DiscoverOptions Education Center provides a broad range of free instructional and informative material for all levels of options traders, from the beginner to the professional.
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Beginner
Category
Full article may be viewed. Basics - What is an Option?
The right to buy or sell specific securities at a specified price within a specified time.
Option Trading
Full article may be viewed. Bring Fundamental Analysis into your Trading
Fundamental analysis is an important tool that traders can use to increase their probability of success.
Finance
Full article may be viewed. Buying Deep ITM Options
A good way of carrying out directional trading in high volatility market environments.
Option Trading
Full article may be viewed. Choosing the Best Option Strategy
How to use Profit and Loss Diagrams.
Option Trading
Full article may be viewed. Choosing the Best Option to Purchase
An option is a beautiful thing. Buy one.
Option Trading
Full article may be viewed. Covered Calls
The covered call allows you to make extra income without having to become a greeter at Wal-Mart.
Option Trading
Full article may be viewed. Covered Writing - A Way to Reduce Risk?
Generating extra income from a stock portfolio.
Option Trading
Full article may be viewed. Exiting an Option Position
An in-depth look at the options for exiting an option position.
Option Trading
Full article may be viewed. Hedging Your Portfolio with Index Options
Analyzing how to hedge risk.
Option Trading
Full article may be viewed. Incorporating Options into your Trading Portfolio
Think about how options fit in with your goals.
Option Trading
Full article may be viewed. Investing During A Recession
Should the Economy Drive Your Investment Strategy?
Finance
Full article may be viewed. LEAPS
LEAPs are an attractive alternative to stock ownership.
Option Trading
Full article may be viewed. Moving Averages
The moving average provides a way to measure the mood of any market.
Technical Analysis
Full article may be viewed. Open Interest
The importance of open interest when trading options.
Trading Concepts
Full article may be viewed. Options Expiration Cycles
Choosing Options Expiration Cycle for Stocks.
Trading Concepts
Full article may be viewed. Option Strategies and the Use of Options
One of the significant advantages of options is their flexibility.
Option Trading
Full article may be viewed. Protective Puts - Protect Your Stockholdings
Buying a put gives an investor complete protection from a drop in the stock price below the strike price of the put.
Option Trading
Full article may be viewed. Review for Beginning Option Traders
A review of some general rules for using options.
Option Trading
Full article may be viewed. Risk Graphs - Visualizing Your Profit Potential
To trade options successfully, investors must have a thorough understanding of the potential profit and risk for any trade they are considering. For this the main tool that option traders use is called a risk graph.
Option Trading
Full article may be viewed. Support and Resistance Lines
Support and resistance lines can give a trader valuable clues.
Technical Analysis
Full article may be viewed. Take Liquidity into Account in your Trading Decisions
Investors require market liquidity.
Option Trading
Full article may be viewed. The Benefits of Listed Options
The benefits to exchange-traded options are standardized contracts, liquidity, quick access to prices, and the use of clearing houses by exchanges.
Option Trading
Full article may be viewed. The Benefits of Trading with Options
For anyone who is uncertain about how the stock market will act in the near term - and that describes just about every stockholder - options present tremendous opportunities.
Option Trading
Full article may be viewed. The Big Three Economic Indicators
How Economic Factors Affect the Stock Market.
Finance
Full article may be viewed. The CBOE S&P 500 BuyWrite Index
This index tracks the performance of a hypothetical buy-write strategy on the S&P 500 Index.
Option Trading
Full article may be viewed. The Long Call Strategy
When a call option on stock is purchased, the call holder is able to control the stock without actually possessing it, and does so for a fraction of the cost.
Option Trading
Full article may be viewed. The Long Put Strategy – Betting on the Downside
Buying put options allows you to profit during seasons of bearish activity.
Option Trading
Full article may be viewed. The Role of News in Fundamental Analysis
Finance
Full article may be viewed. Tips For Beginners
Preparing yourself before you start trading options.
Option Trading
Full article may be viewed. Understanding Volatility
...is of Vital Importance to Option Traders.
Option Trading
Full article may be viewed. Using Stops in Your Trading
How contingency orders can ease your stress.
Trading Concepts
Full article may be viewed. Using the Right Option Strategy
How do option strategies compare, and how should the individual trader select the best for himself?
Option Trading
Intermediate
Category
Full article may be viewed. As Expiration Day Approaches
What to do if your options are trading below fair value.
Trading Concepts
Full article may be viewed. Debit Spreads
How does a debit spread work, and why should you use it?
Option Trading
Full article may be viewed. Diagonal Spreads
Why a Bullish Diagonal Spread is a good choice if you believe the markets have bottomed-out.
Option Trading
Full article may be viewed. Growth Investing
Growth investing is another major school of investment theory that relies on analyzing the fundamentals.
Finance
Full article may be viewed. Horizontal Debit Spreads
A neutral strategy when constructed using at-the-money options.
Option Trading
Full article may be viewed. How to Trade in Trending Markets
A lot of money can be made by simply riding a trend.
Option Trading
Full article may be viewed. Pay Attention to Volatility When You Trade
High IV is synonymous with expensive options; low IV is synonymous with cheap options.
Option Trading
Full article may be viewed. Playing Company Announcements
Trading Concepts
Full article may be viewed. Reading the Bid / Ask Spread
Efficient and effective placing of limits is a must if you plan to successfully trade.
