What is Volatility In Options and Why Is It Important For Option Sellers?
Option prices are based on volatility. Options were invented as ways to trade volatility. If you want to run a successful option selling portfolio, you must have a complete and thorough understanding of what volatility is and how it relates to the value of options. This article is going to introduce you to the concept […]
Structures Used In Option Selling Strategies – Long and Short Straddles
In options trading there are two fundamental opinions that a trader can express on the market. Long volatility and short volatility. These views are fundamentally your opinion on the difference between implied and realized volatility. When you are long volatility, you are saying that you think realized volatility will be higher than implied volatility. If […]
Options Expiration Date: The Importance of Days to Expiration in Options Trading
A key characteristic of option contracts is the number of days until the contract expires, which is often referred to simply as days to expiration (DTE). Simply put if you want to be an option trader you need to understand this term. It is a key factor that affects the pricing and value of options. […]
Introduction to Relative Value Trading: A Profitable Way To Sell Options
One of my favorite option selling topics is relative value trading. It’s based on finding price discrepancies between similar assets and is arguably one of the best approaches to strategy development. Let’s explore how relative value trading works, its applications, and a real-world example that made me some decent coin back in the day. Key […]
How The Term Structure Impacts Option Selling Strategies: A Comprehensive Guide For Option Sellers
In this article you are going to learn about the term structure of an option chain, what it tells us about the market expectations for volatility and how we can use it to make better trading decisions. We took all of the key information you need to take action and compiled it for you into […]
Understanding Option Greeks – The Key to Professional Option Selling
One of the things that makes options such an attractive asset to trade is that there are so many dimensions to them. They can be used to express almost any view you have. But how do we actually describe these different dimensions? This is where the option greeks come into play. The Greeks represent different […]
How to Read an Options Chain: Key Terms You Need to Know
So you understand a bit about how options work. You get the necessary approvals from your brokerage. You open the option chain on your brokerage.. And have absolutely no idea what you are looking at. When you go to place a trade in the market, you are going to need to navigate the option chain […]
The 3 Types Of Volatility That Impact Option Prices – Market, Event and Non-Event Volatility
Every single ticker experiences volatility. And if you want to be a profitable option seller, it’s crucial to understand the different ways that volatility can present itself. To help you make sense of volatility, we created a conceptual model called the Three Circles of Volatility model, which will help you clearly understand the different types […]
What is Gamma in Options Selling – Understanding the Rate of Change in Delta
There’s a saying I like which goes “One man’s theta is another man’s gamma”. I like this a lot because it paints a clear picture of the relationship between how we get paid as option sellers, and what we are getting paid for. Gamma is a really important greek for option sellers to understand. It […]
What is Vega in Options? Understanding Sensitivity to Changes in Implied Volatility
Vega is the option greek that measures an option’s sensitivity to changes in implied volatility. As an option seller, understanding Vega is crucial because it directly impacts your exposure to market uncertainty and can significantly influence your PnL. Key Takeaways What is Vega? Vega represents the amount by which the price of an option changes […]
Volatility Mean Reversion and Clustering – Option Selling Characteristics
Everybody seems to think that volatility is some unpredictable wild horse that bucks and kicks and does whatever it wants. But this is actually untrue. Volatility is something we can measure. It’s something with very distinct characteristics that repeat themselves over time. And after you read this article, you will see exactly what I am […]
How to Read an Option Chain: Identifying Option Information When Placing A Trade
I recently wrote a blog which broke down options into the Six Key Characteristics that define them. To sum it up, we defined an option as a contract between two people that gives the purchaser the right to buy or sell a stock at a given price within a specified timeframe, and the purchaser pays […]