Option Q&A

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What Does It Take To Be A Full-time Trader?

Posted by Pete Stolcers on September 6

Option Trading Question

Today, Don W. asks, “I’ve been trading for a few years with some success. Can you make a living doing this full-time and how much capital does it take?”

Why Use The SPY As A Market Gauge?

Posted by Pete Stolcers on July 19

Option Trading Question

Today I'll address a question I found in the comments. Will Maddox asks, "Why do you use the SPY as a measure of what the market is doing?"

How Do I Determine A Spread Price?

Posted by Pete Stolcers on July 5

Option Trading Question

Today Jackie V. states, “I traded a bull call spread of the Russell 2000. I purchased the 710 Dec Call and sold the 720 Dec call. It is trading @ 730 yet the 710 call has an intrinsic value of $8 and the 720C has an intrinsic value of $9. I don’t get it. I didn’t get a chance to close the position before it passed 720 and now I’m just at a loss.”

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Naked Put Writing And The “Big Hurt”.

Posted by Pete Stolcers on June 20

Option Trading Question

Today Tom T. states, “I have been selling puts as a means to generate income for about 18 months. Most months, I have made money, but in the months I have lost money, I have lost big - even though I try to limit losses by buying back puts when the price of the underlying stock drops below a pre-determined level. In my losing months, there are usually a small number of stocks that drop very quickly (this past month was brutal) and these small-in-number/large-in-value losses wipe out my large-in-number/small-in-value gains. Please help.”

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How Much Should I Expect To Make A Year?

Posted by Pete Stolcers on June 17

Option Trading Question

Today Rich asks such a great question that I will post it all. “This is more trading goal oriented. I would like to setup goals to measure progress. Is this a good idea? What can be reasonably expected as far as a rate of return? I hear about these great trading systems that will make me a gazillion percent return. I've read articles about professional traders that try to beat the return on bonds or to generate 12% a year no matter what the markets do. These are very low returns compared to what the people trying to sell me their products claim. What would be considered a reasonable rate of return for somebody that is a "part-time trader" utilizing somewhat conservative stock/options trades? Should the goal be based off of the market's return or something more static like 3% a month? Personally I am not looking to hit a home run. I'm more of the slow and steady wins the race mentality. I am trying to be realistic and don't know at what rate of return can be considered realistically obtainable? Could this be something that you could write a piece on?"

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Index Trading vs Individual Stocks

Posted by Pete Stolcers on June 14

Option Trading Question

Today Lloyd R. asks "I understand why someone would want to be long options, but why not use indexes for credit spreads? Stocks are so unpredictable and a news event (takeover, earnings pre-announcement, law suit...) can come at any time. The penalties are extreme"

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Will Penny-size Option Quotes Help Traders?

Posted by Pete Stolcers on June 12

Option Trading Question

Today Joe M. asked, “What are your thoughts on exchanges quoting options in pennies instead of nickels and dimes? It seems like it should narrow the spread.”

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Implied Volatility

Posted by Pete Stolcers on June 8

Option Trading Question

Today Paul sends the following, “I really want to understand option volatility. I have looked at it from every side and have even subscribed to sites that compute volatility, but I can never figure out what to do with then number it generates. I don’t know if the number shows high, medium or low volatility. It is killing me because I know how important it is, but I can’t get a handle on it. Help!”

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Hedging Option Positions

Posted by Pete Stolcers on June 5

Option Trading Question

Today Sam P. asks, “How can I keep from getting headfaked out of good options positions when the market moves against me?”

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Profit Management

Posted by Pete Stolcers on June 1

Option Trading Question

Len H. - I have heard many people say, “When you reach a certain profit point, you should take some profit and leave some ride.” I believe that if you are not sure enough in your purchase that you should take it all. Why would you take some and not all? It would be like leaving some ride on a loser, that doesn’t make sense either.