Strategies

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How a Corporation’s Credit Rating Relates to Risk and Returns

The largest determinant of the risk and return you take on by investing in bonds is the fiscal strength of the company behind the bond. A company’s credit ratings are the measure of that financial muscle [more…]

ETF Investments Start with Opening a Brokerage House Account

Before you can invest in exchange-traded funds, you’ll need to open an account with a brokerage house. The brokerage will ask lots of questions related to your personal finances, your financial goals, [more…]

What Are Advanced Life Deferred Annuities?

One of the more intriguing annuities of all is the advanced life deferred annuity (ALDA), also called pure longevity insurance. Typically people who purchase an ALDA [more…]

How to Use Stock Options to Your Advantage

The options market goes hand in hand with the futures markets. When used properly, options give you an opportunity to diversify your holdings beyond traditional investments and to hedge your portfolio [more…]

Options for Trading Investment Assets: Calls and Puts

Two types of options are traded. One kind, a call option, lets you speculate on prices of the underlying asset rising, and the other, a put option, lets you bet on their fall. [more…]

How to Read Option Quotes

When you trade options, you have to look at quote boards on your computer, even if you’re using a broker. The following figure shows you a good generic example of a quote board provided by the Chicago [more…]

How Volatility Affects Option Prices

Volatility, a measure of how fast and how much prices of the underlying asset move, is key to understanding why option prices fluctuate and act the way they do. In fact, volatility is the most important [more…]

Watching Volatility When You Trade Options

When trading options, you want to be able to predict when changes in volatility — and thus changes in prices — are coming. One way to do that is to keep tabs on historical volatility [more…]

How Implied Volatility Figures In Options Trading

The first step to trading options based on implied volatility is to buy and sell them correctly at the best possible price. This may sound difficult but can be made relatively easy by option trading software [more…]

Using "the Greeks" to Measure Risks with Options

Options require you to pick up a bit of the Greek language, which is okay, because you need to learn only four words: delta, gamma, theta, and vega. The Greeks, [more…]

Trading in Futures and Options: Understand the Risk

Futures traders are, by nature, risk takers. And options are an integral part of the trading game that futures traders play, although it is worth noting that options and futures are viable stand-alone [more…]

How to Use Straddles in Futures and Options Trading

In advance of the release of a big economic report, you can set up a straddle. This strategy is simple to execute and the financial move can be quite profitable. [more…]

Factors to Consider When Using Straddles

You can create a straddle when you simultaneously buy a put and a call for the same stock at the same strike price and of the same duration. Keep in mind that there are some important factors that you [more…]

Trading on Margin Basics for Futures and Options

Margin is what makes futures trading so attractive, because it adds leverage to futures contract trades. The downside is that if you don’t understand how trading on a margin works, you can take on some [more…]

Are You Prepared to Trade in Options?

If you’re thinking about options trading, you'd be wise to consider the following facts before you take the financial plunge. You can then decide whether to include options in your trading platform. [more…]

How a Call Option Trade Works

You can think of a call option as a bet that the underlying asset is going to rise in value. The following example illustrates how a call option trade works. [more…]

How a Put Option Trade Works

Put options are bets that the price of the underlying asset is going to fall. Puts are excellent trading instruments when you’re trying to guard against losses in stock, futures contracts, or commodities [more…]

What Is the Purpose of Writing Calls?

When you write a call, you sell someone the right to buy an underlying stock from you at a strike price that’s specified by the option series. As the writer, you are now [more…]

What to Do before You Write a Call

When you write calls, think of your stock and your option as two different parts of one single position. Each part has its own role to play and is dependent on the other to perform a complete job for your [more…]

Protecting Your Stock Trade by Diversification

A diversification strategy is pretty simple, and it works best when you own more than a couple hundred shares of a stock. In this strategy, you sell more than one covered call at different strike prices [more…]

Following Up after Writing a Call in an Options Trade

Your job as an options trader starts when you make the transaction. The heavy lifting is what lies ahead, during the follow-up — managing the position, which is more difficult in some ways than opening [more…]

How to Calculate the Break-Even Price for Calls and Puts

Before you buy any call or put option in your stock trading adventures, you must calculate the break-even price. Here's the formula to figure out if your trade has potential for a profit: [more…]

How to Use Delta to Time Call-Buying Decisions

You can use delta to time your call buying. Delta measures the amount by which the price of a call option will change, up and down, every time the underlying stock moves 1 point. [more…]

Following Up after Buying a Call Option

If you haven’t dealt with call options before, you need to be aware of a few ground rules. Here’s what you should do after you buy a call option: [more…]

What to Consider When Buying Put Options in Stock Trading

When you buy a put option, you’re hoping that the price of the underlying stock falls. You make money with puts when the price of the option rises, or when you exercise the option to buy the stock at a [more…]

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