Option Trading Basics
Option trading is a rapidly growing branch of the trading world. The reasons for this rapid growth are several but include the ability to control risk crisply, take advantage of the inevitable decay of the time premium portion of an option’s price, and to exploit the predictable and stereotypic changes in the factors controlling option pricing that occur on a regular basis. In addition, the ability to leverage positions may appeal to the most aggressive of traders, but this capability is not necessary to exploit for a successful approach to trading these vehicles. Option trading can be approached with a variety of tempos and risk appetites.
However, successful trading of these vehicles requires a skill set that is not intuitively obvious. As opposed to the world of the equity trader where price is the only variable, the value of options respond to the mutual interaction of the forces of time to expiration, implied volatility, and price of the underlying. The interplay of these forces defines the yin and yang of option trading.
The Option Trading Signals Newsletter looks to exploit and profit from opportunities which derive from one or more of these factors.
In my style of trading, the passage of time, theta decay, often forms the profit engine as the inevitable wasting of option premium occurs as expiration is approached. At other times, the predictable collapse of implied volatility following an event (e.g. earnings release, FDA decision) represents a favorable risk: reward scenario. These potential profit engines are not mutually exclusive and often occur in synergistic combinations which my style of trading capitalizes from.
The world of options is rapidly evolving and requires a firm understanding of the variables at play in order to survive and prosper.
For example, the recent explosion in weekly options in a wide variety of underlying stocks, etf’s, and indices has dramatically quickened the pace of potential option trades for those who may wish to participate in a more rapid trading pace.
If you are interested in learning how to trade options effectively while looking over the shoulder of an experienced option trader with access to my exact trades in real time, Subscribe Today!
An interview with J.W. Jones.
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Recent Trades
- IWM 13%
- UUP 81%
- SPY 44%
- GLD 29%
- SPY 32%
- GS 13%
- QQQQ -7%
- FXE 18%
- GLD -65%
- SPY 25%
- XOM 10%
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