I’ve read a few option books.
THANKS... This is probably the most comprehensive "greeks" article/book I’ve read.

Wonderful blog. …..
A wonder wealth of knowledge there. Thanks so much for your kindness in publishing it!

Thank you very much for the most concise and simplest option intro. Highly recommended.

So far, yours is the best blog/site on basic options notes in the web that I have chanced upon.

Saturday, November 22, 2008

Free Trading Educational Videos You Should Not Miss

Previously, I have shared some free trading educational videos from trading experts. Unfortunately, now those videos are no longer available for free.

However, don’t worry! The GOOD NEWS is that there are other 4 new FREE trading educational videos from another trading experts.
One of them is even very valuable particularly for options traders!

Learn from the following 4 new trading educational videos:

1) THE ART OF MORPHING by Ron Ianieri (Duration: 90 Mins)

For option traders, Ron Ianieri is well known as the co-founder & Chief Options Strategist of The Options University.

Every position is the right position when things go exactly as planned. Unfortunately, things do not often go exactly as planned in the market. When all goes right, it is easy to make money but when things go wrong losses follow.
So, when things start to go wrong, what can you do? How can you get out of your bad position that is losing money and into the right position quickly and efficiently and get back to making money? The answer is morphing!

Morphing is the process in which the wrong position is quickly and efficiently changed to the right position by simply adding to or subtracting from the current position based on an understanding of synthetic positions.
Morphing is how the professional floor traders manage their positions to adjust to movements in stock price, time, and volatility.

So, this is the videos that an option trader shouldn’t miss!


John Murphy is the CNBC-TV’s technical analyst for many years and wrote the book “Technical Analysis of the Futures Markets” (Prentice Hall, 1986), which many technicians consider the core of their technical analysis library.

In this video, John explains how he looks at the markets using non-traditional methods. He also shares his thought process in selecting markets to trade using Sector Rotation. Watch too John's inter-market analysis in action and just how commodities can put a drag or a rocket under a stock. He then further explains the relationship between the U.S. Dollar and Gold prices.

3) FIVE NEW TOOLS FOR WINNERS by Jake Bernstein (Duration: 45 Mins)

Jake Bernstein is probably the most prolific writer and researcher of material for today's individual trader. His titles span subjects from basic technical analysis to trading psychology and seasonal price patterns.

Jake has always been willing to share his research on trading with those students of the market who diligently seek his advice. In the process of working on material for this new audience, Jake has discovered new market relationships which will be of interest to all serious traders. It is these relationships that Jake will discuss in detail in this can't miss videotape recorded at a recent futures conference.

4) MARKET WIZARDS INSIGHTS by Jack Schwager (Duration: 85 Mins)

Jack D. Schwager is well known as the author of The Complete Guide to the Futures Markets, Market Wizards, The New Market Wizards, Fundamental Analysis, and Technical Analysis.

In this video, Jack Schwager explains the traits and behavior patterns that super traders have in common, and tells you how you can develop those same winning characteristics.
This is a video that you'll find as entertaining as it is informative.

So, don’t miss this chance anymore! Watch all these four trading videos HERE.
Just click the “SIGN UP” button in that link and fill up the registration form in order to watch the videos for FREE.

Important Note (as at 9 May 09):
These videos have been available for free for quite some time already, and hence, like what has happened previously, they may not be offered for free anymore anytime soon. So, if you’re interested to learn from then, don’t delay anymore to watch it.

Update as at 22 May 09:
Effective from 18 May 09, the above videos are no longer available for free.
Sorry if you've missed this opportunity. However, I'll update you again when there are new free trading educational videos. Hope you won't miss the chance to learn from trading experts for free anymore next time.

