Implied volatility as a trading tool

Implied volatility as a trading tool

Implied Volatility is important when you are selling options. It is a great trading tool that shows you how much potential the stock can move according the market’s opinion. It doesn’t give a clue which direction it is going to move though. If implied volatility is high, the market expects that the stock can move largely. When the stock has […]

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How will Standard Deviation help in trading

Option Premium sellers often sell options one Standard Deviation away from the market price. In this way there is a high probability of profit. The Options sold may expire worthless or you take profits now buy buying them back. Standard Deviation is a statistical term that measures the amount of variability or dispersion around an average. It is a number […]

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Time Decay is your best Friend

We benefit from options because of Time Decay. Time decay is represented by a Greek term know as Theta. Don’t worry too much about the Greeks for now, we will take a look at it a later on. Theta is a crucial component for options traders that decide to sell options. They will receive options premium to take on risk. […]

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Why managing your own money

Why managing your own money, sounds like an obvious question, right? Many people let other people decide how to build up their pension or hire a money manager. You like to choose the food your eat? How would you like to go to the grocery store and let the manager to pick out the food for you. You could end […]

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Importance of Extrinsic Value in Selling Options

The definition of Extrinsic Value is the difference between an option’s market price and its intrinsic value. In theory, options should not trade above their Intrinsic Value due to the time value associated with option pricing. Why is Extrinsic Value important for traders?  We will explain in depth what extrinsic value is. Then we will explain why extrinsic value is […]

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How to make Money with Trading

You might think: How much money can I make with trading?  How trading options can help you earn that extra money with a few basic strategies. Remember when you got your driver license. Maybe your dream was to run in the big car races Indi500. It wasn’t the coolest part being been able to driving to a friend’s house, to […]

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What determines the Option Price and Value

There are several factors that determine the option price of a contract. Most traders are trying to take advantage of directional moves in the underlying stock, and that is the primary driver of the price of an options contract, especially its intrinsic value. But the extrinsic value of an option, also known as its time value, is affected by time […]

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The Mystery of Option Extrinsic Value

Once you understand how extrinsic value interacts with intrinsic and time value of an option, you are better suited to select underlying stocks most suitable for your strategy, and to manage stock and option risks more effectively. We like to sell options in order to receive option premium. Option premium contains three different components, each one has its own unique […]

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What is Option Moneyness

In the world of options trading, Moneyness is used to describe the relationship between the current trading price of the security and the strike price of the option For Traders who are buying or selling options is important to know how far an option is ITM or OTM. Whether an option is in-the-money or out-of-the money it tells the holder […]

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Selling puts for huge income

Selling puts is an essential part of options strategies. Selling a put is a strategy where an trader writes a put contract. By selling the contract the put buyer has the right to sell stocks for a certain price. Selling options is advantageous to an trader, because the option trade has a higher probability of profit and she will receive […]

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What is a stock option

Stock Option Contracts comes in several ways. In a typical option contract, the seller agrees to keep an offer open for a certain amount of time. A potential buyer has to give the seller some payment in exchange. In other words in an option contract, the seller is agreeing to keep the “option”open for the buyer. An option contract gives […]

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