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Power Profit Trades
November 10, 2015
This One Number Will Tell You How Much Your Option Will Move
by Tom Gentile
Dear Power Profit Trader,
In the past few months, I’ve show you how I determine which stocks to trade options on, and how to select which options have the best chance at giving you a 100% return.
As I told you, finding a stock that’s going to make a move is key. Stocks that trade in a sideways are fine for non-directional trades, but I’m a directional trader. I like to predict which way a stock will move, and by how much, and target my options accordingly.
As important as it is to find a stock that moves, it’s even more important to make sure that your option is going to move when the stock does.
So how can you find out ahead of time if your options are going to make a move in price? There’s only one number you need to know.
Let me show you what I mean…
Looking to build a solid trade plan? Start here:
Finding Your Next Double Just Got a Whole Lot Easier
One of my favorite options strategies narrows your potential trades by telling you exactly which options can double your money with the smallest move in the underlying stock.
If you’re looking for more on options ”Greeks,” look no further:
Get to Know Your Greeks
The different components of an option’s premium are all represented by different Greek letters. Theta, or time value, is just one of four factors affecting options pricing.
Click here for more on how options are priced.
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YOUR TRADING SKILLSET
With their risk-slashing and profit-juicing power, you can’t afford not to have options in your investing arsenal. And I contend that if you are educated on the risks inherent to options and train yourself to manage those risks, they can be a lucrative way to go. That’s what we’re doing here.
STRATEGY: UNDERSTANDING DELTA
An option’s Delta is one of its most important components. Here’s what it is, and why it’s important.
Delta is a numerical value that tells you how much an option’s premium will move with a move in the underlying stock. Delta can range from -1.0 to 1.0. -1.0 to 0 is the range for puts, while 0 to 1.0 is the range for calls.
You can use Delta to assess how much an option will move with each $1 move in the underlying stock. For example, a call option with a Delta of .50 indicates a $0.50 move in the option price for a $1 move in the stock.
You can also use Delta to assess an option’s profitability. For example, a call option with a Delta of 1.0 is almost assured to end up In the Money at expiration.
Read More Here.
Is anyone familiar with this teaser? It sounds interesting to me, mostly because it claims to limit risk to only $500 max per trade. I’m sure it’s an option of some sort and $500 is the amount you are putting at risk .
This is a discussion topic or guest posting submitted by a Stock Gumshoe reader. The content has not been edited or reviewed by Stock Gumshoe, and any opinions expressed are those of the author alone.