Understanding Volatility as Synthetic Time: Advanced Option Selling Lesson
When I first learned that volatility and time were the same thing it was pretty mind blowing. It changed the way I think about how options reflect the implied volatility for a ticker over time. In this article we are going to cover how volatility is actually synthetic time and walk through an example of […]
Black Scholes Model Explained – The Foundation of Option Pricing
There is a formula that exists. A magical formula. It’s called the Black-Scholes model, and it’s the most commonly used formula for determining option prices and volatility. Everything from implied volatility to option greeks are derived from this formula. So while we may not need to “use it”, it’s important to understand why it exists. […]
The Importance of Trading Research: Finding Tradable Information
Finding a good trading opportunity requires two things. The first is that there needs to be a pricing discrepancy. A difference between the current market price and what you think fair value should be. The second is that there needs to be an understandable reason why this opportunity exists. Answering this second question requires developing […]
Volatility Characteristics That Explain How Option Prices Change – The Must Know Features of Volatility
A lot of traders will try to tell you that volatility is unpredictable. That all of the time spent by option sellers measuring and analyzing volatility is for nothing. But in reality, there are some key characteristics of volatility that help us forecast how it will behave in the future. It’s not different from how […]
Put Option Explained: A Simple Guide For New Option Traders
This article will give you a simple and clear definition of what a put option is and how they work. A put option gives you the right to sell a stock at a specific price within a certain period. Understanding how put options work is crucial for anyone looking to master options trading and leverage […]
Call Option Explained: A Simple Guide For New Option Traders
In this blog post I am going to continue going over the basics of options and talk about what a call option is and how they work. As option sellers we are going to be dealing with call options pretty much all of the time, so you need to know how they work and the […]
Understanding Spot Vol Correlation – How Share Price and Implied Volatility Move Together
In this blog I’m going to cover the concept of spot and implied volatility (IV) correlation and how it impacts option selling strategies. I will show you the relationship between stock price movements and implied volatility changes, how this correlation varies across different assets, and how you can use this information to structure your trades […]
How to Trade Illiquid Options: The Keys to Success For Selling Options With a Wide Bid Ask Spread
This post will teach you the essential techniques for trading options in illiquid markets. Low-capacity spaces often contain some of the best trading opportunities for retail traders due to their typically less efficient pricing. However, one of the most challenging and often overlooked aspects of trading in low-capacity markets is execution. Often, execution can be […]
How to Think Like a Professional Option Trader: The Secrets of the 1%
We all know that 90% of traders lose money, but when it comes to options, the statistic is even more daunting: 99% of traders end up in the red. Most people who enter the world of options trading do not achieve long-term profitability. When asked why these traders fail, the usual answers are poor mentality, […]
How to Run A Calendar Spread Strategy: A Guide for Option Sellers Looking To Trade Calendars Like a Professional
This guide is intended for professional traders aiming to master calendar spreads. By grasping the concepts detailed below, you’ll be able to discover some truly exciting trades. Be forewarned, this content is challenging. Calendar spreads are intricate financial structures. Many traders lack a deep understanding of calendar spreads’ dynamics. Consequently, it’s uncommon to find retail […]
How to Sell Options Profitably When IV Rank is Low
Compared to a couple years ago, the VIX is pretty low. We are used to seeing VIX at 25 or higher, and now it’s just at 15. Many traders think that this means there are no trading opportunities, but this is simply not true. Our perception of where implied volatility should be is skewed because […]
The Truth About Trading Psychology: The Real Reason You’re Not Profitable
Trader psychology is often touted as the main reason why many traders fail to beat the market. From day one, traders hear that their lack of success is due to being too greedy, not managing risk properly, or simply not having the right mindset. Every “guru” out there points to trader psychology as the culprit […]