My Holiday Trade

My Holiday Trade

It’s an option Christmas Tree. First let’s look at a call tree, then a put tree. We’ll begin with the call Christmas Tree. You are long one call strike A. You skip strike B. You sell three calls strike C and buy two calls, strike D. All strikes must be...
Selling Stock Short

Selling Stock Short

What I want to talk about today is selling stock short. That is, selling something you don’t own, a hard concept for financial newbies to understand. Basically, to sell stock short you have to borrow it from someone who owns it, typically a bank or a pension fund. You...
Interested in the Fed?

Interested in the Fed?

With all eyes on the Fed today and the widely held assumption that rates will get their first hike in years I thought I’d discuss interest rates and how they affect option pricing. Zero or near zero interest rates are not an unabashed good. It punishes savers because...
A  2:1 Ratio Put Back Spread

A 2:1 Ratio Put Back Spread

Here is a trade idea that will make money if the market continues to move higher or even if this is a top and the market breaks.  Keep in mind, this an idea and not a recommendation. I’m in the education business and not the advice business. What I teach is a way of...
Define Your Risk!

Define Your Risk!

Unless one is a professional options trader, their options trading setups should include well-defined risk. I do not advise being naked options short, even net options short as in a ratio spread. Oh, and by the way, a covered write is exactly the same as being naked...