To start off my options posts, I just wanted post some (very) basics. If you don’t have a good handle on what options are and the basics of how they work, READ THIS FIRST.
If you do know something about options…or even if you know a lot, take a quick look at these two pages so you can use them as a quick reference source in the future.
PowerOpt Options Explanations Forbes Options Explanations
Also, take a look at this chart:
If you do know something about options…or even if you know a lot, take a quick look at these two pages so you can use them as a quick reference source in the future.
PowerOpt Options Explanations Forbes Options Explanations
Also, take a look at this chart:
Just to realize what is available when it comes to options. A lot, isn’t it? Each one of these strategies can based on what kind of risk you want to take, your opinion about where you think the market is going.
While it’s nice to know you have all these strategies at your disposal, the thing that bothers me most is that in order to do well, you really have to have an opinion about where the market is going…And if you remember, that is what I really try to avoid: No one really knows where the market is going.
So, while we will look at several different option strategies as time goes on, I am going to focus on the strategies that require the least knowledge of future price movement.
Based on other things laid out in this blog, I feel like we can have a very basic idea of if we are in a bull or bear market, in general (much more to come on this). Obviously, smaller (but still very significant/devastating) interim reversals of the overall trend can occur and be really difficult to handle.
So, what I am interested in are the best strategies (lowest risk) for markets with 1) largely sideways movement and markets 2) which we feel like we have some vague idea of the overall trend. Frankly, if I have to be any more specific about future price movement to make money/avert my losses, I’m really not interested. SO, that kind of rules out simple buying puts or calls, for the most part.
In fact, while I will talk about credit spreads, I really am going to stick with covered calls, covered puts, married puts, and other strategies along these lines.
What I am going to talk about is how to maximize these strategies and how to implement these in a overall portfolio.
Ok, so sorry about the trite overview and the lack of evidence and substance, but I thought it important to tell you where we will be going in this section.
While it’s nice to know you have all these strategies at your disposal, the thing that bothers me most is that in order to do well, you really have to have an opinion about where the market is going…And if you remember, that is what I really try to avoid: No one really knows where the market is going.
So, while we will look at several different option strategies as time goes on, I am going to focus on the strategies that require the least knowledge of future price movement.
Based on other things laid out in this blog, I feel like we can have a very basic idea of if we are in a bull or bear market, in general (much more to come on this). Obviously, smaller (but still very significant/devastating) interim reversals of the overall trend can occur and be really difficult to handle.
So, what I am interested in are the best strategies (lowest risk) for markets with 1) largely sideways movement and markets 2) which we feel like we have some vague idea of the overall trend. Frankly, if I have to be any more specific about future price movement to make money/avert my losses, I’m really not interested. SO, that kind of rules out simple buying puts or calls, for the most part.
In fact, while I will talk about credit spreads, I really am going to stick with covered calls, covered puts, married puts, and other strategies along these lines.
What I am going to talk about is how to maximize these strategies and how to implement these in a overall portfolio.
Ok, so sorry about the trite overview and the lack of evidence and substance, but I thought it important to tell you where we will be going in this section.
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