Last updated Jul 2, 2009
Options education for individual investors: It's more than a tag line - it's our mission.
If you want to learn about options and how they work, you've come to the right place.
Some of the themes below represent important parts of my philosophy of trading:
- Why you should consider adding options to your arsenal of investment tools
- Why risk management is the key to long-term success
- How to reduce risk when investing in the stock market - an overlooked topic that has become more important than ever
- Why the option strategies recommended here increase your chances of earning a profit
- Why you should consider adopting options strategies with limited losses, to prevent the unexpected from destroying your finances
- How options make it easier (no guarantees, but you will have a better chance) to achieve your financial goals
This site, combined with my blog entries, is dedicated to providing you, an individual investor, with information that guides to you earning money by adopting conservative option strategies. But more importantly, you'll learn to reduce risk when investing in the stock market.
One of my strong beliefs (that I hope becomes one of yours) is that managing risk to prevent large losses is the number one key to financial success. I stress the importance of managing risk and it's a constant theme in my writings. Here are a couple of samples (one, two).There's no doubt that the October Massacre of 2008 has hurt a great many investors across these United States and around the world. And the market debacle that continued at an even more rapid pace in early 2009 made matters even worse. We've had a strong recovery since then, but no one really knows whether this is the best buying opportunity of a generation, or if it's only another bear-market rally.
Bear markets are a fact of life and many investors still had not recovered from the bursting of the technology bubble in 2000 when the 2008 markets hit them again. It's easy to be bullish when markets are rising, but the prudent investor should always be mindful of risk and take steps to keep that risk under control. You are guaranteed neither riches nor a bull market when you invest, and I believe more investors should own portfolio insurance by adopting the collar strategy.
The future is uncertain for investors everywhere. The past decade has seen the markets fail to make any headway. Those who anticipated doubling or tripling their money over that 10-year period are disappointed, and possibly unable to afford a comfortable retirement or tp send their children to college. No one wants to gamble with money saved for such purposes, but investing in the market has finally been recognized as less than a sure-thing. Caution is necessary (for most of us).
If you are among those who protected their holdings, as described in The Rookie's Guide to Options, and survived the recent past with realtively little damage, I offer congratulations. The uncertain future - and that may mean another substantial decline or a huge rally, requires diligience on the part of all of us.It appears unlikely that we will see anything resembling the record high volatility levels of 2008. Tthe market has a short memory - not a good thing. Implied volatility, as measured by the CBOE voltility Index, VIX, has declined to levels not seen seens last year - before Lehman Brothers collapsed. NOTE: These markets are still displaying above long-term historical average volatility. Ass the market inches higher, complacency increases. That's dangerous, in my opinion. Take a look at the graph of VIX (CBOE Volatility Index) levels to see just how far volatility has increased in recent times.
I have no idea what's coming next, but I remain a trader who uses insurance to manage risk. Learn more about my most often-used strategy, iron condors, and how to add extra insurance against loss to your portfolio.
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I offer two free e-books as downloads:
The first is a
sampler version of
The Rookie's Guide to Options that includes a brief excerpt from each chapter. E-book revised: October 2008.
The second e-book contains a description of the most basic concepts of options. It's for readers who have little, or no, previous experience with options.
Here's a link to my blog, Options for Rookies. These posts contain opinion, news, nuggets of information for option rookies, strategy discussions and replies to reader comments. Feel free to post any comments, suggestions, or questions.
Follow me on twitter. I don't post frequently, but post many of my trades and adjustments.
Read more of my articles (not published elsewhere) by visiting
http://www.stocktradingtogo.com.
If you want to know who's writing these pages, click here.
My publications: A
list of articles and interviews.
A note to worried investors. If you are no longer worried about the bear market, I encourage you to remember the recent past and not to take on too much risk. Don't ignore the idea of using options to hedge risk.
Note to investors/traders who don't know whether to be bullish or bearish, or market neutral:
- Do you want to learn an options strategy that you can apply, even when you you have no idea whether the market is going to advance or decline? If yes, learn about iron condors.
- Do you have an opinion on market direction? If you are searching for a limited risk strategy, you owe it to yourself to learn how to use spreads (buy one option and sell another). You can own positions with a neutral, bullish or bearish bias.
If this heading describes you, then you'll benefit by learning how to use options as risk-reducing tools.
Options are allow flexibility when choosing strategies, and you can adopt methods that are profitable under a variety of market conditions.
Note to Rookies : If you are just getting started with options,
begin with a description of the basic concepts of options.
My Books
I've written three option books based on the philosophy described on this web site. If that approach appeals to you, you can learn more about The Rookies Guide to Options and our other books.
The Rookie's Guide to Options encourages you understand how options work, and does not just tell you how various staetgies are supposed to work. and how to apply option strategies. You'll learn to think and make good decisions about trading. You'll gain respect for the importance of managing risk. Here are some of the many Testimonials I've received from satisfied readers.
The book was recently reviewed by
two prominent bloggers.
If you landed here searching for seminars that cost thousands of dollars and make unrealistic promises, look elsewhere. I believe in providing education that's customized to meet your specific needs and arranged to suit your schedule.
For information on private consultation or group lessons, send
email or click 'contact us' tab near the top of any page.
Note to readers looking for VIX Data
A graph of VIX data is updated weekly.
As you begin trading options, it's to your advantage to become aware of the CBOE volatility index (VIX).
Click for a brief discussion.
The blog contains articles on a wide variety of topics, but I periodically write an article for this web site. Current Column: May 2009
Some topics (volatility, theoretical values) require an in depth discussion. If you are interested in using options, you cannot afford to ignore these topics; they are important to your better understanding of options. But, there's no hurry. I suggest you begin with the basics.
An options calculator is provided. It's used to estimate the theoretical (or fair) value for an option.
Use the Site Map to find all features of this site.