Option Trading Article of the Week
Option Trading - Reversals - Picking Tops and Bottoms.
Posted by Pete Stolcers on December 16
In today’s option trading blog I will discuss trading reversals. People associate reversal trading with picking tops and bottoms. It is chic to be a contrarian and the masses are always wrong - right? That is certainly not my perspective. TASR was over valued at $30, $70, $90 and $110. All along the way you could have convinced yourself to short the stock and play the reversal. Stocks can stay over bought or over sold for long periods of time before they reverse. In the referenced example, the early shorts never got to see their glory - they were carried…Read the rest of Option Trading - Reversals - Picking Tops and Bottoms.
Stock Options Question of the Week
Option Credit Spreads Gone Bad - Buy In The Short?
Posted by Pete Stolcers on December 16
Question I pulled this question from the archives because the lesson still applies.
When we get stopped out on a put spread why do we close the whole position? I have noticed that if we covered the short leg and keep the long leg the chances are good that we will minimize our loss or possibly make a profit. A good example was the LEH put spread. Our stop was hit and we lost around $900. If we had held the long leg we would be up over $2K as of Friday. I realize that the down side is losing the spread minus the premium but if you are careful and watching what is going on with the markets the odds seem to be in your favor.
Read the answer to Option Credit Spreads Gone Bad - Buy In The Short?
Stock Option Trading Education
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- Index Options and Indices: Index options include baskets of stocks that are combined from group or sector indices. The most... read more
- Options Out of the Money: A call option with a strike price that is much greater than the current stock price is considered... read more
- Option Bid/Ask Spreads and Scaling: The Option Bid/Ask Spread is the difference between the stock option bid price and the ask price.... read more
- Derivatives & Underlying Stock Option Value: A derivative in the context of finance is a contract whose value is dependent on another... read more
- Option Ask Buying Strategies: An option ask is the price an option seller wants to receive for the option. If the option is... read more
- Strike or Exercise Price on Call Options: The strike price (exercise price) is the level at which the buyer of a call option can exercise... read more
- Options At the Money: When the stock price is the same as the strike price an option is considered at the money. The... read more
- Options in the Money: A call option is where the strike price is lower than the current price of the stock is considered... read more
- Option Trading for Investment, Speculation and Hedging: Option trading involves investors and speculators buying and selling stock options before they... read more
- Option Strategy: Options are one of the most dynamic investment vehicles available to traders and investors. Option... read more
- Call Options & Naked Call Writing: A call option gives the buyer the right, but not the obligation, to buy the underlying stock or... read more
- Options and Time Value: The Time Value of an Option is the amount by which the price of a stock option exceeds its... read more
- LEAP Options & Expiration Dates: LEAP stock options have more than six months until expiration. They can have a lifespan of up to... read more
- When Options Trade at a Discount: An option that is trading below its intrinsic value is trading at a discount. For instance, a $50... read more
- Parity and Stock Options: Stock Option Parity means that the stock option is trading at its intrinsic value. If a $100 call... read more

