![]() ![]() Tesla reported last week unspectacular earnings report. ![]() So just kind of break down this trade for us. And this is for a Tesla call at the strike price of $210. Here's Tesla where we have an options chart profit and loss. I just want to point out that we have to consider expiration dates and strike prices.Īnd let's give an example. That's something any option trader needs to understand before they enter a trade. The market expects a fair amount of volatility on earnings even though it is Microsoft. JIM STRUGGER: Options that expire this week are twice the implied volatility that they would normally be. Quick example, Microsoft reports after the close today. JIM STRUGGER: You want to understand where implied volatility is relative to itself and then also realized volatility, which is actually the volatility that's realized looking back over the course of time. And how does that factor into your determination of what to buy an option price at? So when you're talking about implied volatility, this is the amount of volatility that we're expected that the options market is saying we expect the underlying stock to move by this much. And that's fine because options involves a lot of this and we want to break it down. JARED BLIKRE: All right, we're throwing a lot around, a lot of inside baseball terms here. ![]() Is this a directional trade? Are you coming in making a directional decision, buying calls, buying puts outright, or is this a trade where you're seeking to take advantage of implied volatility being elevated where you're short vega or short volatility and extracting premium from the market? One consideration, you have directional bias. But we can go through the directional bias, the strategy, just talk to us about some of these things, some of the considerations that investors should have for their portfolio. And I put S in parentheses because you might have multiple stocks involved in the trade. Investing in options, these are some decisions and things that you'll have to think about before getting into the trade, including the underlying stock. Manage your risks, my number one mantra in trading. But most importantly, understand what that risk is, what it looks like for various outcomes. And the other would be understand your risk before you enter into any position structured as defined risk if you're brand new to these markets. JIM STRUGGER: One would be if you get into options, number one, it requires a certain degree of focus and activity because options expire all the time. And we want to talk about everything, but just an opening line to our viewers. And Jim, we've been throwing some definitions out here. All of this data compiled by the New York Stock Exchange, by the way.īut despite the rise in popularity, we're posing this question, is options trading for all investors? Does it belong in your portfolio? And here to help answer that question is Jim Strugger, Kineo Capital managing partner.Īnd this is part of Yahoo Finance's Option 101 theme week sponsored by Tastytrade. And that month, that number is declining from its peak sitting around at 42% right now. Now, option investing has surged since the pandemic with the retail share of options trading is rising from 35% at the end of 2019 to 48% just six months later. Stock options are financial contracts that grant the buyer the right, but not the obligation to buy or sell a stock at a predetermined price within a specified time frame. ![]() JARED BLIKRE: Many investors look for ways to diversify their portfolios and one way is through options. ![]()
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