This article was originally published in The Option Strategist Newsletter Volume 12, No. 8 on April 24, 2003.
The concept of “delta neutral” is an intriguing one – especially to traders who have had a hard time predicting the market or to those who don’t believe the market can be predicted (random walkers). The concept is even sometimes “sold” to novice investors as a sort of “can’t-lose” trading method, even though that isn’t true at all. While the idea of having a position that can make money without predicting the direction of the underlying stock seems attractive, in practice the strategy is difficult, if not impossible, to apply – at least in terms of keeping a position delta neutral.
This article was originally published in The Option Strategist Newsletter Volume 15, No. 15 on August 10, 2006.
In the past couple of months, we’ve published several articles dealing with covered call writing and some of its companion strategies – naked put writing or put credit spread trading. Two issues ago, the feature article addressed some of the ways that potential bear market risk affects popular strategies, including covered writes. In addition, several of the Covered Writing articles (that usually appear on page 5) have discussed various aspects of naked put selling and credit spreading. We have also received a number of inquiries about these alternate strategies from current and potential money management clients. Therefore, we have compiled this article, which addresses all the aspects of these similar, yet distinct strategies – risk, reward, and suitability.
This article was originally published in The Option Strategist Newsletter Volume 1, No. 2 on January 9, 1992.
All strategy recommendations made by "The Option Strategist" have a graph accompanying them that displays the delta of the entire position. Moreover, this graph also displays how the delta of the position is expected to change as the stock moves up or down in price. This article describes the position delta and how to best use it, especially for follow-up action.
This article was originally published in The Option Strategist Newsletter Volume 17, No. 4 on February 28, 2008.
Most option traders are acutely aware of their costs – especially commissions, but also bid-asked spreads, slippage, and so forth. But there is one area that can prove very costly to an option trader if he’s not aware of how to navigate it – and that is selling an option that should be worth parity, but is bid below that level. Most of the time – but not always – these “parity” situations arise at or near the option’s expiration date.
This article was originally published in The Option Strategist Newsletter Volume 8, No. 5 on March 11, 1999.
From questions asked at seminars and personal appearances, it seems that most people have some difficulty in determining which option to buy once the decision to buy something has been made. This topic is perhaps more elementary than some of the rather high-powered volatility discussions of the past few issues, but it is a very important one. The option speculator must be able to make the “correct” decisions about which option to own, lest the research that was done in order to predict the forthcoming direction of the underlying instrument be wasted by the purchase of the “wrong” call (or put).
This article was originally published in The Option Strategist Newsletter Volume 11, No. 16 on August 22, 2002.
The sale of naked options is a strategy that is probably over-used, in general. However, at the current time, with options remaining expensive, but with the skews lessening, volatility traders’ thoughts should turn more towards selling options these days. This is one of the riskiest option strategies, since losses could be large – even theoretically unlimited. However, the probabilities of such losses occurring might be lessened and the overall profitability turned in favor of the option seller. In this article, we’ll look at the specifics behind writing naked options successfully.
This article was originally published in The Option Strategist Newsletter Volume 9, No. 18 on September 28, 2000.
While the title may look like a typo, it’s what we want to talk about. In order to discuss the implied volatility of a particular entity – stock, index, or futures contract – we generally refer to the implied volatility of individual options or perhaps the composite implied volatility of the entire option series.
This article was originally published in The Option Strategist Newsletter Volume 8, No. 22 on November 24, 1999.
At a recent seminar or conference (don’t ask which one – there have been too many to distinguish one from another!), the subject was raised regarding the effect of time decay on an option. As the discussion progressed, it dawned on me that many (perhaps novice) option traders seem to think of time as the main antagonist to an option buyer. However, when one really thinks about it, he should realize that the portion of an option that is not intrinsic value is really much more related to stock price movement and/or volatility than anything else – at least in the short term.
This article was originally published in The Option Strategist Newsletter Volume 10, No. 23 on December 13, 2001.
This strategy was mentioned in the “Striking Price” column in Barron’s last Sunday, and we have received several questions from subscribers asking about the strategy. The strategy has been around for a long time – since the inception of index options, actually – but it is something of a professional strategy, so it’s not widely know. However, it is gaining more popularity lately, so it is the subject of this week’s feature article.
This article was originally published in The Option Strategist Newsletter Volume 2, No. 10 on May 27, 1993.
We often refer to the put-call ratio in our Sentiment Indicators section. However, judging by questions we have received from subscribers, it might be beneficial to expand on the concept. We will cover the subject both generally and then specifically, in regard to the way we prefer to interpret the ratio. The put-call ratio is simply the number of puts traded, divided by the number of calls traded. It can be computed daily, weekly, or over any other time period. It can be computed for stock options, index options, or futures options.
