Using charts to time an options trade

While there are vital differences between options trading and trading in stocks, forex or futures, there are also some similarities. One of them is that you should not simply enter an options trade without even a cursory glance at the price chart for the underlying asset...

Risk versus reward in options trader

Those unfamiliar with options trading often have a totally skewed perception when it comes to the risks involved with this type of trading. Some view it as a virtually risk free vehicle to instant riches, while others steer clear of options because they view them as ‘exotic’...

American style options versus European style options

In the options world there exists two different exercise styles. These are called American options and European Options. The main difference between the two is that American options can be exercised before the expiration date, while European options can only be exercised at the...

Options Backspreads Explained

Introduction Options backspreads are trading strategies, which have the aim of benefiting from volatile markets. In this context a volatile market is where a sharp price increase or decrease is expected. Typical examples of such a situation is just before publication of...

In the Money Options Explained

Introduction At any given moment during its lifetime, an option is either In the Money (ITM), At the Money (ATM) or Out of the Money (OTM). An In the Money option is therefore only one of the 3 options ‘moneyness’ states. A trader who understands how options are priced will find...

FX and Futures Options Trading

In the world of international finance and trade, FX options and futures options are much more common than the stock options traded in by the majority of US retail traders. The FX (Forex) options market is in fact the biggest, deepest and most liquid options market in the world....

Delta Neutral Options Trading

Introduction In order to understand Delta Neutral options trading, a trader should first be familiar with the Options Greeks of Delta and Gamma and understand the interaction between these concepts and volatility and time decay. Definition: A Delta Neutral options position is one...

Covered Calls

If one has to select the most basic of all options trading strategies, the covered call would certainly be one of the strongest contenders. With a covered call an owner of stocks tries to earn a regular income by writing call options against his or her share holdings. A covered...