Trading Concepts
Full article may be viewed. Simulating the Underlying with Options
Did you know there is an option strategy – involving just two options – that behaves exactly like a position in the underlying? It's called a synthetic.
Option Trading
Full article may be viewed. The Backspread
An amazing little strategy when you expect a potentially big price move.
Option Trading
Full article may be viewed. The Beauty of Combinational Strategies
Trades involving two or more options simultaneously.
Option Trading
Full article may be viewed. The Bull Put Spread - Collecting Income in a Bullish Environment
The bull put spread is a useful tool for producing income in a moderately bullish market.
Option Trading
Full article may be viewed. The Covered Combo
Would you like to pick up some good stocks just below current price levels? If your answer to that question is yes, you might want to consider the covered combo.
Option Trading
Full article may be viewed. The Credit Markets and Company Liquidity
With the current turmoil in the credit markets, looking at the debt and liquidity position of a company can help you avoid nasty surprises.
Finance
Full article may be viewed. The Price to Earnings Ratio
Finance
Full article may be viewed. The Short Put Strategy - Selling Puts to Generate Income
One way to generate income with puts is to simply sell them outright.
Option Trading
Full article may be viewed. The Stock Market and Individual Market Sectors
Overall market conditions have a large effect on the prices of individual stocks.
Technical Analysis
Full article may be viewed. The Vertical Debit Spread - A Perfect Spread for Beginners
So what is a vertical debit spread?
Option Trading
Full article may be viewed. Trading Plan: Capital Allocation by Strategy
A trading plan is critical to help you manage your positions and risk. In the world of options education the Capital Allocation by Strategy Model is quite popular. We take a look at its implications and show why it is not an optimal way to trade.
Trading Concepts
Full article may be viewed. Trading Volatility
The essence of V-trading is buying cheap options and/or selling expensive options, typically holding until the options return to fair valuation levels.
Option Trading
Full article may be viewed. Trend Lines
A stock or commodity will be in a definite trend about a third of the time.
Technical Analysis
Full article may be viewed. Using Options to Protect Your Portfolio
Even if the markets continue to drop, the good news is that hedging with options is a terrific way to fight back.
Option Trading
Full article may be viewed. Using the Collar Trade
Option traders have many advantages over long stock traders.
Option Trading
Full article may be viewed. Value Investing and Book Value
Fundamental analysis can be a critical component to successful trading.
Finance
Full article may be viewed. Vertical Credit Spreads
One of the safest and most successful strategies there is when you don't expect significant movement by the underlying in a specific direction.
Option Trading
Full article may be viewed. What is the Best Option Strategy
Each of the various option strategies results in a specific risk/reward profile across a range of underlying prices. They each behave differently to changes in other variables such as the passage of time or volatility. As a trader your job is to understand all the strategies and know when to use each given your expectations and market conditions.
Option Trading
Full article may be viewed. When should you exercise an option early?
When its theoretical value is exactly at parity and its delta is exactly 100.
Trading Concepts
Advanced
Category
Full article may be viewed. Arbitrage Strategies and Price Relationships
Trading Concepts
Full article may be viewed. Buying and Selling Volatility
Options are like a 3D chess game.
Option Trading
Full article may be viewed. Dividends and Interest Rates
The Effect of Dividends and Interest Rates on Option Prices.
Trading Concepts
Full article may be viewed. Ever Considered Selling Naked Puts?
Selling high volatility to generate income.
Option Trading
Full article may be viewed. High probability Trading – Avoid Delta Exposure in Expiration Week
The best time to exit a position with front month options is seven or eight days prior to expiration day.
Option Trading
Full article may be viewed. In-the-Money Covered Calls
Traders and investors use this strategy on bullish stocks.
Option Trading
Full article may be viewed. Iron Condors
To trade condors, it is best to look at an index or high-priced stock.
Option Trading
Full article may be viewed. Life and Death and Company Liquidity
Learning how to analyze a company's financial statement.
Finance
Full article may be viewed. Put/Call Parity and Synthetic Positions
The theory of Put/Call Parity is important to know.
Option Trading
Full article may be viewed. Selling High Volatility
The first step to selling high volatility is to find assets whose current implied volatility is much higher than usual, relative to it past history.
Option Trading
Full article may be viewed. Selling Naked Calls: A Risky Way to Get Income
The naked call seller is interested in the same thing as the covered call seller - income.
Option Trading
Full article may be viewed. The Constant Elasticity of Volatility
Understanding the Importance of the CEV factor.
Option Trading
Full article may be viewed. The Income Statement
The income statement answers the all-important question: "Are they making money"?
Finance
Full article may be viewed. The Put/Call Ratio: A Useful Indicator of Sentiment
One of the more reliable measures of sentiment for predicting future market direction.
Technical Analysis
Full article may be viewed. The Way of the Calendar
Calendar spreads are ideal when future price movement is expected to be minimal and implied volatility is stable to rising.
Option Trading
Full article may be viewed. Using Long Synthetic Straddles with Stocks
Stockholders and short sellers alike can use synthetic straddles to completely change the risk/reward of a directional stock position.
Option Trading
Full article may be viewed. Using VIX Options to Hedge Market Risk
The VIX options can be used as a hedge to offset market risk.
Option Trading
Full article may be viewed. V - Trading
Volatility trading, called V-trading for short, has two attractive sides.
Option Trading