Madeira Trading Newsletters LLC
Trading Options For Income © - Trading Puts and Calls ©
Trading Options For Income © - Trading Puts and Calls ©
Madeira Investments LLC is the parent company of "Trading Options For Income" and "Trading Puts and Calls", newsletters dedicated to analyzing and publishing options spread trading ideas. At Trading Options For income (TOFI) we analyze and publish credit/debit spread trading ideas in strategies such as Iron Condors, Calender spreads, verticals and diagonal spreads. Trading Puts and Calls (TPAC) is dedicated to publishing deep in the money option strategies on broad based index ETFs. Using our proprietary technical analysis, we publish trade ideas concentrating on short term directional movements in the broad based index ETFs. At TPAC we do not ever use spreads only individual deep in the money puts or calls.
No statement in this web site is to be construed as a recommendation by Trading Options For Income to purchase or sell a security, or to provide investment advice. Options involve risk and are not suitable for all investors. Prior to buying or selling an option, a person must receive a copy of Characteristics and Risks of Standardized Options . Copies of this document may be obtained from your broker, from any exchange on which options are traded or by contacting The Options Clearing Corporation, One North Wacker Dr., Suite 500 Chicago, IL 60606 (1-800-678-4667).
TradeKing is a nationally licensed online broker with a mission to help investors become smarter, more empowered stock and options traders. In addition to our fair and simple pricing - just $4.95 per trade, plus 65 cents per option contract - we offer all clients the same white-glove customer service, intuitive trading platform and advanced suite of trading tools no matter how often they trade, or the size of their account. In August 2007, SmartMoney Magazine rated TradeKing the "Best Discount Online Broker" for the second year in a row.
Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options available at www.tradeking.com/ODD .$4.95 for equity and option trades. See our Commissions + Fees for commissions for low priced stock and other securities. www.tradeking.com/PrivateView/services/Services/commissions.tmpl
Madeira Investments LLC
8770 Sunset Drive # 201
Miami, Florida 33173-3512
Tel: 305-432-5066
Fax: 305-279-0532
admin@madeirainvestmentsllc.com
Copyright © 2008 Madeira Investments LLC. All rights reserved
TradeKing is a nationally licensed online broker with a mission to help investors become smarter, more empowered stock and options traders. In addition to our fair and simple pricing - just $4.95 per trade, plus 65 cents per option contract - we offer all clients the same white-glove customer service, intuitive trading platform and advanced suite of trading tools no matter how often they trade, or the size of their account. In August 2007, SmartMoney Magazine rated TradeKing the "Best Discount Online Broker" for the second year in a row.
Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options available at www.tradeking.com/ODD .$4.95 for equity and option trades. See our Commissions + Fees for commissions for low priced stock and other securities. www.tradeking.com/PrivateView/services/Services/commissions.tmpl
Madeira Investments LLC
8770 Sunset Drive # 201
Miami, Florida 33173-3512
Tel: 305-432-5066
Fax: 305-279-0532
admin@madeirainvestmentsllc.com
Copyright © 2008 Madeira Investments LLC. All rights reserved
Our Newsletters alerts can be autotrade at our any of our autotrade partners listed below
Why Trade Deep in The Money Options?
Deep in the money puts and calls are a great alternative to trading stocks. If you bullish or bearish on a particular stock or index, a deep in the money option will simulate the perance of its underlying stock with substantially less capital outlays. Deep in the money options are much less sensitive to volatility and time decay than at the money options. Have you ever been right about the direction of the movement in a stock or index only to see your ATM option lose value or not move at all? Well if you have, more than likely what you experienced is what is called “volatility crush”, a sharp decrease in the implied volatility of an at the money or out of the money option which has the effect of crushing the value of the contract.
Another very common occurrence to novice traders is not understanding the concept of time value of an option. Have you ever purchased an at the money call and held it too long expecting a bullish move in the underlying only to see the value of the option plummet during the last couple of days or weeks until maturity? Well in this case you were robbed by father time! Options, being wasting assets, will lose value everyday as the expiration date nears. If the option is out of the money, the rate at which the options lose value daily is magnified. The further you are away from being "at the money" the more exposure you have to time decay and volatility crush.
