May 22, 2013
Traders use the following terms:
–bull call spread
–bear call spread
–bull put spread
–bear put spread
Each seems so descriptive of the given trade that no one complains that these using this terminology makes it far more difficult for the average options trader to understand how options work.
Add to that the extra complication of deciphering the difference between buying the bull call spread and selling the bull all spread.
Here’s a far better idea for you. If you have any difficulty figuring out how to trade spreads effectively or if the terms above are confusing, here is Part I of a basic lesson on trading spreads. It is based on the principle that there is only one vertical spread.
You can buy it or sell it; you can use puts or calls. Just know which bet you want to make and choose appropriate options. This concept is fully explained in Parts II and III.
Part II tomorrow.
May 17, 2013
A video lesson for the newer trader.
An introduction to spreads for someone who has not yet used them
This is a sample Options for Rookies video lesson.
May 16, 2013
I found an interesting quote at The Big Picture blog
If you’re bullish and wrong, you usually have plenty of company. But if you’re bearish and wrong, it’s almost unforgivable
-Bob Kargenian, TABR Capital Management, Barron’s DECEMBER 15, 2012
There is much to consider in this quote.
Looking at it from the perspective of a professional money manager, this statement is as true as any statement can be. Investors want results. If the person who is responsible for managing the portfolio and its risk is expected to make money. After all, that’s why they get paid.
When they get caught unprepared for a severe market decline, there may be a modest amount of asking: “why didn’t you see it coming?” But for the most part clients tend to be forgiving because ‘everyone’ – except for the few proud bears – took a hit when the unexpected downturn occurred. Clients seldom ask why the portfolio manager did not protect their assets with option strategies.
Missing the rally or having too much cash or being too conservative when markets are moving higher and clients run for the exits. They believe it is so easy to rack up giant profits when markets rally. They expect their managers to own the best stocks in the best sectors. In short, inability to keep up with the benchmark is unforgivable.
That doesn’t seem right to me. The money manager who can protect assets during declines – even at the expense of earning a bit less during good times should be the most sought-after manager in the field. Alas, greed conquers all.
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Weeklys Iron Condor Trades
Higher-risk/higher reward trades. Not recommended for newer option traders (but do read about them).
Links to courses. Free to Gold Members.
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Video presentations on a variety of topics.
Trades we are following
Suggest a trade and if appropriate, I'll follow it from entry to exit.