Options Trading Tips
Technical Analysis - In order to predict the future direction of the market, technical analysis based on options volume is a very powerful tool.
Options Trading - When volatility is at high levels and the stop loss point on a particular stock is at about the same price as the cost of an option, Options are the preferred vehicle.
Call Put Ratio - To calculate the Put/Call ratio, divide the volume of put option contracts by the volume of call option contracts. Chicago Board Options Exchange (CBOE) calculates this ratio.
Expiration Cycle - Expiration dates applicable to options of listed securities is referred to Expiration Cycle. There are three major cycles for options (not LEAPs).
Options Expiration Strike - The price and date at which an option can be exercised, is the Strike Price and Expiration Date...
Stock Options - As a form of compensation, some companies issue stock options to employees. Incentive Stock Options (ISO), or Nonqualified Stock Options (NSO) is the general form which these stock options take.
Intrinsic Value - An option has intrinsic value when it is in-the-money. For an in-the-money call the intrinsic value is equal to the underlying asset price less the strike price.
Index Trading - Unpredictable events such as news, rumors and earnings reports fluctuate the price and volume for individual stocks.
LEAPS - Leverage is one of the great advantages that options provide. For a small amount of money, you can control a large holding in an asset.
Options Margin Requirements - When an investor borrows money from a brokerage house to cover part of the purchase of a security, an investor is borrowing on margin.
Naked Options - When an investor sells a call option without owning the underlying asset or without depositing funds to cover the exercise value of the call, a naked call (uncovered call) occurs.
Stock Options - Nonqualified Stock Options are generally easier to establish and administer and are generally less restrictive than Incentive Stock Options.
Beta - How a stock's movement correlates to the movement of the overall stock market is measured by beta. Beta is related to but is not the same as volatility.
Bid Ask - Commonly used options terminology
Options Price - Option pricing techniques have reached a level of sophistication that transformed the option trading market into the hugely lucrative industry that it is today.
Options Pricing - The Binomial Model for pricing American stock options was founded by Cox, Ross, and Rubenstein in 1979.
Options Style - Options that can be exercised anytime up to their expiration date, are American Style Options (American Options).
Options Volatility - The Volatility of an asset, which usually is quoted as the annual standard deviation of an asset' price, provides a measure of the random variability or dispersion of price per unit of time.
Options Glossary - list of the most used terms in the options trading
Sell Buy Options - By comparing the benefits (outlined in the table above) of selling short options and of buying long options, it becomes evident that option sellers have more opportunities to profit.
Market Timing - Options Market Timing is a method of analyzing past trends in options volume and options cash volume, to accurately forecast the future direction of the market.
QQQ - The QQQ is ETF (Exchange Traded Fund) that tracks the NASDAQ 100 Index.
DISCLAIMER: THIS INFORMATION IS INTENDED FOR EDUCATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE ANY FINANCIAL ADVICE. RISK IS INVOLVED IN ALL STYLES OF MONEY MANAGEMENT. Uncovered options trading involves greater risk than stock trading. You absolutely must make your own decisions before acting on any information obtained from this Website.