Free Articles and White Papers
Understanding Implied Volatility, VIX, and how it can impact options trades
Implied Volatility (IV) is a measure of how much the "market place" expects the price of an underlying stock or index to move, usually over the next 30 days. For the S&P500 index, implied volatility is the VIX. Volatility is an important concept to understand, especially for option traders.
How to Adjust a Credit Spread Option if the Underlying Index Suddenly Declines
This case study looks at an iron condor options trade and an appropriate adjustment when the bottom bull put spread gets under pressure when the underlying SPX index suddenly declines.
A Comparison of Various Width Credit Spreads on the SPY ETF to Maximize Returns
This study compares 1, 2, 3, 4, 5, 7 and 10 point wide credit spreads on the SPY. The SPY is a popular ETF that tracks at 1/10th the value of the S&P 500 index, SPX. The objective of this analysis is to determine the best width of spreads to open on ETFs such as the SPY that maximize returns, when taking into account typical broker commissions.
A Comparison of 90% and 70% Probability Index Iron Condor and Credit Spread Options
Most Index iron condor & credit spread traders fall into two camps, either using 70% probability trades or 90% probability trades. This white paper analyzes and compares each approach to understand the pros and cons of each.
Market Timing - How It Helps Modulate Exposure Levels, a Key to Capital Preservation
Market Timing is the science of analyzing macro level economic, technical and sentiment indicators along with other "big-picture" data to predict the beginning and end of recessions, and the beginning and end of major up-trends and downtrends of stocks, bonds, gold, currencies, and commodities. Market timing can help portfolio managers better time entries and exits, and to guide the manager when to temporarily cut downside exposure or to move completely to the sidelines. This data and proper interpretation of it is critical to outperform the broad market when the market is in a confirmed up-trend, and to preserve capital during uncertain times.
How to Adjust a Credit Spread if the Underlying Index Suddenly Surges Upward
This case study looks at an iron condor options trade and an appropriate adjustment when the top bear call spread gets under pressure when the underlying SPX index suddenly surges upward.
How and Why Mergers Happen, such as Gilead Sciences buying Kite Pharma
Of all the companies that resided in the Fortune 500 in 1950, less than 30 exist today. The reason for this is not because of failing businesses, after all these were the best companies of their time. The reason that so many companies disappeared was because of consolidation. Mergers and acquisitions are a day to day occurrence. It is vital that investors understand the inner workings of why and how these deals are executed, and how it can impact one’s investments.
The Math Behind Diversification and Why it is Effective
Risk is one of the greatest enemies against growing and protecting your assets. There are two forms of risk: Unsystematic and systematic risk. This article outlines a diversification methodology that can mitigate unsystematic risk while maintaining optimum levels of returns.
How the interplay of Delta, Theta, and time to expiration plays a role when selling options such as credit spreads
When determining the best options to sell when trading credit spreads or iron condors, it’s important to understand the basics of how Delta, Theta and time to expiration play a role. This article defines Delta and Theta, and then looks at options over three different time periods to show the effect that Delta and Theta have when selecting an option to sell.
How to value an option using the binomial pricing model
When trading options it is important to perform valuation analysis just as you would on any other asset class. Buying an option that is too expensive can affect the outcome of the trade. This article takes a look at the binomial pricing model, one of two models traditionally used to price options.
Calendar Spreads - An Ideal Options Strategy to Generate Weekly Income
Calendar spreads represent a non-directional options strategy that takes advantage of time decay. Calendars can make money in up-trending, down-trending and sideways trending markets. It’s an excellent strategy to generate weekly income and to diversify most portfolios.
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