Stock Option Investment Advice

A Balanced Approach for Portfolio Success

The Conservative Barbell Strategy: We recently reviewed a book written by Nassim Taleb called “The Black Swan”. In it, the author suggests an approach for investing called the Barbell Strategy. The approach is based on the concern that unexpected market events can happen with devastating impact to our portfolios. The Black Swan is about such events that are generally unknown, unpredictable, and cannot be planned against to mitigate losses. Because they are unpredictable they cannot be avoided, we need a way to protect assets as best we can against these unforeseen events. The Barbell strategy uses the two extremes: Ultra conservative positions at one end and highly leveraged, speculative positions at the other end of the risk range. The strategy advocates having most assets in very safe securities like treasury bills or conservative options and a small portion in high risk – high reward securities like long put or call…

Stock Option Investment Advice

Effectively Track and Manage your Options Investments

As we approach options expiration you need tools to properly track, evaluate and manage your options positions.  All of this can be done using the Portfolio tools on PowerOptions. You can quickly create and enter new or existing positions into the Portfolio tools. Once a position is entered you can set Alerts to be notified when profit targets are hit or when losses may need to be managed. As you track your positions you can link to the Position Analysis tool to see your current liquidation and future expiration values as well as view various roll out opportunities for your positions. As you are viewing potential Roll Out Opportunities you can link to the Trade Simulator tool to see the before and after profit and loss graph of your current position compared to the potential adjustment. This video shows just how easy it is to enter positions into the Portfolio…

Stock Option Investment Advice

5 Keys to a Successful Option Spread Trading Plan

The key is likely to first develop a trading plan for your spread positions in conjunction with the tools on PowerOptions. A trading plan may consist of: What are my goals for monthly or annual income? What exposure am I willing to risk in the market? Should I look for lower probability trades with a higher return, or higher probability trades with a lower return and higher risk vs. reward ratio? What is most important in your trade selection: The underlying security? Minimum option premium? Volatility? % Return or % Annualized Return? % Probability? Difference in strike prices (risk on the trade) Time frame for an open position (weeklies vs. standard expiration). Detailed Exit Strategy, including what is an acceptable loss vs. management techniques in various situations. This may sound like a lot to cover but once you map out a trading plan the pieces will fit together regarding: What…

Stock Option Investment Advice

Conversions Are A Riskless Options Trade

Conversions, if you are able to receive a credit, are no risk options trades with a very limited reward. One example of a conversion is: Buy shares of SLV @ $18.73 Sell JUN 18 call @ -$ 1.08 Buy JUN 18 put @    $ 0.34 Net Debit =         $17.99 Guaranteed exit/assignment = $18.00 Guaranteed Profit =          $ 0.01 ADVANTAGES: 1.  Possibility for a no-risk trade 2.  Credit is received 3.  Management is not necessary 4.  Opportunities can easily be found with PowerOptions DISADVANTAGES: 1.  Guaranteed Profit is extremely limited 2.  After commissions limited profit might turn into a loss 3.  Due to low profit, 1,000s of shares may need to be traded which hinders the retail investor 4.  Opportunities may appear, then disappear quickly.  I found this trade on PowerOptions, but by the time I linked to the profit and loss chart the trade showed a guaranteed loss of -$0.04…

Stock Option Investment Advice

Stock Insurance OR Portfolio Insurance – Revisited

With the addition of new and interesting securities to help hedge a stock portfolio, the question arises more and more: ‘Is it better to insure my stock directly or use a different hedge to insure my portfolio?’ This is a very important question which has many components to it. During a PowerOptions Open Forum Webinar on January 14th, 2014 this question was posed. The actual question was:

Stock Option Investment Advice

MORNING UPDATE: PriceWatch Alerts for BA, TSLA, AAPL, and More…

MORNING UPDATE: PriceWatch Alerts for BA, TSLA, AAPL, and More… February, 11 9:00 AM ET – PriceWatch Alerts for BA, ATVI, MNST, TGT, YPF, TSLA, DISH, BLK, MMM, RIG, AAPL, NPSP, GM, X, Market Overview, News Leaders and Laggards, Today’s Economic Calendar, and Index Support & Resistance Levels. PriceWatch Alerts for BA, ATVI, MNST, TGT, YPF, TSLA, DISH, BLK, MMM, RIG, AAPL, NPSP, GM, X, DLTR.

Stock Option Investment Advice

Filter for MACD added to the PowerOptions Search

A new filter for MACD has been added to the PowerOptions Search tool for all strategies! This new filter (located in the Technicals tab) will allow you to search for stocks where the MACD is above or below the Signal Line and by how many days. You will also be able to screen for stocks where the MACD and Signal Line are above or below the Zero line. This filter will allow you to better screen for stocks with positive or negative momentum.

Stock Option Investment Advice

Timing Investments when Stock Price Crosses a Moving Average

Timing your entry into a position using options is very important because time premium is continually eroding from the position.  Ideally we want to enter a bullish position just as the stock is about to move up.  It is not possible to know in advance when the move will occur, but we can get an early indicator once the move has started.  There are several tools available to help the investor pick the best time to enter a position.  One such tool, which has been recently added to the PowerOptions screener, is the crossing of a stock price above a moving average such as a 20 or 50 day moving average.  Another form of this tool is to use the crossing of the 20 day moving average over the 50 day moving average as a bullish trigger. Investors will scan charts looking for this type of crossing to trigger a…

Stock Option Investment Advice

Portfolio Tools offer Trade Management Ideas

Have you been using the PowerOptions Portfolio tools to help track and manage your options positions? If not, now is a great time to start! PowerOptions free trial users and subscribers can enter new positions into the Portfolio directly from the patented Search tools or manually with just a few clicks. Some basic features of the Portfolio tools to help you better track and manage your positions are: Profit and Loss Portfolio tool tracks your current positions as linked trades – meaning your covered call position will have the stock and call option linked together rather than separately. View Original Expected Gain vs. Liquidation Value vs. Future Expiration Value for the entire position, not just the individual leg.