I am not greedy. I would be perfectly happy with 3%/ month.
When the Bid/Ask spread in an option is very large, what is the best strategy when placing an order? What factors should be considered before placing it? And how should one place an order to get filled and get an optimal price in between the Bid/Ask spread?
There are various strategies to employ when a speculator wishes to take a directional position in an underlying contract. If the trader correctly anticipates the move and takes an appropriate position he can expect to show a profit. However this is not always the case as if the trader is successful in selecting the correct direction the position is not always profitable. This is because there are many different forces which affect option pricing. According to Natenberg the majority of successful option traders engage in spread trading. The laws of probability tend to even out over a longer period of time, as such an option trader should hold the option position for extended periods of time. Spreads allow for the option trader to take advantage of option mispricing, whilst at the same time reducing the affects of short term changes in market conditions. A spread is a strategy whereby we take a simultaneous but opposite position in different instruments. One would buy the underpriced instrument and at the same time sell the overpriced instrument. Spread strategies not only take advantage of the laws of probability over long periods of time, but also protect the trader against incorrectly estimating inputs into theoretical pricing. In summary option traders prefer to spread as spreading maintains profit potential but reduces short term risk. There is no perfect spread position but a good trader will learn to spread risk in as many different ways as possible to minimize the affects of short term volatility. A trader must always consider the effects of an incorrect volatility estimate, and then decide how much risk he is willing to take. Margin for error is very tight on single series option positions. However option spreading strategies enable traders to profit over a wide variety of market conditions by giving them an increased margin for error in estimating theoretical variables. At a later date we will review volatility spreads (backspreads, ratio vertical spreads, straddles, strangles, butterflies, time spreads & diagonal spreads). Bull and bear spreads (ratio spreads, vertical spreads & butterflies). As shown above it’s a good idea to implement spreads into an option traders portfolio. Many online trading platforms allow for such strategies to be easily entered as a single order into the market. Enfinium supports such order types on over 80 markets worldwide including America, Australia, Hong Kong, Singapore and United Kingdom. Enfinium’s clients benefit from direct market access to stocks, options, futures, forex, bonds and funds on over 80 market destinations worldwide. As a client you will receive best price execution, ultra low commission, live quotes, low option margin, high interest earned and low financing costs.
Are you trading stock options? Just buying puts and calls or more advanced strategies?
Have you ever traded an option before and lost money even though you got the direction right? Well you probably experienced a volatility crush. A volatility crush is simply where an option moves from a period of high implied volatility to low implied volatility. The most common scenario is just before earnings. You will find implied volatility to be high and then after, volatility will rush out causing the option to be significantly less in premium. If you are a holder of a long option during this period you will be at the mercy of what’s known as a volatility crush. The easiest way to protect yourself from a volatility crush is not to buy an option during a period of uncertainty. An example of such a period would be during earnings, or awaiting the release of product test results. Before entering a position you should always check for recent news and also chart the implied volatility. Most option brokers will be able to provide you with the necessary tools. During periods of high volatility one should sell premium or instead of buying single options use a spread strategy. Trade stocks, options, futures and other derivatives online with Enfinium International www. enfiniuminternational. com. au About Enfinium Enfinium International offers a Global trading platform which consists of a vast array of advanced orders and tradable products. Our systems eliminate the need for multiple accounts with different currencies across multiple platforms. You will no longer need to contact the trading desk for option quotes on the ASX market as you have a quote request function within the trading platform. This means that with a simple click of the mouse an electronic message will be sent to the market makers and they will respond with a price visable to the whole market. If you are with another stock broker online then contact us today to find out how Enfinium International can be beneficial to you. If you prefer for an Investment Manager to trade on your behalf you can visit the Enfinium Capital Management website. The current strategies open to the general public are a Global Volatility Porfolio and a Long / Short Equity Portfolio.
Hi all,
I’m relatively new to options trading. I was wondering if anyone had any suggestions for books or web sites relating to options strategies.
Thank you in advance!
When I turn aged 18 I want to get into the idea of trading stocks using options and their many different strategies. I have read books on the subject and I am beginning to understand them a lot better. I was just wondering if it is possible to hold a long stock position and make a quick, say within 1 month, £25,000 salary as this is what I’d like to have for as a living to last 1 year? Please give a reasonable, easy to understand answer.
I want to know if it is possible to trade a single volatile stock over and over again by trading options and become a millionaire? Also, If this is possible I have found a stock that is very volatile, and that’s First Solar, Inc. It moves up and down between 2-5% every day and I know that the best way to trade a stock like this is using the straddle options trading strategy. Could this work and have there been any recorded cases of this ever happening at all by someone actually doing this?
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