Let’s talk today about another way to hedge your stock portfolio against a major move down, albeit indirectly. We can do this by using options on the CBOE Volatility Index (VIX) in the form of a vertical call spread. The VIX is an index which provides a measurement of implied volatility in the S&P 500 […]

Over the last few months we have examined the Greek letters that make the life of option traders much easier. Delta, gamma, rho, vega, and theta are highly useful tools that correlate dimensions of risk in the price of an option to important factors such as the price of the underlying asset, interest rates, volatility, […]

The U.S. economy has greatly improved since the peak of the financial crisis with the financial markets recovering all losses and rising to record all-time highs. The $85 billion asset purchase program expanded the monetary base by trillions of dollars in just a few years, has contributed to the financial enthusiasm. The real recovery hasn’t […]

Every now and then it’s wise to review some of the basic elements in the options working method. Today I am going to review what happens when an-in-the-money option turns into the underlying asset, long or short (i.e., bought or sold,) through exercise and assignment. This happens in two ways, depending on the style of […]

Over the last month we have discussed the main options Greeks that an option trader should look at. We started with delta and gamma, which are related to the change in the option price due to changes in the underlying price. After that, we explored vega and rho, which relate the price of an option […]

Over the last few weeks we have been looking at options Greeks, invaluable tools for serious options traders. Greeks measure the sensitivity of the price of an option to a change in a specific variable. We already explored delta, gamma, and vega. Today we focus on rho. Rho is a measure of the change in […]

In recent articles we covered delta and gamma, important Greeks that option traders should look at before trading options. Both delta and gamma are related to the sensitivity of an option’s price to changes in the price of the underlying asset. The difference between the strike price of an option and the price of the […]

Is the long anticipated Correction upon us? Is the Bull run over, at least for now? Are you tempted just to get to cash and be safe? Maybe, maybe not.  One thing is certain, the only thing worse than buying at the top is selling at the bottom. And you’d sure hate to get out […]

Last week we looked at delta — one of the most important Greek letters for options traders. Delta is significant because it captures the expected change in the option price deriving from a unit change in the underlying price. So, a delta of 0.75 means that if the underlying increases by $1, the option will […]

Sometimes bad things happen to good stocks. And when this happens, good stock trades can quickly become broken stock trades. Just like a rising tide lifts all boats, when the tide goes out, the boats go lower. Massive market sell-offs show no mercy, are not selective, and take no prisoners. What can you do when […]