Recent content by msecrist

If You're talking about this month's cycle, the RUT actually settled Friday morning at $607.90. Considering how much can happen between Thursday's close and Friday's open, I'd say this pricing represents the premium the market maker puts on the risk of settling ITM. And... as it turned out, if...

If you have the TOS platform, I'd recommend trading a few spreads in papermoney first just to get comfortable with the mechanics. Also, have a look at the following, which might answer more of your questions. http://www.success-with-options.com/vertical-spread.html The full answer to your...

Or, you can take the time to learn about options and their various characteristics, do some research, build a watch list and employ a strategy or two that you've back tested Let's face it. Option trading can be difficult to master - especially in this market. Yet, the best way to become...

Illiquid options have several factors stacked against you. 1. They usually have wider bid/ask spread 2. It's more likely that when you trade one it will affect the price - in other words you can move the market for that option with your order 3. It can be difficult to get out at a fair price...

I agree stops can be dangerous, especially with gap downs on market open or other unusual events. I do use them though it's usually not my ultimate solution. I prefer defined risk trades though as it makes it much easier to size my positions consistently. I'm thinking the answer might be to...

I guess it depends on how you plan to backtest. Many times people use an automated system where they can set their entries and exits programmatically. The problem is that this isn't the way we actually trade so it isn't always as accurate. With that said, there are a few ways that occur to me...

This trade looks like a pretty decent setup. Nice find. My bias tends to look for the bounce, which is often like trying to catch the falling knife. However, it hasn't always worked well for me. This trade looks to provide some margin of error. You've introduced me to another premium selling...

Keep in mind that options prices are set by the market - meaning the price reflects what the market will bear. Assuming a given option is fairly liquid (sufficient open interest), the market maker adjusts the price to compensate for risk they are taking. For an ATM option with a .55 delta...

The trouble is prices are rarely constant over any stretch of time. So for analysis' sake I guess it helps to look at it this way but consider that in reality the price is moving some amount on any given day. One of the things that happens as you get into the last week of expiration is that...

My favorite book is probably "Option Volatility and pricing" by Sheldon Nateberg. It provides a really good coverage of the foundational concepts necessary to trade options. These include volatility and its impact on option pricing, which is critical to understand. I don't find the coverage on...

It depends on what kind of trader you are. Frankly, in this market, it's pretty tough to do well unless you happen to get lucky and have some long puts when one of the quick sell-offs happens. It happened to me and I have to admit it was pure luck. That said, I'd guess someone who is a decent...

I'm not sure if this is what you're looking for or not, but Thinkorswim now offers two kinds of backtesting. Their thinkback feature allows you to enter trades based on end of day prices and then you can move time forward to see what happens. The more interesting feature they just released is...

Kevin, More important than picking the right stock to do a covered call on is having a solid trading plan. I assume you do. Make sure you know how you will time your entry, when you will take your profit and when you will pull the plug and exit the trade if it goes bad. I prefer ETFs for...

I'd say it is possible to make money on a $5k account if your expectations are properly set (and many of the other great suggestions from the the group have been followed). The key thing is that you have to look at a 5-10 year timeframe, not next year. There are some relatively conservative...