Archive for Options

Covered Call Writing Options

Sunday, February 22nd, 2009

I’m about to get involved in covered calls. I notice you prefer one month just OTM calls yielding 3-5%/month. I find this strategy offers very little downside protection and it would be easy to quickly slip into a loss position. I’m a novice but writing 6-12 month ITM or ATM Canadian bank calls with much larger premiums makes sense to me as it offers greater downside protection, more time to react to a downward movement, a greater opportunity to collect dividends and a greater chance of having my shares “called away” which to me is a plus as I only collect my maximum profit potential when that happens. I may even consider OTM calls if I think the share price has a good chance of going up. I would be happy if this strategy yielded 15-20% annually. Your comments would be greatly appreciated Anna. Thank you from Vancouver, BC, Canada

Option Trading Strategies

Sunday, February 22nd, 2009

Hi Anna, First and foremost, I would like to thank you for this wonderful site that you have with it’s rich contents. I have learnt a valuable lesson in understanding how trading mechanism works and how to invest wisely in financial markets. I’m humble by the courage that you have, in creating a niche for yourself in a male dominated workspace. I started trading online since 2005 on Option trading – learn from another woman trader. But the amount of time to research and scanning for potential Option just exhausted me. Since I am in the South East Asia – Singapore, The US market open, at local time will be at 09:30 PM or 10:30 PM depending on the season. And I have a day job that required me to be in the office at 08:30 in the morning, I can’t stay up too long. I than move on to futures index E-mini Russell 2000 to be a day trader. The nature of the E-mini Russell 2000 market that it’s volatile and the platform that I use to trade, suit me. I use Interactive Broker and Ensign Charting program to monitor the market and I use Bracket Trader to execute the trade. I will finish trading within two hours of market opens or early if I hit my daily targets. I have setup in Bracket Trader program to have my stop loss and also my profit target when I execute a trading position. The problem is with my trading plan is like I have one step forward with profit but two step backward with my losses. The questions that I would like to ask you, what the best formulas to derive in calculate the profit/loss ratio in Futures Index market. I have a target of 5 ticks profit against 10 ticks stop loss. Most of the time, when I enter a position, after follow strict set of conditions and parameters in the chart, I will hit the profits very quick. Usually, less than 10 min due to the volatile of the market. But if I have a bad signal, trade that did not go my way. I got stop loss at 10 ticks which means I lost two times my profits. Should I close position, if the trade didn’t go my way, which will be less than 10 ticks? Or should I just let it go and loss 10 ticks. Appreciates your comment and advice. Thanks and Cheers Abdul

Trading Online Options

Sunday, February 22nd, 2009

Hi Anna, I was reading your section on Options Trading (link below). I have an options account already set up in Australia but am now based in the UK.  I would be very interested in being “personally introduced” to the brokers at Interactive Brokers with a view to hearing about the T&C’s and possibly setting up an account. This e-mail is my best contact point.I look forward to hearing from you. Many thanks, Straun

Options Trading Volatility

Thursday, January 22nd, 2009

Hi Anna. On your “trading plan” web page, http://www.trading-plan.co.uk/options-trading-plan.htm you’ve cited as part of the straddle setup: IV current > HV past HV current < HV past IV current > IV past Should it not be written as IV current < HV Past and IV current < IV past???? We are looking for an expansion in volatility to help our straddle position, so hopefully our IV values are starting out LOWER than recent history not greater when we buy the options. Regards, Jennifer