Category: Stock Option Investment Advice

The Strike of Pain is the strike price with the lowest In-the-Money value for both calls and puts on a given stock for a given expiration date. This is the strike where the long option traders will lose the most money and the short option traders will gain the most value. The Strike of Pain is calculated by taking the open interest of the various In-the-Money strike prices multiplied by the amount that the call or put is ITM. The ITM values are added together, and the strike with the lowest monetary value is the Strike of Pain. The Strike of Pain calculation is based on the theory of Max-Pain(tm) developed by BCA Software.

To be a successful option trader, an investor naturally has to pay attention to the prices of options. It is not enough to merely watch the option prices, selling when the price is up and buying when the price is down. Informed options investors will study and analyze their positions based on the Greeks. The Greeks are the indicators of how an option moves based on the outside components of the option.

Vertical spreads offer investors the opportunity to profit on an underlying security without owning the stock and leaving themselves open to large risks. Of the many stock investment strategies, there are only four Vertical Spreads: two credit spreads (Bear-Call Credit Spreads and Bull-Put Credit Spreads) and two debit spreads (Bull-Call Debit and Bear-Put Debit). But which spread should you choose?

Investors who are new to the stock option investing markets may hear frightening tales of the dreaded Triple Witching Hour or worse, The Quadruple Witching Hour. Boo! Spooky language! However, there is nothing to be afraid of. These terms simply describe a quarterly event wherein several types of derivative contracts expire on the same day. This typically happens on the third Friday in March, June, September, and December.

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