1. Your Questions About Options Strategies
Mark asks…
What options strategies to use when implied volatility is high?
Certainly you can't just buy calls (or puts), because if implied volatility lowers, you may lose
money, even if the stock goes up (or down).
On the other hand there are interesting oportunities for a stock to move during high volatility
periods, so
What options strategies to use when implied volatility is high?
Steve Winston answers:
If it's directional, it's great to sell calls or puts.
If you're not sure of direction, then you should do credit or debit spreads. Your one position is
offset by the high IV in the other.
Take ICE for example with the ATM options priced pretty high. If you buy a call and sell a call
(or do a credit spread on the put side), you mitigate the high IV allowing you to participate in the
movement w/o getting burned by the IV dropping.
Now, there are some stocks that are high all the time. In these "rare" cases, you can buy
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2. straight calls/puts, but I still wouldn't hold them for long because theta (time decay) will still eat
you alive.
If you have other questions, please feel free to ask.
Hope that helps!
Laura asks…
What is a top options trading strategies website with high returns?
I'm looking a for speculative website/service with stock option recommendations. I would prefer
documented returns from their option strategy.
Steve Winston answers:
Nothing is guaranteed with investing - no one can guarantee even consistent small returns,
never mind high returns - there is always the risk of losing money and options are a lot riskier
than just trading stocks - if the stock price decreases by the time the option expires, you lose
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3. 100% of the money you invested in the option - that's like gambling, not investing
Lisa asks…
What Are The Best Option Trading Strategies For Trading Options
In The Stock Market?
I've heard of many different stock option trading strategies and would like to know which are
the best ones to use. If you've had experience with any, please share your results in general.
Steve Winston answers:
To be successful at trading options in the stock market, you'll need practice. The best way to get
practice is through paper trading, that's where you follow a stock and pretend you are actually
putting trades in and then taking them out, hopefully for a profit.
You can also find books on the subject, like on amazon or barnes and noble. You'll need a good
foundation on the basics. There are also different strategies when it comes to trading options so
you'll need to learn those first as well.
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4. For more advanced ways on how to trade options, there are sites that offer guidance. The
advantage with these sites is that they will take you beyond the basics and offer you a better
chance at higher returns on your trades.
I've listed some sites below that you can check out, they are for information purposes only and
not a recommendation. However, you will learn a little more than what you can get from reading
books.
Http://www.stockoptiontradingsystems.com
http://optionsexpress.stockoptiontradingsystems.com
http://tradeking.stockoptiontradingsystems.com
I think if you start your learning this way, you will be able to succeed in trading options. Others
have done it so there's no reason why you can't learn how to do it too.
Hope that helps and good luck!
William asks…
What option strategies are similar to a covered call / buy/write for
stock options?
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5. Steve Winston answers:
An equivalent position to a covered call is a cash-secured put. In a covered call, the underlying
stock secures the sale of the call. On a cash-secured put, a full amount of cash equal to the
cost being assigned the stock secures the sold put. For a more detailed discussion of
cash-secured puts have a look at
http://www.safe-options-trading-income.com/Cash-Secured-Puts.html
Richard asks…
How to calculate the price stratgies options (i.e. butterfly).
Universal formula for all strategies in world?
Is there any universal formula to calculate the price of all kinds of strategies options such as
butterfly, packs, strangle or whatever options the traders pick.
Answer 1 below is not what I am looking for. Strategies options is a combination of many
option trades and they will execute as a single instrument. Each trade is called leg. I need a
formula to calculate the strategy's price based on the fill price of all the legs. I am told that
different strategy has different to calculate the price. Is it true?
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6. Steve Winston answers:
A universal formula for all strategies does not exist. However this site has a lot of return formula
and might have what you are looking for:
http://www.poweropt.com/strategymenu.asp
Betty asks…
What are some good investment newsletters or strategies for stock
options?
Hi
Please advice if anybody have tried a good investment newsletter for stock options?
Is there a listing to rank the performance of stock option newsletters?
Thank you for your help
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7. Steve Winston answers:
Discoveroptions.com has a free newsletter about options strategies. They have plenty of free
education and a mentoring program if you want to take that route.
Www.Ivolatility.com is another site that is also free.
I have my own blog that discuss different strategies. Feel free to check it out.
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