How to sells calls and puts

Traders sell calls and puts depending of their assumption. They will receive option premium upfront by selling options. In this yield-seeking environment, selling options is a strategy designed to generate current income. We sell options with high implied volatility. We want the option to expire worthless or we buy them back when they are much cheaper. If you the options […]

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How to Trade Volatility effectively

For traders it is important to know how to trade Volatility. When the stock moves up and down Volatility increases. While uncertainty increases the option premium increases. This change of the stock option premium always is exaggerated. And the experienced trader knows that the the price will have a mean reversion. Mean reversion is the tendency of a stock price to […]

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Trading Implied Volatility

Trading Implied Volatility is a key concept for option traders. Even if you are a beginner, you should try to have at least a basic understanding. Options with a high Implied Volatility are more expensive than options with low IV. This knowledge gives us an advantage when we sell options and receive option premium. Option volatility is reflected by the […]

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Implied Volatility Rank

Before we explain Implied Volatility Rank (IVR) we briefly look at Implied Volatility. Implied volatility (IV) is a forward-looking expectation of price fluctuation.  This is derived from an option pricing model and carries great importance in the pricing of options.  However, due to multiple inputs in option pricing models, IV can (and typically does) constantly fluctuate. Beyond the actual reading […]

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Implied Volatility Explanation

  Volatility can be defined by how much the price of an underlying can fluctuate during a certain period of time. The volatility of the underlying instrument plays a big role in the pricing of the options. In the option market, traders care about historical volatility and implied volatility. We focus on Implied Volatility. We sell options with high Implied […]

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The ABC of selling Options

Learn the ABC of selling options. Investors who trade options has to make many decisions like buying or selling options. Which strategy is best considering the market. What is investors assumption about the stock. If an investor is bullish, she can sell a put, whereas if she is bearish, may sell a call. There are many reasons to choose each […]

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Optimal Strike Selection of Options

In this articles we will discuss how to determine strikes of your option trades. You want to select strikes which gives you the optimal price risk reward.  With the selection of strikes you determine the amount of risk you take. The use of the Probability Model and Standard Deviation is very helpful. Our practice is to sell options order to […]

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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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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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