Should i buy the call/put options of which the strike price is same as market price or higher/lower?

March 13, 2011 by  
Filed under Option Trading

Supposing i they do not have predicted to exert the option and I only want to remove benefit from the commerce options. Inc. E. g Apple is of $ 100 and I hope that " levantarse". Thus am wise I who to buy the option of Inc. purchase of Apple, that the price of exercise is of $ 80? Or he is wiser to buy purchase option that the price of exercise is of $ 120? And the strategy of sale option? Thanks.

Could I become at least a millionaire by age 23 by trading options using a “Straddle” strategy every time?

September 12, 2010 by  
Filed under Option Trading

I have 17 now, be? 18 in 2 months, I will? do about all veh? ass of investors? n different there to make money. Because I live in the UK, could negotiate CFD (contracts for difference), but do not float my boat now. I have it? Do in options trading, buying books, reading blogs and art? Ass on the subject, and have been exploring many different strategies you can use to invest and straddles to catch my eye. Straddles are the strategies in which the purchase of a long call and long Put under the same strike price, where before the option “is ning? N value, the price action? n must be high up or down. What I like? To know is when I started? with, say, 500 euros and trade stocks using straddles every time, but once I made enough money, branched and diversified my INVESTMENT? ns? what to avoid losing everything, Could you? to in 5 years, from age 18 to 23 Through years of age, or alternatively, by the age of 27 to? you become a millionaire, and this is possible and has anyone ever has done in this short period, but time ?

Selling Options Before Expiration – Premium Selling For Low Maintenance Options Trading

September 7, 2010 by  
Filed under Option Trading

Selling Options Before Expiration

I admit it. I love options strategies that involve being a net seller of premium. This approach allows me to spend less time managing the trade, more room to be wrong on the direction of the underlying, and best of all, I don’t need a large account to trade. In this article, I want to talk about a few of my favorite premium selling strategies and give some brief pointers on how to trade them with a minimum amount of time investment. Selling Options Before Expiration
Overview of option spreads
Before jumping into a discussion of the strategies, let me give a brief overview of option spreads. The basic idea of a spread is to buy one option and sell another against it. This usually has the advantage of creating a defined risk position but gives up the unlimited profit potential of simply buying an option outright. Variations on spreads include vertical spreads where I buy one option strike in a given month for a specific underlying and sell another option in the same month and same underlying. Calendar spreads involve buying an option strike in one month for a given underlying and selling an option of the same strike price and same underlying but in a different month.
Premium selling strategies
My favorite strategy is the short vertical spread, where I sell an option close to the current trading price of the underlying and buy a strike price farther away from the current price than the strike I sold. This trade is put on for a credit and the risk is limited to the dollar difference between my long and short strike prices minus the credit I received. The maximum profit in this trade is the credit I receive from selling the spread. I will get to keep this credit on expiration if the short strike expires out of the money by $. 01 or more.
Why is this my favorite strategy? Let me use an example to illustrate. Let’s say that SPY, currently trading at $108, has been in a bullish trend of late and my near term (20-40 day) forecast is for SPY to go up more or move sideways. A vertical spread trade I might put on is to sell a put option on SPY at $104 for a month with 20-40 days left until expiration and buy a put option at $102. This is a $2 wide spread and can be put on for $. 50, which means my risk in the trade is $1. 50. For one contract, it will cost me $200 in margin and my max risk is $150.
Once the trade is on, what are the possibilities? SPY can move up strongly and within a week I could close the trade for $. 10 debit locking in $. 40 gain and an ROI of 26%. However, SPY could also go sideways for the next month or even pull back a few dollars. In all of those cases my trade still makes money. Why is that? Because I have sold an out of the money option that is 100% time premium with no intrinsic value. In a case like that, time is my friend. While it’s true I also own a long put option that is also wasting away, it’s value was initially less so if both expire worthless, I end up with a net credit. Selling Options Before Expiration
Creating a trading plan
It’s not enough to simply know about the strategy. To be successful in the long term, I need to have some consistent rules I follow that dictate when to get into a trade, when to get out and how much risk to assume on each trade. These rules together are a key part of an option trading plan. I have one for this strategy, which I’ll briefly outline.
I trade both bullish and bearish short verticals. For this discussion, I’ll talk just about the bullish trade and leave the bearish as an exercise for the reader.
Outlook: Trade this strategy on an underlying (usually an ETF) with an established bullish trend (higher highs & higher lows)
Entry: Look to enter a trade on options with 20-40 days remaining until expiration and I try to sell a few strikes out of the money on the short strike. I also prefer $2 wide spreads as the margin requirement and risk are easily managed
Exit: I have at least one ideal profit target and one ‘worst case’ scenario defined as exits. An easy one for me is what I call the 20%/100% rule. I will exit when there is only 20% of the initial credit left in the trade. I will also exit if the cost to close has grown by 100%. For example, if I put on the trade for $. 50, then my ideal exit would be to close for $. 10 (20% rule), while my ‘worst case’ exit would be $1. 00 (100% rule).
This is obviously a very simple trading plan that needs some more definition but offers a very low maintenance approach to option trading. With many options trading platforms, I can enter my exit rules as a ‘one-cancels-other’ order where both orders are entered and when one triggers to fill, the other is cancelled. That’s it – no muss, no fuss.
More strategies
Another strategy I like when I’m more neutral is what is known as an iron condor. That’s when I sell both a short call vertical and a short put vertical on the same underlying for the same month. Usually with a $2 wide spread, I’ll have at least $4 between the short put and the short call. So on the SPY position I mentioned, that might be a $114/112 call spread and a $104/102 put spread.
The advantage of this strategy is that it can receive twice the premium with the same amount of risk. Think about it. On expiration, is it possible for SPY to both be above $110 AND below $104? No. So, most brokerages will only hold margin on one side for this kind of trade.
Another strategy I like is a calendar spread. I might buy a $104 put several months out on the SPY and then sell a $104 put out 20-40 days until expiration. This is actually a debit spread but is still considered a premium selling strategy. It’s a little longer term strategy but can pay quite well.
These are my bread and butter trades. I can trade them no matter what the market is doing and they continue to do well for me. Selling Options Before Expiration

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