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AMGN Chart – Protective Put Example #2A protective put can be used here with the purchase of the stock in case the stock has a false bottom. RJR Chart - Protective Put Example #1Normally, when a stock breaks a resistance level, it normally trades up to find a new range most specifically a top of the range. Often, there is an opportunity to make a large gain in a very short amount of time when a stock beaks a support or a resistance. Key Point in Protective Put Strategy.Key Point - The protective put strategy, when used correctly,
will allow investors to take advantage of some opportunities
that could provide large potential gains without being exposed
to the severe risks that normally accompany such risky
opportunities. How Can Protective Put Strategy be Adjusted?The Protective Put Strategy can be adjusted to address the
particular lean that the stock owner has at a particular time. Protective Put Strategy in Different ScenariosAs previously stated, when we buy a stock, three potential
outcomes exist. The stock can go up, go down, or remain
stagnant. The Protective Put StrategyAs a reminder, a put gives an owner the right but not the
obligation to sell a certain stock, at a specific price, by a
specified date. FON Daily Chart - Covered Call Example #4These slow upward directional moves work well for covered call writers in two ways; capital appreciation and premium capturing. DELL Daily Chart - Covered Call Example #3During this period of time, the drop was a low volatility, gradual one in which the stock loss could have been well offset by premium collection. JPM Daily Chart - Covered Call Example #2From the time that the stock enters the trading channel, the range of the channel has been decreasing or tightening, which indicates decreasing volatility. MCD Daily Chart - Covered Call Example #1This type of pattern is an opportunity for buy-writers because this type of gradual rise normally brings about a decreasing implied volatility period which is great for premium selling. Options Trading Strategies - RollingRolling is defined in options as moving a position from one
strike to another either vertically in the same month,
horizontally to another month or some combination thereof. Options Trading Strategies - LeanProfessional traders use the term "lean" to refer to one’s perception about the directional strength of the stock. When you own a stock and intend to hold it for a period of time, you are aware that you will probably be holding it while it goes up and while it goes down. The "Stagnant" Scenario vs. The "Down" ScenarioThe "stagnant" scenario. When we apply the covered call strategy to the stagnant stock scenario, we take a negative return scenario and turn it into a positive scenario. Remember, when we sell an option, we receive a premium for doing so. The "Up" ScenarioIn the "up" scenario, the maximum gain that can be attained is the stock finishing at $10.00 or higher. At $10.00, you would profit from the full value of the extrinsic value of the option which is $.50 and you would also have $.50 of capital appreciation from the stock for a total of $1.00. Time DecayTime decay, also known as theta, is defined as the rate by which
an option’s value erodes into expiration. The value of the
option over parity to the stock is called extrinsic value. The Covered Call / Buy-Write StrategyFor better or worse, most investors purchase stocks with the
intent of holding their shares for an extended period of time. Advantages & Disadvantages of At-the-money Option, In-the-money Option and Out-of-the-money OptionAn at-the-money option has both advantages and disadvantages
over stock and in-the-money options. First, the at-the-money
option will be cheaper then both the stock and the in-the-money
option. So there is less capital requirement and less total
risk. Trading Naked Calls and PutsAn option is a derivative trading product that is best used by
investors as a hedging tool providing profit protection and
profit enhancement. Options Trading StrategiesWebster’s Dictionary defines the term strategy as 1 a) the science of planning and directing larger scale military operations, specifically (as distinguished from TACTICS) of maneuvering forces into the most advantageous position prior to actual engagement with the enemy b) a plan or action based on this. 2 a) skill in managing or planning, especially by using stratagems b) a stratagem or artful means to some end. Put OptionA put option is a contract between two parties (a buyer and a
seller) whereby the buyer acquires the right but not the
obligation to sell a specified stock or other underlying
instrument at a specified price by a specified date. ParityParity - When we discuss parity in terms of options, we say that
parity is the amount by which an option is in the money. PremiumPremium is the total amount of money (price) you pay for an
option. So, if the Microsoft (MSFT) May 65 calls cost you $1.50
then the $1.50 is the amount of the premium of the option. Difference between In-the-money (ITM), Out-of-the-money (OTM), or At-the-money (ATM).An option can be described by its strike price’s proximity to
the stock’s price. An option can either be in-the-money (ITM),
out-of-the-money (OTM), or at-the-money (ATM). Two kinds of Options are Calls and PutsA call option gives the buyer the right but not the obligation
to buy a specific security at a specific price by a specific
date. It’s a way of "locking in" the purchase price of the stock
for a period of time. Options BasicsWhat is an option? An option is a traded security that is a derivative product. Investor's Responsibility When He is Alone in the MarketIn today’s market environment, the best remedy for this situation is for you to get more involved in your own investing decisions. On-line Investing, Riskier than Bingo! The Elderly and Financial Risk TakingThe modern world of On-Line Investing. Just tune in to CNBC and feed your Attention Deficit Disorder while gambling, yes, gambling with your nest egg. Can you afford a Humpty Dumpty fall with your retirement funds. Read these cautionary steps to take. Managed Funds -- Growing Your Wealth without the HeadachesManaged funds are an easy way to invest wisely and with low risk. Investment in a fixed term deposit -- especially with a fund that invests in real estate -- is an easy way to grow to your wealth. Read more about securing your financial future. A Risky Investment Becomes CommonplaceIt was not that long ago that investors heard the words ‘Commodity Investments’ and for the most part ran the other way. These investments meant investing in the highly leveraged and volatile futures markets, something most investment advisor’s would tell their clients to stay clear of. A Unique Precious Metals Exchange Traded Fund is Launched Under a Cloud of WorryOn May 22nd a new metals based Exchange Traded Fund began trading on the Amex (GDX). The new Market Vectors - Gold Miners ETF was launched by the Van Eck Global firm and trades under the ticker symbol GDX.Records: 571-600 from 1035