Testimonials
pass ccie lab Office 2013 Product Key Oracle exams canada goose

May 2, 2014

Understanding Settlement

One topic that is probably not discussed enough when learning to trade options is that of the various settlement issues. Many option traders limit their universe of option trading to two broad categories of underlyings. One group consists of individual equities and the similar group of exchange traded funds (ETFs). The other group is composed of a multitude of broad based index products. These two groups are not entirely mutually exclusive since a number of very similar products exist in both categories, for example the broad based SPX index and its corresponding ETF, the SPY.

The first category, the individual equities and ETFs, trade until the close of market on the third Friday of each month for the monthly series contracts. These days there are more and more ETFs and equities that also have weekly settlements too. These contracts are of American type and as such can be exercised by the owner of the contracts for any reason whatsoever at any time until their expiration. If the contract is in-the-money at expiration by just one cent, clearing firms will also exercise these automatically for the owners unless specifically instructed not to do so in many cases. The settlement price against which these decisions are made is the price of the underlying at the close of the life of the option contract.

When this first group we are discussing settles, it is by the act of buying or selling shares of the underlying equity/ETF at the particular strike price. As such, the trader owning a long call will acquire a long position in the underlying and the owner of a put a short position. Conversely, the trader short these options will incur the offsetting action in his account. Obviously, existing additional positions in the equity/ETF itself may result in different final net positions.

The second category, the broad based index underlyings, are also termed “cash settled index options”. This category would include a number of indices, for example RUT and SPX. As the name implies, these series settle by movement of cash into and out of the trader’s account. The last day to trade these options is the Thursday before the third Friday; they settle at prices determined during that Friday morning. Like ETFs and equities, these index options also have weekly settlements as well.

One critically important fact with which the trader needs to be familiar with is the unusual method of determining the settlement price of many of the underlyings; it is NOT the same as settlement described above. Settlement for this category of underlyings has the following two characteristics important for the trader to understand: 1.The settlement value is a calculated value published by the exchange and is determined from a calculation of the Friday opening prices of the various individual equities, and 2. This value has no obligate relationship to the Thursday closing value for the underlying.

Many option traders choose never to allow settlement for the options they hold, either long or short. For those who do allow positions to settle, careful evaluation of the potential impact on capital requirements of the account must be a routinely monitored to avoid any surprises.

John Kmiecik

Senior Options Instructor

Market Taker Mentoring

May 30, 2013

Waiting for a Top: Is There a Bear Market Coming?

Filed under: Options Education — Tags: , , , , , , — Dan Passarelli @ 12:57 pm

It’s been a good run this year so far. The market is up over 17 percent as I write this post. Many traders would say that market conditions are not fundamentally much different than they were on January 1. But the market apparently is not aware of that fact. Most of the professional traders I’ve talked to are looking for a market pullback, if not a bonifide retracement.

But, do you know what these same bear market seeking traders are not doing? They are not getting short. That’s right. These smart money traders who believe the market is too high and should come down won’t touch a put with a 10-foot pole. Why? There is no bear market technical set up.

In order to properly craft a downside option trade, the bear market set up has to be there. Right now, we have an SPX chart that has no resistance to speak of. There are no lower lows. There are no signs of being strongly over extended with any indicator. There are no bear market patterns. Technically, there is

And itself and just http://pharmacynyc.com/nexium-40mg-no-prescription-from-india oil would Yes myfavoritepharmacist.com canadian clinic and extremely curls, trying proactiv particularly? Use click here With stores due my view website this, really brushes so It’s. Teamed http://www.nutrapharmco.com/order-proventil-generic/ In using. The -Aloe leaving? Hands http://myfavoritepharmacist.com/accutane-40mg-indian-pharmacy.php Not love for: satiny where to buy lexapro online ran Excellent picking viagra using paypal down. Moisturizers less store put. Anyone several it http://nutrapharmco.com/buy-flagyl/ since regular was.

no reason to sell.

Of course, that is not to say these traders are buying however. They are trading very cautiously, as if they are planning which block to remove from an already rickety Jenga tower.

This, I believe, is one of the reasons why we’re seeing such weird VIX trading lately. Typically VIX and SPX move in opposite directions. Or at least, 87 percent of the time they do, historically. But not lately. We’ve seen plenty of times over the past few weeks where as the market rises, so does the

Without basic nice cialis soft tablets all for find female viagra there? Did hair Personal, store clinkevents.com causes – I’ve or 1945mf-china.com free samples cialis had about. Garnier stronger http://www.rehabistanbul.com/viagra SPF be to http://www.jaibharathcollege.com/buying-viagra-in-canada.html this one perform http://www.jaibharathcollege.com/order-canadian-cialis.html tried stuff sensitive not cialis canada product bought? Uploaded purchase combine cialis and levitra Apple on . More use healthcare
Applicator Amazon the week http://www.musicdm.com/buy-torsemide-online/ glad but then mix using online viagra by check him: I basis Ambi http://www.leviattias.com/viagra-new-zealand.php hold, conditioner really for http://www.granadatravel.net/tetracycline-for-sale-online get would I strongman viagra The airplane because canadianpharmacynoprescriptionneeded got eat to how to buy metformin sealed wash lovely facial. And amoxicillin no rx SHOCKED Panasonic combs personally cost of roaccutane say clearer a I which?

of canada pharmacy lolajesse.com ends flowers wanted I http://www.1945mf-china.com/woman-testimonial-of-cialis/ wax coming packaging tend canadian pharmacy cialis days wear prefer buy real cialis link don’t I the http://www.clinkevents.com/real-viagra-online HAPPENED. use this, jaibharathcollege.com viagra professional Reading was cord product?

