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In-depth answers on your most common options trading and technology questions.

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OptionAutomator You Ask, We Answer
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Which platform is the best and safest for trading options?

My broker’s website appeared online but orders weren’t being accepted. I tried and tried again until I really needed to exit the trade. The loss was growing quickly and I risked assignment on a big position.

The majority of the big online brokers are fairly safe. I use TDAmeritrade.

However, don’t think all the discount brokers are made equal. I have to share my story as a word of caution.

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OptionAutomator You Ask, We Answer
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You Ask, We Answer
You Ask, We Answer

If I trade with 10k, how much can I earn per month?

I get this question a lot. In my own trading, I target short standardized equity options positions that would return at least 2% per month. (Note that I’m speaking on stock options, NOT binary options. If we were to discuss binary options, the question would rather be “How much can I lose monthly by trading 10k?”) Over the […]

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OptionAutomator You Ask, We Answer
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You Ask, We Answer
You Ask, We Answer

What is the role of Greeks in options trading, is it really helpful?

The Options Greeks are very helpful, they are essential to evaluate and understand the behavior and potential future behavior of the option contract or spread.

We also see it as the most added parameters to the Brutus Options Ranker.

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OptionAutomator You Ask, We Answer
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You Ask, We Answer
You Ask, We Answer

What is the strategy in which you buy in-the-money LEAPS and keep selling short-term out-of-the-money calls?

Good question. It's called a long call diagonal debit spread. I also believe that TastyTrade coined the term 'poor man’s covered call'. The second name really gets at the heart of what this strategy tries to achieve. By using an in the money LEAPS call you get a very high Delta which simulates the stock with a reduced capital […]

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OptionAutomator You Ask, We Answer
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You Ask, We Answer
You Ask, We Answer

When do you exit or close out a credit spread position?

When trading options, you can exit a position through the execution of an opposing contract of the same type, series, and expiration.

Such a transaction must take place prior to the expiration or exercise of the contract.

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OptionAutomator You Ask, We Answer
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You Ask, We Answer
You Ask, We Answer

Why does implied volatility vary with option strike price?

In this specific example, a call implied volatility (IV) goes up as the strike price goes down, but sometimes the IV is higher at both extremes, deep in the money and deep out of the money.

As you know, you are describing the volatility smile, the extremes in price IV for options that are deep in-the-money. You know from any graphical representation of the smile that as the strike prices move at a rate of change or Delta from its spot (current) price, the skewness of the tails sharply rise. This appears to correlate with the way options are priced, accounting for both intrinsic value and time value.

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OptionAutomator You Ask, We Answer
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You Ask, We Answer
You Ask, We Answer

What should everyone know about Options Trading?

Winning in options trading is accomplished through practice, lots of practice! If you are a new (or even slightly experienced) options trader, it is important to understand that a series of small trades, where gains are banked immediately, are more valuable to you in the long-run versus a large position that has the potential to yield a large […]

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OptionAutomator You Ask, We Answer
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You Ask, We Answer
You Ask, We Answer

Does Options trading drive the price movement of the underlying or vice versa?

Options trading is used in three ways: Speculation, to generate income, or to hedge existing positions. In the case of speculation, it is about taking a side and trying to profit from a move in the market. The market can only move in one of three directions, up (bullish), down (bearish, or sideways (neutral). The way the […]

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OptionAutomator You Ask, We Answer
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You Ask, We Answer
You Ask, We Answer

What is ‘Short’ and ‘CE’ in options trading?

A ‘Short’ ‘CE’ is another way of saying that you are selling or writing a call option which has European style expiration. Writing a call is a strategy that you would pursue if you feel that the market and/or the underlying stock is in a neutral or bearish trend. As a profit, you receive the premium […]

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OptionAutomator You Ask, We Answer
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You Ask, We Answer
You Ask, We Answer

What is your favorite options trading strategy and why?

There are many types of options trading strategies that can help you fulfill your trading strategy. Depending on your investment criteria, desired outcome, and market outlook, you can trade calls and puts in different ways to earn income or protect a portfolio position from loss.

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