What's the Difference Between SPX and SPY Options? Dividends Dividends are not normally paid to options holders. However, SPY pays a dividend every quarter. This is vital because if you trade with in-the-money (ITM) call options, you can exercise them to collect the dividend. To do this, you need to exercise your options on SPY before the ex-dividend date or own shares and place a call (called a covered call option).   It is important to be alert when trading ITM calls because most calls are exercised for the dividend on expiration Friday. Therefore, if you own ..read more

A few weeks ago we introduced a new strategy to our members. While a double diagonal spread is a well known strategy, we are trading it with a tweak. One of our members have mentioned that "I realize they are lower risk in the sense that they can be open longer without big losses, but feels to me like playing not to lose."   Here is a response from our contributor @Yowster who introduced the strategy:   Well... Lay me outline reasons why I like them (and I've been doing a ton more of them in personal trades in addition to the official ones, and are tracking even more of them ..read more

This article will shows how this works, and how IV can affect your decision on what type of trade to open.   Directional Spreads Let’s start with the simplest of options spreads, the put or call vertical spread which is often used as to place a trade for a stock to move in a certain direction.   Here’s a slightly OTM (Out of The Money) call vertical debit spread on AAPL about a month away from expiration (a popular spread to play for stock price to rise).  The stock price is $182 and the call vertical is long the 185 call and short the 190 call.  Note the highlighted ..read more

Insider Buying and Selling In doing so we are competing with quant-based analysis that is poring hundreds of millions of dollars into similar things and rarely does the retail investor get a peek in with any edge. Courtesy of regulation, however, there are a number of things that we – the retail investor – can see as well (or as poorly) as anyone else and one of those things is insider buying. Due to grey zones in reporting and execution of trades, the exact timing is not what matters the most, it is simply a head’s up that insiders are buying.   Why is this meaningful, well to quote one ..read more

Ratio trading the earnings Everyone knows what a ratio trade is right? A ratio can be found in many shapes, forms and directions, the SO beloved Hedged Straddle is a ratio whereby a larger number of long positions are offset (in part) with short positions that are closer in time. Its a more sophisticated version of the humble sell 1 short ITM and buy 2 long ITM (whether with calls and puts) for zero cash outlay (or even a minor cash+ or cash -) except margin. This article is my own reflection of the use of this option strategy but inspired partially by what I learnt here on SO. I give i ..read more

Performance Dissected Check out the Performance page to see the full results. Please note that those results are based on real fills, not hypothetical performance, and exclude commissions, so your actual results will be lower, depending on the broker and number of trades. Please read 2023 Year End Performance by Trade Type for full analysis of our 2021 performance. We have extensive discussions about brokers and commissions on the Forum (like this one) and help members to select the best broker.  The 112% annual return was pretty typical, compare ..read more

This skill is about blending analytical prowess with a dash of intuition. Think of it as chess, but the pieces are stocks, bonds, and the occasional cryptocurrency.   Via Pexels   The Art Of Calm And Portfolio Diversification In asset management, not putting all your eggs in one basket isn’t just good advice; it’s a survival tactic. Diversification is your financial calm. It’s about balancing different asset types to mitigate risk. Imagine a tightrope walker juggling while crossing Niagara Falls; that’s you balancing equities, bonds, and alternatives. The goal? Not falling into the ..read more

In both cases a (usually near the money) option is sold and used to partially fund the purchase of two (or more) out of the money options. Let’s see an example:   Let’s say Apple was $710 in the beginning of September and we thought it was going to rise in value, quickly. We might put on a call backspread: Sell 1 AAPL Sep 710 Calls Buy 2 AAPL Sep 720 Calls It might cost us $50. Here’s the profit and loss diagram:   As you can see if we are correct, and AAPL rises, we will enjoy any rise over $720; for every $1 over $720 we make $100 profit. All for an investment of $50. So you ..read more

Introduction To The Long Put Strategy Options are used by investors to take advantage of a wide range of projections on the state of the market.   Unlike stock investing, where only a rise makes money, options can profit from falls in the market, and a range of other market movements such as changes in a security’s volatility. One such simple strategy used in the long put, detailed here.   Description of the Long Put Strategy Long Put P&L Diagram   The strategy involves the purchase of a put option.   Puts give the buyer the right but not the obligation to ..read more

Introduction Options can provide investors with an extremely versatile tool that can be used to bet on market direction or changes in volatility levels. Long options positions can be initiated with defined risk, and may present excellent profit potential.   Although options trades can become quite complicated, sometimes simpler is better. One of the simplest positions available to both seasoned and novice options traders is the long call.   Description of the Strategy Long Call Profit & Loss A bullish call option position is exactly that: a long option. Call options are derivat ..read more