Tag: options

The following is an excerpt from the eBook, Options Trading 101, authored by MarketClub Options lead trainer, Trader Travis. Learn more about MarketClub Options and how to obtain this entire eBook.

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Learning how to read an option chain is a vital component to options trading. Many traders lose money because they don't fully understand option chains.

An option chain is essentially a list of all the stock option contracts available for a given security (stock).

There are only two types of stock option contracts, puts and calls, so an option chain is essentially a list of all the puts and calls available for the particular stock you're looking at.

Now that wasn't so hard to understand, was it? Well the confusing part comes when you actually pull up a stock option chain.

All that easy-to-understand information suddenly gets lost in translation and you're left looking at a table full of numbers and symbols that make absolutely no sense at all.

Part of the confusion in understanding option chains is that every option chain looks different.

If you go to Yahoo, MSN, CBOE, or your brokerage account and pull up an option quote, you will notice that the layout of each of their option chains is completely different.

However, they all essentially have the same information displayed, but look completely different.

Let's use a snippet of the stock option chain listed above, which is a stock option chain of the stock symbol “MV":

Expiration Month

As you can see from the picture, there are several different expiration months listed horizontally across the top of the option chain (Aug 09, Sep 09, Dec 09, etc.). For our example we are looking at all the call and put options that expire the 3rd week of December 2009.

Some traders want to stay in a trade 1 week, some want to stay in a trade 2 months, so your trading plan will dictate which month you look at.

Call Options & Put Options

Each stock option chain will list out all the call options and all the put options for the particular stock. Depending on which option chain you are looking at, the call options may be listed above the put options or sometimes the calls and puts are listed side-by-side.

Strike

The first column lists all of the different strike prices of the stock that you can trade. The strike/exercise price of an option is the "price" at which the stock will be bought or sold when the option is exercised.

Symbol

The second column lists all of the different ticker/trading symbols for each stock option. "MVLLE.X" is the ticker symbol for the 09 December 25 call option. The symbol identifies 4 things: which stock this option belongs to, what the strike price is, what month it expires in, and if it is a call or a put option.

Last

The third column lists the last price at which an option was traded (was opened or closed). It's the price at which the transaction took place.

WARNING: This transaction could have been minutes, days, or weeks ago, and may not reflect the current market price.

Change (Chg)

The fourth column lists the change in the options price. It shows how much the option price has risen or fallen since the previous day's close.

Bid

The Bid price is the price that a buyer is willing to pay for that particular stock option. It's like buying a home at an auction, you bid (offer) what you are willing to pay for the home.

Ask

The Ask price is the price that a seller is willing to accept for that particular stock option (this is the price the seller is "asking" for).

WARNING: One stock option contract represents or controls 100 shares of stock. So
whatever Bid/Ask price you see has to be multiplied by 100. This will be the actual cost of the contract.

Volume (Vol)

List how many stock option contracts were traded throughout the day.

Open Interest (Open Int)

This column lists the total number of option contracts still outstanding. These are contracts that have not been exercised, closed, or expired. The higher the open interests, the easier it will be to buy or sell the stock option because it means a greater deal of traders are trading this stock option.

Keep an eye out for my next post.

Best,

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MarketClub has been helping thousands of traders successfully navigate the markets for the last decade. But now, with MarketClub Options, members can learn how to accelerate their profits with the power of leverage and a strategy built for long-term success. Trader Travis will show you step-by-step how to find, execute and manage winning options trades. Watch his 10 Minute MarketClub Options Strategy.

The following is an excerpt from the eBook, Options Trading 101, authored by MarketClub Options lead trainer, Trader Travis. Learn more about MarketClub Options and how to obtain this entire eBook.

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So what are puts and calls?

Generally speaking, put options are used to both protect the value of your assets as well as make money when stocks fall in price. And, generally speaking, call options are how investors make ten times more money when stocks go up in price.

As an options buyer, it's not uncommon to earn (and lose) upwards of 40 - 50% return on your money.

But one of the inherent problems with options trading is that for new traders these returns just seem too good to be true.

