Recent Articles and Videos

Rolling is defined in options as moving a position from one strike to another either vertically in the same month, horizontally to another month or some combination thereof. Other times, you may have to buy your short call back so that you will not lose your stock. Sometimes, you may even want to allow the…click to read more.

October 7, 2007 Market Report

Monday, October 8, 2007
Filed Under Market Snapshots 

Well, there is an old axiom that says something like “a sane man who dwells in a society of the insane, will then appear insane himself”.  This paraphrasing is, I am sure, words that ring very true to market bears that find themselves scratching their heads after yet another decisive rally on Wall Street on…click to read more.

Professional traders use the term “lean” to refer to one’s perception about the directional strength of the stock. When you own a stock and intend to hold it for a period of time, you are aware that you will probably be holding it while it goes up and while it goes down. This means that…click to read more.

The “stagnant” scenario When we apply the covered call strategy to the stagnant stock scenario, we take a negative return scenario and turn it into a positive scenario. Remember, when we sell an option, we receive a premium for doing so. When the stock does not move during the option’s life, the extrinsic value of…click to read more.

The “up” scenario

Saturday, October 6, 2007
Filed Under Intermediate Options Trading 

In the “up” scenario, the maximum gain that can be attained is the stock finishing at $10.00 or higher. At $10.00, you would profit from the full value of the extrinsic value of the option which is $.50 and you would also have $.50 of capital appreciation from the stock for a total of $1.00.…click to read more.

Time Decay

Friday, October 5, 2007
Filed Under Option Trading Articles 

Time decay, also known as theta, is defined as the rate by which an option’s value erodes into expiration. The value of the option over parity to the stock is called extrinsic value. Since an option is a depreciating asset, meaning it has a limited life, the extrinsic value in the option will wither away…click to read more.

For better or worse, most investors purchase stocks with the intent of holding their shares for an extended period of time. We do this mainly because the media and industry professionals have drilled into our heads, year after year, time after time, that it’s best to buy and hold. The recent bull market phenomenon also…click to read more.

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