Options

Short Put Strategies

When selling puts with no intention of buying the stock, you want the puts you sell to expire worthless. This strategy has a limited profit potential if the stock remains above strike A at expiration, but substantial potential risk if the stock goes down. The reason some traders run this strategy is that there is […]

Options

Options Expiration

If you have positions that are in the money, it's crucial that you monitor your account and communicate with Ally on Expiration. There are a few choices if you have positions that are expiring in the money: You can close the option position. You can leave the position open. However, if it's in the money, […]

Options

Understanding Option Greeks and Dividends: Vega

Vega is one of the most important Greeks, but it often doesn't get the respect it deserves. Vega is the amount a theoretical option's price will change for a corresponding one-unit (percentage-point) change in the implied volatility of the option contract. Simply stated, Vega is the Greek that follows implied volatility (IV) swings. Don't forget […]

Options

Trading Options In An IRA

Interested in trading options in your individual retirement account (IRA)? You've come to the right place. Ally Invest combines a powerful online trading platform with highly rated customer service and easy-to-understand options investing education for beginning and advanced traders alike. If you're ready to start investing money for your retirement, your first move may be […]

Options

Understanding Dividends

Dividends (either in cash or in shares) are paid by many companies to its shareholders, most often on a quarterly basis. Why should options traders care about dividends? Dividends are part of the options pricing model, and so that alone makes them relevant. But the real answer is that dividends can impact option price movement […]

Options

Protective Put Strategy

You buy stock because you're bullish and expect the stock's price to go up. Since you're bullish, chances are you aren't too preoccupied with the downside. But as we all know, markets can shift quickly. Puts are a handy tool to help lock in profits on your existing positions in the event of a sudden […]

Options

Understanding Option Greeks and Dividends: An Introduction

In the options marketplace, the Greeks have zero to do with classic philosophers or toga parties (unless you're trading from the fraternity house). For option traders, the Greeks are a series of handy variables that help explain the various factors driving movement in options prices (also known as premiums). Many options traders mistakenly assume that […]

Options

Understanding Option Greeks and Dividends: Delta

One of the biggest mistakes new options traders make is buying a call option in order to try and pick a winner. After all, buying calls maps to the pattern you're used to following as an equity trader: buy low, sell high, in that order. Options are trickier. Sometimes the underlying stock moves in the […]

Options

Understanding Option Greeks and Dividends: Gamma

Keep in mind that delta is dynamic: it changes not only as the underlying stock moves, but as expiration approaches. Gamma is the Greek that determines the amount of that movement. Gamma is the amount a theoretical option's delta will change for a corresponding one-unit (point) change in the price of the underlying security. In […]

Options

Understanding Option Greeks and Dividends: Rho

Rho is the amount a theoretical option's price will change for a corresponding one-unit (percentage-point) change in the interest rate used to price the option contract. Typically the interest rate used here would be the risk-free rate of return. The rate associated with investing in Treasuries is traditionally defined by market experts as virtually risk-free. […]