general reading audience. Here are some of the questions that I was asked recently. Some questions are related to the topics of options, others to stop losses, while others are on the topic of ETFs. Hence, in this article there is a bit for everyone.
A major story in late 2009 was the negative correlation between equities and the U.S. dollar. It appears the attention has been well deserved: both the 3-month and 1-year rolling correlations are the lowest they’ve been in at least two decades.
This exposé, the second in a series of articles on the topic of Butterfly spreads, will visually show how to place a Call Butterfly spread using the TradeStation platform. The actual trade is NOT meant to be a trade suggestion.
This article is 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. Specific examples will follow in the subsequent newsletters.
Options Insider readers can view a live webinar today with Options Insider Founder Mark Longo. The subject of the webinar is using options to add income and downside protection to an equity portfolio.
I get plenty of questions emailed to me and I endeavor to answer as many as I can, even sometimes publicly through another one of these articles. However, on numerous occasions I have been asked to give my longer term outlook on the market and I thought that as we are coming to the end of the year, now would be a good time to do so. As this is a Forex article, I thought I would take a look at the good old US Dollar, a central and intrinsic piece of the economic puzzle.
During one of my option classes, some of my students were really having a hard time grasping the concept of the Greeks, namely the Delta and Gamma, as well as their relationship to each other. In this article, I will focus on explaining those concepts to the readers in a similar way that I did for my option students.
The goal of this article is to explain the last of the four possible vertical spreads which will bring this series of five articles to a conclusion. Once again, this vertical debit put strategy is not meant to be a trade recommendation for it is just a theoretical explanation...
We've mentioned before that our preference is to close out short option positions before the dynamics of expiration week have a chance to kick in. In a nutshell, while it's true that theta declines more quickly as expiration looms, tempting option shorts to hold on as long as possible, it is also true that gamma rises more quickly closer to expiration...
In the last two articles I explained two vertical call spreads; namely, Bear Call and Bull Call. As the reader will notice, these two are not grouped by direction, for one is bearish in nature while the other is bullish in its outlook. Most option books out there separate the verticals according to direction: Bullish or Bearish. However, that is a mere matter of preference. As long as the option trader understands that a bearish or a bullish vertical position can be built by either calls or puts, that is all that matters. The fine difference that I use in my option trading, which determines whether to use calls or puts, is determined by (I.V) implied volatility. Let me elaborate on this a bit more...
In my previous article, I introduced the concept of verticals and defined their four main components. Here I am going to deal with a specific vertical spread that also happens to be one of my favorite strategies. It is known under many different names: Short credit call, Bear Call, or vertical call sale.
This article is the first one in a series of five articles on the topic of vertical spreads. It will introduce the concept of the vertical spread and define its four main components. The subsequent articles are going to deal with individual vertical spread strategies, one vertical spread per article.
As the title of the piece suggests, discipline indeed transcends trading. It's what we eat (quantity and type of food), how we comport ourselves, and how we go about pursuing our goals. It's making a commitment to achieving what we set out to accomplish, without compromises or excuses. Why would we believe that if we lack discipline in our day-to-day lives, that we would suddenly become disciplined in our futures trading? That's just deluded thinking...
There is a lot of information on trading and I mean a lot. As traders we can use various tools such as charts, news, Fundamentals and Technical Indicators to name just a few. But what are the best ones to use? In a world full of opinion and hypothesis, it can often be difficult to decide on what route to take when speculating in the Forex markets.
Next, let us look at the option chain and instead of focusing on the selection of the strike prices, let us see if there is any premium worthwhile selling...
Every once in awhile, students ask me if it is wise to sell verticals on any given product at any time. The answer is much more complex than a simple yes or no reply. In this article, I will explain my thinking when it comes to selling verticals, either Bull Puts or Bear Calls. For a change, I will not focus in this newsletter on the technicals or fundamentals but instead, I will place my entire center of attention on I.V. (implied volatility) of the underlying and three additional option components.
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