What is an Option Contract? 6 Characteristics That Every Option Has
This guide explains exactly what an option is and paints a picture of them that you can use to really understand what you are trading. This is really a guide for traders who are completely new to options but that doesn’t mean it isn’t important. The first step on the road to options mastery is […]
What is an Iron Butterfly and How Do You Trade Them – A Comprehensive Guide for Option Sellers
So you want to sell volatility but aren’t comfortable holding the unlimited loss exposures that come with a short straddle or strangle. This is where our trusty tool the iron butterfly comes into play. I’m not going to sugar coat it and say that they are the best way, because they aren’t. If you are […]
What is Theta In Option Selling – The Cost of Holding an Option Over Time
Theta is the greek that most option sellers are familiar with because it tells us about how much we are getting paid each day when we sell an option. Theta represents the daily loss in the value of an option due to the passage of time, assuming all other factors remain constant. Key Takeaways What […]
How to Trade Iron Condors – Ultimate Guide For Option Sellers
One of the hardest hurdles for retail traders to overcome when they look at the world of option selling is the idea of carrying the unlimited risk exposure that is technically a part of your position when you selling a straddle or a strangle. It makes sense that we would have a natural aversion towards […]
What Does Delta Mean In Options? – Controlling Direction When Selling Options
Delta is one of the option greeks that every option seller has heard of, but may not fully understand. It’s one of the most important concepts that option sellers have to be familiar with because we need to understand it in order to structure our trades correctly and manage them properly. Failing to understand how […]
Worried About Early Assignment in Option Selling? It’s Not As Scary As You Think
One of the biggest fears that I hear expressed by option sellers is: “What do I do if I get assigned early!” Exercise and assignment are a real part of the option market, so the idea that this could happen to you is very real, and especially as your trade approaches expiration, there will be […]
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. […]
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 […]