You have probably heard or read that selling (writing) uncovered puts, also known as naked puts, is extremely risky. This is actually true, but only part of the story. The whole truth is — all market investing has risk! As with any investment strategy, there are trade-offs along with downside consequences. As a whole, selling […]
Interest rates are at historically low levels, creating investor appetite for income producing strategies. Below I present three option strategies that seek to generate income from stock positions. Covered calls The strategy consists of selling a call option against a stock position. The option is sold for an upfront premium. The option buyer acquires the […]
The payout characteristics of short selling are similar to buying puts. The value of both instruments increases when the price of the asset (or underlying asset) decreases. This is where the similarities end, however. In fact, these two types of trading are significantly different. Perhaps the biggest difference is the risk. The risk for the […]
Beginning options investors often struggle with the concept of put options. They have no trouble with call options. With calls, beginners usually grasp that you will buy a predetermined number of shares in the future. The expiration date is also decided ahead of time. Puts, on the other hand. give the holders of shares the […]
An exchange-traded fund (ETF) is a collection of assets that track specific investment categories. For instance, SPY tracks the S&P 500. ETFs can also track sectors and industries, such as energy and technology. ETFs often support options, but is it a good idea to trade options on ETFs? ETFs may be less risky than holding […]
You will likely hear about technical analysis during your trading experience. Technical analysis is a discipline that uses stock prices to determine signals on when to trade. Many people swear by the practice. Others equate it to sorcery. While it may work for determining signals for stocks, can technical analysis help your options trading? A […]
With round lots of 100 shares becoming less important these days, we are seeing fewer stock splits it seems. There are a number of stocks that are trading above $200 a share and that is something we didn’t use to see very often — at least not when I first started studying the market, but […]
When you buy a new car, you look for insurance on the car. Most states require some form of coverage, but it is usually worthwhile to have it. When you buy a home, lenders will require you to purchase homeowner’s insurance. While it doesn’t cover everything, it gives you some peace of mind. While many […]
Since the beginning of September we have seen the main U.S. indices drop. There are a number of possible reasons for the decline, but more importantly I expect the increased volatility will be with us through the next few months. Between the uncertainty about the virus and the impending election in November, I don’t see […]
When you hear talk of markets trending, people think of uptrends or downtrends. However, markets often get stuck in a trading range. This is the condition where there is no definitive direction. But, eventually, one direction or the other reasserts itself. The problem is knowing which direction will prevail. A few strategies can help in […]
