A type of options strategy used when a moderate rise in the price of the underlying asset is expected. It is achieved by purchasing call options at a specific strike price while also selling the same number of calls of the same asset and expiration date but at a higher strike. The maximum profit in this strategy is the difference between the strike prices of the long and short … [Read more...]
Short Put : Option Trading Explained
Writing a put obligates you to buy the underlying stock at the strike price any time until expiry if you are assigned. short put is created when long stock position is combined with a short call of the same series. It is so named because the established position has the same profit potential a short put. Limited Profit Potential The formula for calculating maximum profit … [Read more...]
Putting stops on options
One thing that I think is critical for any option trader whether they are an option seller or a buyer is a stop. Just like stock traders everyone who trades options should have a stop that tells them when to get out of a trade. There are a couple different ways you can go about placing a stop on an option. The first is placing a stop loss based on the price of the option … [Read more...]
What are the Benefits of trading in a bears markets?
Everyone is concerned about the scenario of how terrible bears markets are. But there are many ways in which trading and especially learning to trade in a bears market can help you. 1. Stocks tend to go down faster then they go up. I know to most of you that does not seem like a good thing but think about this. If a stock is moving in either direction you can … [Read more...]
Understanding Stock Volume And Liquidity
Understanding that volume and liquidity in a better way will boost trading profits puts you one step closer to financial freedom. The active, professional trader should know how to act in any market, liquid or illiquid condition 1. High Volume Means High LiquidityStocks with a high volume are very liquid, not to mention they have lower spreads between the bid and ask … [Read more...]