Is the GME Short Squeeze a Black Swan for the Market and Hedge Funds?
By now you know all about the historic GME short squeeze. What we don't know is what this Black Swan event means for the market going forward.
Read More
The first—and perhaps biggest—challenge of options trading is understanding what an option is.
An option is a contract giving you the right, but not the obligation, to buy or sell a specific security at a specific price over a specific period of time. After that period of time has elapsed (known as “expiration day”), the option ceases to exist.
Once considered a niche segment of the investing world, options trading has now gone mainstream.
With little knowledge on the best strategies, you can use options to work the odds in your favor and make trades that have up to an 80% probability of success. Find out how in this free report, How Options Work—and How to Hedge Portfolios with Options.
Read Your Free Report Here.Call options give you the right to buy the security.
Put options give you the right to sell the security.
There are numerous types of options trades. Depending on which method you choose, options trading can be used to hedge a portfolio, create yield or gain significant market exposure and returns with little capital risk.
Options contracts typically represent 100 shares of the underlying stock. So, if you exercise a call, you’re buying 100 shares of the underlying stock; if you exercise a put, you are selling the underlying 100 shares at a stated price—known as the “strike price.”
Other terms to remember that can help you understand options trading:
Options Premium: This is also known as the options “price.” The potential loss for the holder of an option is limited to the premium paid for the contract. On the other hand, the initial premium can offset the potential loss for the seller of the option.
Time Decay: All options are wasting assets whose time value erodes by expiration—and that erosion is called “time decay.” The more time remaining until expiration day, the higher the premium will be. That’s because the longer an option’s lifetime, the greater the possibility that the underlying share price will move to make the option in-the-money.
Implied Volatility: If the market becomes volatile, or if volatility is expected, implied volatility will rise, thereby increasing options prices. Conversely, low market volatility lowers options prices. The Chicago Board of Options Exchange Volatility Index (VIX)—a.k.a. the investor “fear gauge”—is the best way to measure near-term volatility in the S&P 500. It represents the market’s volatility expectations over the next 30 days.
Still confused? Let our options expert Jacob Mintz explain more about options basics, and his own personal options strategies. Jacob runs two options services for Cabot Investing Advice: Cabot Options Trader, catered to options beginners, and Cabot Options Trader Pro, for more experienced options traders.
Jacob carefully assesses the risk and reward of each one of his options trades. When he buys options, he risks pennies to make dollars. When he sells options, he does so with very defined risk to avoid big losses. Sometimes Jacob uses conservative options strategies to hit singles; other times he uses more aggressive strategies to try to hit home runs.
There is great mystery that surrounds options trading. Some investors avoid it altogether because they think it’s too confusing or too risky. But understanding options is easier than you think. And once you get the hang of options trading, the risks can be easily minimized.
If done right, options trading can be simple and—more importantly—lucrative.
By now you know all about the historic GME short squeeze. What we don't know is what this Black Swan event means for the market going forward.
Read More
Contrary to popular belief, options trading is a good way to reduce risk. Weekly options? That's more akin to a roll of the dice.
Read More
Let me tell you about the greatest options trade I saw in my 10 years on the Chicago Board of Options Exchange (CBOE) - and what I learned from it.
Read More
My wife recently bought be a Sonos sound system, and I can't stand it. SONO stock, on the other hand, continues to be a big winner.
Read More
This past May, I recommended buying calls in PTON stock. The result was perhaps the greatest options trade I've ever made.
Read More
Looking to invest in a good stock that's either young or has long-term turnaround potential? Try LEAP options in these three stocks.
Read More
Why am I very bullish on the market right now? Because the most bullish option trade I've ever seen keeps happening every day.
Read More
Purple Innovations (PRPL) and Peloton (PTON) have been two of the market's hotter stocks. I recently found out first-hand why.
Read More
A Joe Biden election this November is seeming increasingly possible. Regardless of how you feel about that outcome, here's how to hedge it.
Read More
My subscribers and I have made a lot of money trading options this year. Which begs the question: who is on the losing end of these trades?
Read More
Once considered a niche segment of the investing world, options trading has now gone mainstream.
With little knowledge on the best strategies, you can use options to work the odds in your favor and make trades that have up to an 80% probability of success. Find out how in this free report, How Options Work—and How to Hedge Portfolios with Options.
Read Your Free Report Here.