Bollinger bands and the t-line

by Michael Thomsett

Options traders constantly seek that elusive, consistently dependable signal. But if you use a combination of two powerful signals, you might discover that getting a strong trend signal is not difficult at all. The two signals are Bollinger Bands and the t-line. Both are based on moving averages, but the bands include upper and lower… [READ MORE]

Covered calls, annualizing your return

by Michael Thomsett

When you compare two or more covered calls, the comparison is not always valid – even if the initial yield is identical. The holding period makes all the difference. Figuring out the true net return To calculate annualized return on a covered call, you first have to address a question: What is your basis for… [READ MORE]

Shorting stock – options are a better choice

by Michael Thomsett

Swing traders have a dilemma: Getting in with long positions at the bottom is easy, but shorting stock at the top is much more problematical. Swing trading is a popular and widely understood trading technique. Based on a three- to five-day short-term trend, you expect to see stock prices turn and reverse in a predictable… [READ MORE]

A Contrarian View

by Michael Thomsett

  A “contrarian” trader tends to time trades differently than the typical investor. What exactly does this mean? To many observers, being a contrarian is assumed to mean going against the majority in each case. But this is not accurate; in fact, the contrarian does not trade differently just to be contrary. There is a… [READ MORE]

Problems with Implied Volatility Calculations

by Michael Thomsett

Traders relying on implied volatility (IV) to time trades are relying on a deeply flawed calculation. The debate over whether to use implied or historical volatility is pointless. The one (historical volatility, or HV) is based on actual stock prices in the recent past. The other (IV) is an estimate of future option volatility based… [READ MORE]

Breakeven rate of return

by Michael Thomsett

Options traders tend to think about return almost exclusively, to the exclusion of other risk attributes within their control – cost, time, exposure, and personal bias. Return, however, is poorly understood even among seasoned traders. In setting goals for your options trades, how much return do you expect? How much do you need? Options solve… [READ MORE]

Ratio write versus covered call

by Michael Thomsett

The ratio write is an expansion of the covered call. At first glance, it does not seem that there is much difference between the two positions. There is considerable difference, however. The covered clal is based on a match between 100 shares of stock and one call. The ratio expands this. For example, in a… [READ MORE]

Calculations for the bear call credit spread

by Michael Thomsett

Among the range of vertical spreads, the bear call credit spread is of special interest to traders. Although it employs calls exclusively, it is used for a bearish sentiment. In a similar manner, its opposite, the bull put credit spread is based solely on puts but represents a bullish assumption. The bear call credit spread… [READ MORE]

Calculations for the bear put debit spread

by Michael Thomsett

The bear put debit spread is designed to limit losses, in exchange for also limiting profits. It combines a long in-the-money put with a short out-of-the-money put, each with the same expiration date. This sets up the limited profit and limited loss, illustrated in the payoff diagram. A profit is realized when the underlying moves… [READ MORE]

Calculations for the bull put credit spread

by Michael Thomsett

The bull put credit spread yields either a limited profit or a limited loss. This makes it a desirable strategy, in which the limits work out favorably for both sides. A limited profit is acceptable in exchange for a limited loss, making it a conservative strategy. When underlying volatility is high, this credit spread is… [READ MORE]

Load More

Sign up for e-mail updates

Follow us and we will keep you posted

Sign Up
Select a Program

Based on your experience and time available to trade, we offer four opportunities to learn how to earn.

Compare Plans