What are stock options? A stock option is an agreement which gives you the right (but not the obligation) to buy or sell underlying stock at a fixed price (the strike price) on or before a given future date (the expiry date). Each option is typically over 100 shares. The two parties in an options…
How to trade options The first step to becoming an options trader is to learn more about it. If you asked us “How do you trade options?”, we would reply “With great care!”. As good as options sound, with a bad strategy or no strategy you might be faced with substantial losses! Why options are…
What is a call option? A call option conveys the right to buy stock at a fixed price (the “strike price”) on or before the expiry of the option. If you are a buyer (taker) of a call option, you can exercise the option and take delivery of stock when the market gets to or…
What is a put option? A put option conveys the right to sell stock at a fixed price (the “strike price”) on or before the expiry of the option. If you are a buyer (taker) of a put option, you can exercise your right to sell stock when the market gets to or below your…
Options Trading Strategies To trade Exchange Traded Options (ETO) markets, traders must start with an understanding of call options and put options. They are the initial building blocks of all option strategies. Bought put options can be used to capture profits from downward moves in the price of the underlying stock, and bought call options…
ASX Options Australian companies with public share ownership are listed on the Australian Securities Exchange (ASX). In April 2018 roughly 2,400 companies and securities were listed on the ASX. The number changes with every newly listed company, and with every one that ceases to exist. When a stock is “optionable” investors are able to purchase…
How to trade successfully There are many traders in the markets, but only few are achieving consistent profits. To join the ranks of successful traders you need to jump two hurdles: You need a structured trading system, and you need a trader’s mindset to implement this system. Don’t be fooled by the seemingly unimportant “trader’s…
How to design a successful trading Strategy As we mentioned in How to trade successfully, as a successful trader you need to have a detailed, structured, rule-based trading approach, also referred to as your “trading system” or” trading strategy”. Your structured approach should start with trade discovery, should have a defined entry point, a methodology…
How to backtest a trading strategy The most expensive and fool hardy thing you can do is to start trading with real money before you have proven to yourself the validity of your trading strategy in ALL possible market environments. If your trading ideas have been developed and tested over only a couple of weeks…
The four stages of the market Know what to look for and you should be able to recognise market tops/bottoms as they are in the process of forming. Although you may not be able to pick the exact top of the market or the exact bottom of the market, through observation we have learned that…
Trading Volatility Volatility is probably the most overlooked and misunderstood aspect of options trading. The important fact is that volatility affects the price you pay for an option. In simple terms: Rising volatility “inflates” the value of an option Subsequently falling volatility “deflates” the value of an option Volatility in itself is not static; it…
