The Traderszone Network

Last week’s missive began the introduction of the three major families of option trade constructions (see Learning the Various Trade Constructions Available for Options Trading). My purpose in this approach is to make the reader familiar with the concept that certain groups of trades share common characteristics. The reason for this approach is to try to render the selection of the specific trades the new option trader must consider in his quest to fit his price and time scenario to the multitude of option trades available for consideration.

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By Bear Fight:

As the market has drifted higher over the last few days on light volume, individual investors should take this opportunity to lighten up on equities or sell call options into the New Year. Thin trading volume and the markets levitation may provide an opportunity to exit position or sell covered calls on long-term positions before a tumultuous 2012.

Europe at the forefront in 2012

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By Bear Fight:

As the market has drifted higher over the last few days on light volume, individual investors should take this opportunity to lighten up on equities or sell call options into the New Year. Thin trading volume and the markets levitation may provide an opportunity to exit position or sell covered calls on long-term positions before a tumultuous 2012.

Europe at the forefront in 2012

read more

By Bear Fight:

As the market has drifted higher over the last few days on light volume, individual investors should take this opportunity to lighten up on equities or sell call options into the New Year. Thin trading volume and the markets levitation may provide an opportunity to exit position or sell covered calls on long-term positions before a tumultuous 2012.

Europe at the forefront in 2012

read more

By David Pinsen:

S&P 500 Volatility drops to its lowest level since late July

On Friday, December 23rd, risk-averse investors received an early gift: stock market volatility, as measured by the VIX S&P 500 volatility index, declined to its lowest level since late July, as shown by the chart below:

This is good news for investors looking to limit risk, as, all things equal, hedging costs tend to be lower when volatility is lower.

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The PowerOptions blog has an interesting recent post on the Iron Condor Spread strategy. The Iron Condor is a neutral strategy where a trader combines a Bear-Call Credit Spread and a Bull-Put Credit Spread on the same underlying security. This type of trade is often used when an investor thinks the underlying may trend neutral over the life of the trade. Also, there is the potential to double the credit obtained over a single spread position.

There are two spreads involved in the strategy (four options). There is an upper break even and a lower break even. A profit is made if the stock remains above the lower break even point or below the upper break even point as evidenced by the chart.

An investor will receive a net credit from both positions. The total net credit is the max. profit. The max. profit is earned if the stock price remains above the sold put strike and below the sold call strike. The max. risk is the difference in strike prices on either spread minus the net credit.

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• Using Options to Play Defense in a Scary Market (businessweek.com)
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