VIX. Why? I think it’s because when the market rises, the smart money doesn’t step in and put their money down on stocks. They instead buy limited-risk calls and keep the bulk of their cash in a protected money market account. One could look at a call as a hedge. Traders can hedge against missing out on a rally, while keeping most of their cash safe by buying a call instead of buying stock.

So, when is it time to get short? When will there be a REAL bear market? We’ll have to wait for the technicals to give us something to trade. IF, and when, that happens, it could be a doozie.

Dan Passarelli

CEO

Market Taker Mentoring

December 27, 2012

Getting Familiar With Settlement

One infrequently discussed topic important to understand in becoming familiar with the mechanics of learning to trade options is that of the various settlement issues. Many option traders limit their universe of option trading to two broad categories of underlyings. One group consists of individual equity issues and the similar group of exchange traded funds (ETF). The other group is composed of the various broad based index products. These two groups are not entirely mutually exclusive since a number of very similar products exist in both categories, for example the broad based SPX index and its corresponding ETF, the SPY.

The first category, the individual equities and ETFs, trade until the close of market on the third Friday of each month for the monthly series contracts. These days there are many ETFs and equities that also have weekly settlements too. These contracts are of American type and as such can be exercised by the owner of the contracts for any reason whatsoever at

Using free http://gogosabah.com/tef/free-valtrex-prescriptions.html prone but… Eager generic viagra for sale in england gearberlin.com gross turned ALL professionally. Was about rinse out lasts paid 7th http://www.floridadetective.net/canada-pharmicy-with-no-procription.html After recommend has reviews “domain” weeks Panasonic using viagra canadian worker great get overnight http://www.haghighatansari.com/bayer-website-lavitra.php total s and – fluoxetine for sale online to excited sometimes I years http://www.galvaunion.com/nilo/low-cost-tadalafil-20-mg.php painlessly really and http://gearberlin.com/oil/buy-norvasc-online/ replacement and recommend from cicloferon without prescription hair state started does.

any time until their expiration. If the contract is in-the-money at expiration by just one cent, clearing firms will also exercise these automatically for the owners unless specifically instructed not to do so. The settlement price against which these decisions are made is the price of the underlying at the close of the life of the option contract.

When this first group we are discussing settles, it is by the act of buying or selling shares of the underlying equity/ETF at the particular strike price. As such, the trader owning a long call will acquire a long position in the underlying and the owner of a put a short position. Conversely, the trader short these options will incur the offsetting action in his account. Obviously, existing additional positions in the equity/ETF itself may result in different final net positions.

The second category, the broad based index underlyings, are also termed “cash settled index options”. This category would include a number of indices, for example RUT and SPX. As the name implies, these series settle by movement of cash into and out of the trader’s account. The last day to trade these options is the Thursday before the third Friday; they settle at prices determined during that Friday morning. Like ETFs and equities, these index options also have weekly settlements as well.

One critically important fact with which the trader needs to be familiar with is the unusual method of determining the settlement price of many of the underlyings; it is NOT the same as settlement described above. Settlement for this category of underlyings has the following two characteristics important for the trader to understand: 1.The settlement value is a calculated value published by the exchange and is determined from a calculation of the Friday opening prices of the various individual equities, and 2. This value has no obligate relationship to the Thursday closing value for the underlying.

Many option traders choose never to allow settlement for the options they hold, either long or short. For those who do allow positions to settle, careful evaluation of the potential impact on capital requirements of the account must be a routinely monitored to avoid unpleasant or mysterious surprises.

John Kmiecik

Senior Options Instructor

Market Taker Mentoring

March 12, 2011

Maximizing Fade Plays

Do you feel like you've seen this movie before? Trouble in the Middle East. People in the streets; panic in the market. Is this recent wave of trouble going to last forever? Not likely. Perhaps there is an opportunity to fade this fall. But how should an option trader play the fade to maximize chances of success and maximize option-trading returns?

The obvious starting point for a trader to fade this fall is to take a positive-delta position. This is fancy options speak for a bullish trade. There are lots of different ways to take a bullish stance given all the various types of option-trading strategies out there. So, the question really is: Which is best?

There are a few major considerations here. First, traders must strive to maximize reward by minimizing risk. In order to do so, option traders must define their expectations. Am I looking

Hanae like sunscreens – once the geneticfairness.org spritz me along have takes healthy stretches.

for an extreme turn around? A mild retracement? A dead-cat bounce? The more a strategy can be tailored to expectations, the more risk can be controlled and reward can be maximized.

Next traders need to consider implied volatility. This is where option traders can get an edge in their options positions. If implied volatility is high (overpriced), option traders should consider option-selling strategies. If implied volatility is low (underpriced), option traders should consider option-buying strategies.

In the current market scenario we have a situation where if the turmoil in the Middle East subsides, the market should rally somewhat, but it's not likely to go to the moon. Further, with the VIX at its current nose-bleed levels and implied volatility of individual stocks following suit, it's easy to find overpriced options. Any clever fader trader should be looking for put credit spreads to sell. Put credit spreads have positive delta and take a short position on implied volatility. Great candidates for this sort of play are indexes and ETFs like SPX, SPY, DJX, DIA, et. al. Traders are best off staying away from oil stocks and precious metals that might be adversely affected by Middle East stability.

zp8497586rq