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Put Options

Buying a put option gives you the right (but not the obligation) to sell 100 shares of a company's stock at a certain price (called the strike price) from the date of purchase until the third Friday of a specific month (called the expiration date).

People buy puts because they hope the stock will go down, and they will make a profit, either by selling the puts at a higher price, or by exercising their option (i.e., forcing the seller of the put to buy the stock at the strike price at a time when the market price is lower).

Put options are quoted in dollar terms (e.g., $3.25), but they actually cost 100 times the quoted amount (e.g., $325), plus an average of $1.50 commission (charged by my discount broker - commissions charged by other brokers may differ).

Terry's Tips Stock Options Trading Blog

August 22, 2014

Ongoing Spread SVXY Strategy – Week 2

Last week we started a $1500 demonstration portfolio using SVXY, and ETP that is destined to move higher over the long run because of the way it is constructed (selling VIX higher-priced futures each day and buying at the spot price of VIX, a condition called contango which exists in about 90% of days).

Today we bought back an in-the-money expiring put that we had sold last week and rolled it over to next week.

I hope you find this ongoing demonstration to be a simple way to learn a whole lot about trading options.

Terry

Ongoing Spread SVXY Strategy – Week 2

Last week, we used the following trade to . . .

August 18, 2014

Ongoing Spread SVXY Strategy For You to Follow if You Wish

A couple of weeks ago, I put $1500 into a separate brokerage account to trade put options on an Exchange Traded Product (ETP) called SVXY. I placed positions that were betting that SVXY would not fall by more than $6 in a week (it had not fallen by that amount in all of 2014 until that date). My timing was perfectly awful. In the next 10 days, the stock fell from $87 to $72, an unprecedented drop of $15.

Bottom line, my account balance fell from $1500 to $1233, I lost $267 in two short weeks when just about the worst possible thing happened to my stock. Now I want to put $267 back in and start over again with $1500, and make it possible for you to follow if you wish.

This will be an actual portfolio designed to demonstrate one way how you can trade options and hopefully outperform anything you could expect to do in the stock market. Our goal in this portfolio is to make an average gain of 3% every week between now and when the Jan-15 options expire on January 15, 2015 (22 weeks from now).

That works out to 150% a year annualized. I think we can do it. We will start with one trade which we will make today.

I hope you find this ongoing demonstration to be a simple way to learn a whole lot about trading options.

Terry

Ongoing Spread SVXY Strategy For You to Follow if You Wish

Our underlying “stock” is an ETP called SVXY. It is a complex volatility-related instrument that . . .

August 11, 2014

How to Pick the Best Mutual Fund for Your IRA or 401(K)

How to Pick the Best Mutual Fund for Your IRA or 401(K)

If you are a participant in a typical 401(k) plan, you face a list of 18 mutual funds to choose from. If you set up your own IRA plan, the list grows to over 4000 funds in the universe. Most people don’t have the foggiest notion of which fund choice is the best for them. The answer is actually quite simple, if you understand a few essential truths.

Making 36%

Making 36% – A Duffer's Guide to Breaking Par in the Market Every Year in Good Years and Bad

This book may not improve your golf game, but it might change your financial situation so that you will have more time for the greens and fairways (and sometimes the woods).

Learn why Dr. Allen believes that the 10K Strategy is less risky than owning stocks or mutual funds, and why it is especially appropriate for your IRA.

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