|
|
Don Kaufman here. |
And I'm about to blow your mind faster than a gamma squeeze on a Friday afternoon. |
You think you know options? |
Think again! |
I've got five quick and dirty tricks that'll turn your options game from snooze-worthy to newsworthy. |
We're talking "make the market-makers sweat" level stuff here, folks. |
These tricks are like finding the cheat codes to the stock market video game. |
And the best part? |
They're simpler than explaining theta to your grandma. |
So, are you ready to stop being the fish and start being the shark? |
Let's get started! |
#1: The At-the-Money Straddle Trick |
Want to know the expected move of a stock? |
Here's how you do it… |
Find the at-the-money straddle for the nearest expiration. |
Take that price, divide it by the current stock price, and boom! |
You've got yourself a rough percentage of the expected move. |
For example, Microsoft is currently trading at around $420. |
The ATM call expiring this week is about $3.95, and the ATM put expiring this week is about $3.45. |
When we add those premiums up and divide it by the stock price we get an expected move about 1.7%. |
Now that you know what the market is expecting you can come up with strategy ideas. |
In addition, it can be used to set your profit targets and stop losses. |
It's like having a crystal ball, except it actually works. |
#2: The Volume-to-Open-Interest Ratio |
Alright, here's where it gets juicy. You want to know where the big boys are playing? This is how you do it. |
Take the day's volume and divide it by the open interest for a particular strike. |
If this ratio is high, especially over 0.5, you're looking at some fresh, hot activity. |
For example, Nvidia is on fire today. At 1:30 PM ET, we saw 43.9K $143 calls expiring on Friday trade vs. open interest of 11.2K contracts. |
That's like a neon sign saying "Look here!" |
It could signal that big bets are moving in. And in this market, folks, sometimes it pays to be a follower. |
|
|
|
#3: The Volatility Skew Analysis |
Now, don't fall asleep on me because this is where it gets really interesting. |
Don't just look at implied volatility (IV) for one strike. Compare the IV of out-of-the-money puts to out-of-the-money calls. |
If put IV is much higher, the market's bracing for a downside move. |
Let's say you're looking at XYZ stock again. The 90-strike puts have an IV of 40, while the 110-strike calls have an IV of 30. |
That's the market telling you it's more worried about downside risk. That's your cue to consider some bearish strategies, people! |
#4: The Poor Man's Covered Call |
Can't afford 100 shares for a covered call? |
No problem! |
Here's a trick that'll make you feel like a millionaire on a budget. |
Buy a deep in-the-money LEAP call and sell shorter-term out-of-the-money calls against it. |
It's like a covered call on steroids, with less capital outlay. |
Let's say you believe that Boeing (BA) is eventually going to get their act together and you don't want to invest nearly $15K to buy 100 shares. |
You could buy the $110 calls expiring on Dec 19 2025 for $52.25, and then start selling calls like the Nov 15 2024 $160 calls for $4.20. |
You get the upside potential with a fraction of the cost. It's beautiful, folks! |
|
#5: The Liquidity Litmus Test |
Last but not least, here's a trick that might just save your bacon one day. |
Before any trade, check the bid-ask spread as a percentage of the option's price. |
Aim for 10% or less for liquid options. Anything more, and you're swimming in dangerous waters, my friends. |
Say you're looking at an option with a bid of $1.90 and an ask of $2.10. |
That's a $0.20 spread on a roughly $2.00 option, or 10%. That's your upper limit. Any wider, and you're asking for trouble. |
It's like trying to parallel park a semi-truck in downtown Manhattan – technically possible, but why put yourself through that? |
There you have it… |
Five killer tricks to supercharge your options trading. These aren't just party tricks, people. |
These are battle-tested strategies that can give you an edge in the options market. |
But remember, with great power comes great responsibility. |
Always, and I mean ALWAYS, manage your risk. |
The options market can be a goldmine, but it can also be a minefield if you're not careful. |
Use these tricks wisely, and you might just find yourself on the right side of the trade more often than not. |
|
To your success, |
Don Kaufman |
Tidak ada komentar:
Posting Komentar