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Option Q&A

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Is there an options trading strategy that would produce an income of around 8% per year?

Posted by Pete Stolcers on November 12

Option Trading Question

Is there an options trading strategy that would produce an income of around 8% per year selling FAR OUT THE MONEY PUTS with 3 months duration to expiry? This would be repeated 4 times a year, to produce an 8% return per year. The strategy would be an alternative to investing in a structured product related to a index, where if the index did not fall by more than 45% from a fixed starting level each quarter over a five year period then the 2%/quarter would be paid on the investment. Therfore my question is could options better this return and how? Where the 45% level was breached then the 2%/quarter would not be paid, one breach per year = 6%/year

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Option Credit Spreads - Where Should I Place The Stop Loss?

Posted by Pete Stolcers on October 5

Option Trading Question

I've lost 25 % of my account becasue I did not set a proper stop loss order during the big market decline last week. I'm confused on how to set a stop loss order and follow a good risk management rules. For example, if I establish a put option credit spread trade @ $1, should I place a buy-stop order to buy back the credit spread when it reaches $ 2 or $ 1.5 ? What type of option order do you place on the trading platform (trailing stop, stop limit order, order cancels other, conditional order)?

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How To Get In When You Can’t Be Around.

Posted by Pete Stolcers on June 20

Option Trading Question

Today Tim S. asks, “Often, I see a good trade but I can’t be around to watch it. When I pay up, it goes against me, when I put a low bid in it runs up without me. What can I do?”

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“Rolling” An Option Position

Posted by Pete Stolcers on April 12

Option Trading Question

Rick S. asks, "I have seen you post comments that refer to "rolling" positions the week of expiration. What exactly is that?

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Defining Relative Strength and Weakness

Posted by Pete Stolcers on February 14

Option Trading Question

Can you please explain what relative strength and weakness mean as they pertain to options trading?

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What Determines An Option Bid/Ask Spread?

Posted by Pete Stolcers on December 27

Option Trading Question

Today Rick S. asks, "Why are some option bid/ask spreads a nickel wide and others are fifty cents wide?"

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The Problem With Option Limit Orders.

Posted by Pete Stolcers on November 15

Option Trading Question

Today Don G. states, “I don’t like to place market orders because I always seem to pay more than I should. However, when I place a limit order I rarely get filled unless the stock moves against me in a big way. What can I do?”

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Option Credit Spreads Gone Bad - Buy In The Short?

Posted by Pete Stolcers on October 15

Option Trading Question

I pulled this question from the archives because the lesson still applies. When we get stopped out on a put spread why do we close the whole position? I have noticed that if we covered the short leg and keep the long leg the chances are good that we will minimize our loss or possibly make a profit. A good example was the LEH put spread. Our stop was hit and we lost around $900. If we had held the long leg we would be up over $2K as of Friday. I realize that the down side is losing the spread minus the premium but if you are careful and watching what is going on with the markets the odds seem to be in your favor.

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How Can I Get An Entry Level Position Where I Can Learn How To Trade?

Posted by Pete Stolcers on September 15

Option Trading Question

I was wondering if you could give me some advice on how to get an entry-level position trading options. I would like to learn the job from a professional. I currently trade on my own and have a basic understanding of equity options and some more advanced strategies from reading various trade journals. Where might one apply for a position like this? I have a B.S. degree in accounting. I'm not an "Ivy Leaguer" and I'm having trouble getting into a training program at the institutional level. I have a strong desire to make this my profession. I live in the Northeast but would be willing to move. Any ideas would be greatly appreciated.

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How Should I Approach High Implied Volatility Stock Options?

Posted by Pete Stolcers on July 22

Option Trading Question

Every month we can always find options with very high implied volatility, especially from pharmacuetical companies that are waiting for FDA approval. Is there any proven way to profit from this situation regardless of the decision of FDA? (please, don't recommend a straddle)

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The Options Trader: Who’s Involved

Posted by Pete Stolcers on March 23

Option Trading Question

Who is involved in options trading?

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Bullish Options Trading Strategies

Posted by Pete Stolcers on March 15

Option Trading Question

What are the three main strategies used by options traders?

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Understanding the Risks of Options Trading

Posted by Pete Stolcers on March 5

Option Trading Question

What can I expect to experience as a new trader?

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Types of Options Traders

Posted by Pete Stolcers on February 26

Option Trading Question

Describe for me the different types of options traders.

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Testing Your Options Trading Skills

Posted by Pete Stolcers on February 16

Option Trading Question

How can I test the waters without getting burned?

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