Tag: options

Options Traders: Watch Out For This Little-Known Income Killer

Posted on by admin

Using a covered call strategy can be a great way to generate steady returns in your portfolio. As a general rule, I expect my covered call trades to increase my capital by about 25% to 35% per year, depending on the market environment.

(If you're new to the covered call strategy, click here for an introduction to how this strategy works.)

Whenever I set up a new covered call trade, there are a number of different dynamics to be aware of.

I always want to start with an underlying stock that has a high probability of increasing in price. I typically look for stocks with strong fundamental growth and a chart pattern that indicates investors are steadily buying the stock.

Next, I want to make sure that the option contract we use has plenty of premium built into it. Since we make our income by selling attractively priced call options, we need to make sure we're getting a good value for the contracts we sell. Continue reading "Options Traders: Watch Out For This Little-Known Income Killer" →

Options vs. Options Spreads: How To Minimize Your Risk

Posted on by The INO.com Team

By: Nic Chahine

Investing in options is better than investing in stocks.
Today's post will show how there is an even better way of trading options. Consider this article to be part two of a three part series; the third part will follow in the coming days.

Even though investing in options provides a better bang for buck, one can immediately look for ways of perfecting the craft.

The Problem
The enemy of long options positions is time! All else held equal, out of the money long options positions will decay to zero and cause buyers a complete loss.

Example: a trader buys a September 500 put in Apple (NASDAQ: AAPL) for $8.80 per contract. If Apple is over 500 on the expiration day (September 21), then the trader loses the entire $8.80, which is 880 per contract. Continue reading "Options vs. Options Spreads: How To Minimize Your Risk" →

Option Trade of The Week

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Watch CEO of Acorn Wealth, John Seville, as he showcases one of his most exciting and profitable strategies finding unique Option setups in earnings season! Watch as he discusses his company's specially designed scan to locate and trade earnings announcements for some very impressive returns last week.

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CLICK HERE TO GET JOHN'S FREE STOCK SCAN REPORT.

John has invited all INO readers to enjoy 7 days of complimentary, unlimited access to Acorn's Premium Gold membership service. Experience professional trading at its best as you join Acorns live trading room where head coaches John Seville and Strath Curtis break down the markets at the end of the trading day by reviewing watch lists and scanning for opportunities for the next day. Attendees also can join in on an interactive Q&A At the end. Click here for exclusive access.

Option Trade of The Week

Posted on by The INO.com Team

Watch CEO of Acorn Wealth, John Seville, as he showcases one of his most exciting and profitable strategies finding unique Option setups in earnings season! Watch as he discusses his companys specially designed scan to locate and trade earnings announcements for some very impressive returns last week.

Loading the player...

CLICK HERE TO GET JOHN'S FREE STOCK SCAN REPORT.

John has invited all INO readers to enjoy 7 days of complimentary, unlimited access to Acorn's Premium Gold membership service. Experience professional trading at its best as you join Acorns live trading room where head coaches John Seville and Strath Curtis break down the markets at the end of the trading day by reviewing watch lists and scanning for opportunities for the next day. Attendees also can join in on an interactive Q&A At the end. Click here for exclusive access.

To Exercise, Or Not To Exercise (Options), That Is The Question

Posted on by The INO.com Team

In a previous article, I explained commodity option expiration, exercising, and assignment. I noted a long (purchased) option position (call or put) has the right to exercise the contract. To make an informed decision, I will explain the result of exercising an option contract.

A commodity option contract is a decaying asset that will expire. As an option contract draws near its expiration date, set by the exchanges, both the time value and intrinsic value diminish. Time value is premium in relation to days until expiration. Intrinsic value is the premium in relation to the strike price’s distance from underlying futures contract price. Note that volatility will also play a role in the calculated premium price. The exception to intrinsic value diminishing is an in-the-money contract. At that point, the intrinsic value is a one-to-one ratio of the strike price in relation to the underlying futures contract. For example, a long April 2013 Gold 1600 call will be valued at 50 points (or $5,000) if futures are at 1650.0 on option expiration (March 25, 2013). On the other hand, if futures are at 1600.0 or below on expiration, the option contract is valued at zero. An in-the-money contract, before expiration, will also have time value included in the premium price. However, because there are a number of finite days until expiration, the time value diminishes from day one. Continue reading "To Exercise, Or Not To Exercise (Options), That Is The Question" →