On the other hand, deep in the money options feature very little sensitivity to either swings in implied volatility or time decay. Why? deep in the money options have deltas extremely close to 1 meaning that for every 1 dollar move in the underlying you get close to a 1 dollar move in the value of the option contract! Deep in the money options allow you to simulate the move of an equivalent purchase in the underlying instrument at a fraction of the cost.
Because deep in the money options are not as sensitive to shifts in volatility, they are an ideal instrument to trade in times of high implied volatility. Take a look at our site and review the examples page. Deep in the money options trading can be an excellent way to profit in volatile directional trading environments.
Deep in the money puts and calls are a great alternative to trading stocks. If you bullish or bearish on a particular stock or index, a deep in the money option will simulate the perance of its underlying stock with substantially less capital outlays. Deep in the money options are much less sensitive to volatility and time decay than at the money options. Have you ever been right about the direction of the movement in a stock or index only to see your ATM option lose value or not move at all? Well if you have, more than likely what you experienced is what is called “volatility crush”, a sharp decrease in the implied volatility of an at the money or out of the money option which has the effect of crushing the value of the contract.
Another very common occurrence to novice traders is not understanding the concept of time value of an option. Have you ever purchased an at the money call and held it too long expecting a bullish move in the underlying only to see the value of the option plummet during the last couple of days or weeks until maturity? Well in this case you were robbed by father time! Options, being wasting assets, will lose value everyday as the expiration date nears. If the option is out of the money, the rate at which the options lose value daily is magnified. The further you are away from being "at the money" the more exposure you have to time decay and volatility crush.
On the other hand, deep in the money options feature very little sensitivity to either swings in implied volatility or time decay. Why? deep in the money options have deltas extremely close to 1 meaning that for every 1 dollar move in the underlying you get close to a 1 dollar move in the value of the option contract! Deep in the money options allow you to simulate the move of an equivalent purchase in the underlying instrument at a fraction of the cost.
Because deep in the money options are not as sensitive to shifts in volatility, they are an ideal instrument to trade in times of high implied volatility. Take a look at our site and review the examples page. Deep in the money options trading can be an excellent way to profit in volatile directional trading environments.
Why Trade Option Spreads?
If we were to reduce the idea of a spread to its most basic or essential characteristic, it would have to be its use of two option contracts, known as the legs of the spread. Using two legs simply means that we are combining, for example, a call option that you buy (sell) with a call option that you sell (buy). Therefore, you are taking both sides of the market in all spreads (buying/selling or selling/buying).
Option spreads have some major advantages over individual strategies. In fact, the full power of options as a trading vehicle doesn't really become known until you develop a good understanding of the workings of spreads. Most importantly, the selling side of option spreads has the greatest potential because you can profit from both time value decay and leverage of holding a long option in, for example, a diagonal spread. Even if using debit spreads, however, there are excellent hidden advantages mostly overlooked by novice traders. Certain debit spreads, for instance, can give you the ability to profit from time value decay (on a short out of the money leg) and potentially gain on the long side (from an in-the-money leg).
The advantage with the in the money debit spread is that you can cover the short option with a long in-the-money option instead of holding the stock itself, which entails much greater risk. And reducing risk is really what spreads are all about.
If we were to reduce the idea of a spread to its most basic or essential characteristic, it would have to be its use of two option contracts, known as the legs of the spread. Using two legs simply means that we are combining, for example, a call option that you buy (sell) with a call option that you sell (buy). Therefore, you are taking both sides of the market in all spreads (buying/selling or selling/buying).
Option spreads have some major advantages over individual strategies. In fact, the full power of options as a trading vehicle doesn't really become known until you develop a good understanding of the workings of spreads. Most importantly, the selling side of option spreads has the greatest potential because you can profit from both time value decay and leverage of holding a long option in, for example, a diagonal spread. Even if using debit spreads, however, there are excellent hidden advantages mostly overlooked by novice traders. Certain debit spreads, for instance, can give you the ability to profit from time value decay (on a short out of the money leg) and potentially gain on the long side (from an in-the-money leg).
The advantage with the in the money debit spread is that you can cover the short option with a long in-the-money option instead of holding the stock itself, which entails much greater risk. And reducing risk is really what spreads are all about.
