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Stocks & Commodities V. 29:2 (48-50): The Expiration Trade by Joe Luisi
Stocks & Commodities V. 29:2 (48-50): The Expiration Trade by Joe Luisi
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The Expiration Trade by Joe Luisi
In this world of algorithmic trading, how can an independent trader stand a chance? Heres one way you can trade options to get an edge in the markets.
WE have all heard that 70% to 80% of all options expire worthless. Many of us have purchased options, only to watch the market move in the direction we anticipate and still lose money as the option we bought drops to zero. Im not sure whether the percentage of options that expire worthless is correct and there have been articles published about that statement in general, but the one thing I do know is that all out-of-the-money options expire worthless. The key is to determine where that out of the money is.
SO WHAT'S YOUR EDGE?
The exciting thing about selling options is that you can stack the odds in your favor to get an edge in the markets. But edges are hard to find, even more now with so many supercomputers looking at patterns and algorithms trading in fractions of a second. In such an environment, is it even possible for an independent part-time trader to get a leg up in the market?
Successful option selling requires determining where the market wont go. Can you sell an option with only one week till expiration and make money? How about limiting your risks?
In this world of algorithmic trading, how can an independent trader stand a chance? Heres one way you can trade options to get an edge in the markets.
WE have all heard that 70% to 80% of all options expire worthless. Many of us have purchased options, only to watch the market move in the direction we anticipate and still lose money as the option we bought drops to zero. Im not sure whether the percentage of options that expire worthless is correct and there have been articles published about that statement in general, but the one thing I do know is that all out-of-the-money options expire worthless. The key is to determine where that out of the money is.
SO WHAT'S YOUR EDGE?
The exciting thing about selling options is that you can stack the odds in your favor to get an edge in the markets. But edges are hard to find, even more now with so many supercomputers looking at patterns and algorithms trading in fractions of a second. In such an environment, is it even possible for an independent part-time trader to get a leg up in the market?
Successful option selling requires determining where the market wont go. Can you sell an option with only one week till expiration and make money? How about limiting your risks?
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