Where else are you going to hear that you can make $1,000 in three days, or a 40 - 50% return on your money in a matter of days?

It's not like they teach you this stuff in school.

And with any other form of stock market investing, you don't have these returns and in such a short period of time.

So it's natural if you are a little skeptical, that's okay... so was I.

The problem is that these kinds of returns are normal. They can happen on a consistent basis if you develop the skills.

So what people do is choose to allow their skepticism to rule and they keep this kind of information out of their life when it can actually help them.

I do hope the example in the previous chapter was enough to at least get you to see how leverage can help you earn supercharged investment returns.

And yes, there is risk with trading options and you won't always make money, but the rewards are well worth the risk (at least in my opinion).

Stock options are precisely what the ultra-rich use for accelerated wealth creation! But what about the common man? What about the person barely scraping by and all they have is the dream of becoming wealthy? Continue reading "How To Build Wealth And Protect Your Assets At The Same Time" →

The following is an excerpt from the eBook, Options Trading 101, authored by MarketClub Options lead trainer, Trader Travis. Learn more about MarketClub Options and how to obtain this entire eBook.

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If you recall from the earlier chapter I told you that buying put options gives you the right, but not the obligation, to sell shares of a stock at a specified price on or before a given date.

A "put option" will increase in value when the underlying stock it's attached to declines in price, and it decreases in value when the stock goes up in price. Read that sentence again. Really, do it.

Most of the people I teach have a hard time wrapping their head around the concept of making money when stocks fall in price. But once I break down how calls and puts work it should be easier to understand the above concept.

Remember, put options give you the right to "sell" a stock at a specified price. When you are buying put options you are preparing for, expecting, or want the price of the stock to decline.

Imagine that, wanting a stock to fall so you can make money. It's so counterintuitive, but that's just how these contracts work.

Over time you will begin to like bear markets (market crashes) as you make your money much quicker because stocks fall faster than they rise.

Put Examples

If you bought a "May 120 put option" on stock XYZ, the option (contract) gives you the right to "sell" stock XYZ for a price of $120 on or before the 3rd Friday in May.

If stock XYZ falls below $120 before the 3rd Friday in May you have the right to sell the stock for more than its market value.

So let's say that stock XYZ falls in price to $50. Everyone else who owns the stock has to sell it for $50, but you own a contract that says you can sell it for $120.

Can you now see why put option contracts go up in value as the underlying stock goes down in price? Continue reading "The Secret To Make Money When Stocks Go Down In Price" →

Update 7/10/15: See how I used the Trade Triangle I saw on AAPL (mentioned in this video) to double my investment in 1 day. - See Video Update

Yesterday was a strange day for the markets. Not only did we have the major glitch in the NYSE, but the big three indices took major hits, with the Dow Jones sliding more than 200 points, its lowest closing since February.

But, that really doesn't bother me. In fact, I'm surprised just how many traders don't realize that they can make as much (if not more!) during major market sell-offs, then when the markets are on the up-and-up. My students and I actually look forward to market days like this.

In this video, I'm going to show you exactly how you can make money when the market is going down or sideways. Yes, everyone knows you can make money when the market is going up... but knowing what to do during market sell-offs could take you off the sidelines and into a profitable position.

I'm also going to show you how to protect yourself from losses and put a cap on how much money you could lose with "stock insurance."

That's why I don't worry, because I know that a triple-digit Dow Jones loss could be a possible double-digit gain!

Learn About MarketClub Options.

Here's to your success and worry-free trading,

Travis Wilkerson (AKA Trader Travis) is the lead stock option trainer at MarketClub Options and founder of the Option Profit Formula Success Academy. Travis has been investing in stocks and options since early 2002 and became a full-time options trader in 2009. Since then, he has become a mentor to share the lessons he learned the hard way to help his students create multiple streams of income instead of one sole source of income.

Travis is just a down-to-earth, regular guy who believes in helping people by giving them a hand up, not a handout. To Travis, investing strategies should be simple, not complicated, thus allowing you to spend more time with your family.