By Jay Kaeppel
With over 50,000 copies in print for the 1st variation, Kaeppel's perception has certainly made its mark within the concepts international. Now, he moves back with an up-to-date and extra complete examine these pesky errors that investors proceed to make in buying and selling innovations. In easy-to-understand phrases, he systematically breaks down each one challenge and provides concrete and functional suggestions to beat it sooner or later. There Read more...
summary: With over 50,000 copies in print for the 1st version, Kaeppel's perception has absolutely made its mark within the techniques global. Now, he moves back with an up to date and extra accomplished examine these pesky blunders that investors proceed to make in buying and selling concepts. In easy-to-understand phrases, he systematically breaks down each one challenge and provides concrete and sensible suggestions to beat it sooner or later. There are sizeable gains to be made in techniques buying and selling. through fending off the 4 most typical and most expensive blunders nearly all of investors make, you may be set to win massive. method and s
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Additional info for The Four Biggest Mistakes in Option Trading
Example text
While each of these three uses represents a useful opportunity for investors, the majority of traders who enter into the options market—especially those who fail in the long run— do so for the express purpose of generating speculative profits. The irony is that what they set out to do is in fact possible via option trading. The problem is the way in which they go about attempting to achieve these goals. Before explaining why this is so, let’s first cover a few basic but critical concepts. Buying an option gives a trader the right to control 100 shares of stock or one futures contract, typically for far less money than it would cost to trade the underlying security itself.
A put option is “in-the-money” if its strike price is higher than the current market price of the underlying. (ITM = put strike > underlying price). • Out-Of-The-Money Option: An option that currently has no intrinsic value. A call option is “out-of-the-money” if its strike price is higher than the current market price of the underlying (OTM = call strike > underlying price). A put option is “out-of-the-money” if its strike price is lower than the current price of the underlying (OTM = put strike < underlying price).
Figure 16 - Eastman Kodak Calendar Spread Source: Optionetics Platinum 64 Figure 17 - Eastman Kodak Calendar Spread Risk Curve Source: Optionetics Platinum The calendar spread is a very useful and viable strategy. Unfortunately, if the trader doesn’t fully understand the implications of this strategy, he may encounter some unanticipated problems. , it generates profits when the underlying security remains within a given price range).