Recent content by Russ Allen

In this article I’ll go back to options trading basics. If you are a new option trader, or interested in seeing what option trading has to offer, these will be for you. Short articles like this are not going to take you from zero to amazing as an option trader. For that, you need serious...

Many traders use the selling of options as an income-generating device. A question that comes up in this connection is when, and whether, to do what is called rolling out your position. What Is Rolling Out an Option Position? Selling an option position that has not yet expired in order to buy...

Recently I received a question concerning an option strategy known as in-the-money (ITM) covered calls. This is a variation on the more common out-of-the-money covered call, and it has some interesting uses. What Is an In-the-Money Covered Call? The ITM covered call can be used as a device to...

When considering options expectations and what makes option prices change, it would be nice if we could visualize this in some way that makes the concepts of extrinsic value, intrinsic value and strike price more concrete. Below is one attempt at that, which I hope will add to your...

If you have looked at option trading at all, you probably know that the price of an option has two components: intrinsic value and time value. Intrinsic value is easy to understand; time value is much more interesting. To dispose of intrinsic value first, think of it as the amount of the...

One creative way in which put options can be used is to buy a desired stock at a discounted price. This strategy works best when a stock has recently had a sharp drop, to a point that you believe is a bargain price. It will allow you to buy the stock at a discount from the current market, if...

As we all know, the stock market has been in a bull run for a very long time. By the time you read this, it will be the longest bull market on record. In the nine and a half years since the final down month of the previous bear market (February 2009), the S&P 500 Index has increased by almost...

You probably know that a Call option gives you the right to buy a stock at a fixed price; and that a Put option gives you the right to sell a stock at a fixed price. These rights are what give the option its value. When you take advantage of these rights it is called exercising options. When...

When you open your first option trading account (or add option capability to an existing equities brokerage account), your broker assigns you an options approval level. Usually the levels run from Level One to Level Five. Your approval level determines which option strategies you are allowed to...

As investors, we must take some risk to make any money in the markets. While it is true that cash in the bank doesn’t seem to have any risk, since it doesn’t rise and fall, changing interest rates cause its return to vary. And because the interest on cash is so low, the risk is that it won’t...

One of the asset classes that can be productively used by many investors is fixed-income investments – bonds. I have been asked several times recently about the wisdom of investing in bonds in an environment of rising interest rates. That’s what I’ll address here. The reason that the question...

Most investors desire diversification. It only makes sense not to put all your eggs in one basket. One of the boons of the age of exchange-traded funds (ETFs) is that it’s now easy to diversify among many asset classes within a regular stock brokerage account. Besides funds based on...

Option trading can be a great way to make money, offering strategies for traders from beginner level to the most advanced. Before we can begin to make it work, though, there a few basic things that we need to understand. What You Need to Understand About Options Trading A listed stock option...

As I’m writing this, it is the afternoon of January 6, 2016. The stock market has been in full-blown meltdown mode for the last five trading days. The S&P 500 index has dropped by about 4% in that time. The Chinese stock market is down much more after dropping 5% yesterday alone. Crude oil has...

Currently the implied volatility levels in the stock market are much higher than they have been for quite some time. What does this mean for our option trading? One of the main factors in the profitability of our option trades is the “inflatedness” of the prices of the options. When the...