Understanding the Delta of an option is crucial for both new and seasoned traders. It’s one of five specific calculations called “Greeks,” which help measure specific factors that could influence the price of an options contract. Delta is a metric that helps you gauge how much the value of an option contract is expected to […]
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Rho is the rate at which the price of a derivative changes relative to a change in the risk-free rate of interest. Rho measures the sensitivity of an option or options portfolio to a change in interest rate. Rho may also refer to the aggregated risk exposure to interest rate changes that exist for a book of several options positions. For example, […]
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There are a number of different types of options expiration types. In the vast majority of our signals, our options will be categorized as “American”-style options. There are some, like VIX options, that are “European”-style options. Here’s a quick explanation of both. The term “American style” in relation to options has nothing to do with […]
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If you have spent any time researching trading schools or trading signal services, you undoubtedly have come across many that claim that buying options is a proposition that loses up to 90% of the time and thus you should always take the other side and sell options. Sound great right? Problem is that these claims […]
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An inside bar is just what the name implied. It is a bar that is “inside” of another bar. We use a daily chart for this approach. So the high from two days ago is higher than the high from one day ago and the low of two days ago is lower than the low […]
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A ratio spread is a neutral options strategy in which an investor simultaneously holds an unequal number of long and short or written options. … Conceptually, this is similar to a spread strategy in that there are short and long positions of the same options type (put or call) on the same underlying asset. A backspread is s a type of option trading plan in which […]
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We believe that some banks are in a position to make the next leg up? Why? You ask. Unlike your conventional banks, some banks like Goldman Sachs, JP Morgan, Citibank and, Morgan Stanley have resources that many conventional banks do not. They have MASSIVE trading entities. They are not simply a place to park […]
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Vega is the measurement of an option’s price sensitivity to changes in the volatility of the underlying asset. Vega represents the amount that an option contract’s price changes in reaction to a 1% change in the implied volatility of the underlying asset. We also discuss order flow and how it can affect implied volatility and the balance of supply and demand. Click […]
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Open interest is a concept that is unique to options. Volume is a parallel concept to stocks. First, what are they? Second, why should an options trader care about them? Open interest is the number of active contracts. It is a metric that can be tracked or displayed on most options trading platforms, like bid […]
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A call is an option that gives the buyer the right, not the obligation, to buy an underlying asset at a certain point in time at a certain price. A put option gives the buyer the right, not the obligation, to sell an underlying asset at a certain point in time at a certain price. […]
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