Update as at 30 July 09:
There is a new FREE trading educational video from another trading expert.
For more info about the new trading video, read this post.
Hope you don’t miss this chance anymore! :)

Sunday, November 16, 2008

Limit Order

Limit Order is an order to buy or sell by setting the maximum price (for buy) or minimum price (for sell) at which you are willing to buy or sell.
Hence, when you buy shares/options, you will not pay at any price higher than the limit you set, and it’s even possible for the order to get filled at a price lower than the stated limit.
Similarly, when you sell shares/options, you will not receive at any price lower than the limit you set, and it’s also even possible for the order to get filled at a price higher than the stated limit.

While Limit Order has an advantage that you can be sure the order will be executed / filled at the limit price or better, the disadvantage of this order is that there is no guarantee that the order will be executed / filled.

As a result, in the case when the price has moved up while you are placing a buy order (particularly when the market is moving very fast at that time), the order may not get filled.
Therefore, if an order is not filled on Limit Order within a few seconds, you should check what the prevailing ask price is at that time, and then modify the order accordingly if you’re still interested to buy the shares/options.

Some brokers may charge different commissions between Market & Limit Orders.
Typically, due to more complexity / additional condition, the commission for Limit Order is more expensive than for Market Order.
Hence, you need to check your broker’s commission before placing a Limit Order.

For the list of other types of order, go to: Types of Orders in Trading.

Related Topics:
* Getting Started Trading
* A Chance to Learn from World Class Trading Experts For FREE You Should Not Miss
* Learning Candlestick Charts
* Learning Charts Patterns

Saturday, November 8, 2008

Market Order

Market Order is an order to buy or sell immediately at the best available price in the market at that time.
The advantage of Market Order is that it will guarantee an execution.
However, the disadvantage of this order is that you cannot control the price at which your order will get executed (or filled), and hence you also won’t know at what price your order will eventually get filled.

Typically, if you are going to buy shares/options, you will pay a price near the Ask Price. If you are going to sell shares/options, you will receive a price near the Bid Price.
However, it is important to note that the last-traded price is not always necessarily the price at which the Market Order will be executed.

When the market is very liquid with very tight bid-ask spreads and not so volatile whereby prices don't change drastically, this kind of order is rather safe.
However, in fast moving & volatile market whereby prices move very fast, or in a less liquid market whereby bid-ask spreads is wide, placing a Market Order can be quite risky, because the price at which the trade got executed (or filled) can deviate significantly from the last-traded price.

When the size of a Market Order is quite big, it is possible that the broker will split the order across a number of participants at the other sides of transaction, resulting in different execution/filling prices for different portion of shares/options.

For the list of other types of order, go to: Types of Orders in Trading.

Related Topics:
* Getting Started Trading
* FREE Trading Educational Videos You Should Not Miss
* Option Greeks
* Understanding Implied Volatility (IV)

Sunday, November 2, 2008

Types of Orders in Trading

Before getting started to trade, a trader needs to get familiar with types and specification of orders in order to prevent from making unnecessary mistakes.

Below is a list of a number of types of orders. I’m trying to organize them for easier understanding. We’ll discuss each of them further in the next posts.

Too many types of orders may cause some confusion and lose of focus. Therefore, I also mark a few of very common types of orders in the list below with “***”.
(Click the LINK in BLUE FONTS below to read the posts on each type of orders).

For beginners, you can start to get familiar with these marked types of orders first, before moving on to more advanced types of orders. Hope this can help you to speed up your learning. :-)

Types of Orders related to How an Order will Get FILLED:

1) Market Order ***
2) Limit Order ***

3) Market-On-Close (MOC) Order
4) Limit-On-Close (LOC) Order

5) Market-On-Open (MOO) Order
6) Limit-On-Open (LOO) Order

7) Market-To-Limit (MTL) Order
8) Iceberg Order

Types of Orders related to the TIMING / DURATION of the Order:
When submitting an order, a trader also needs to specify the timing or duration in which the order will still be active / valid before it gets executed.

1) Day Order ***
2) Good Till Cancelled (GTC) ***
3) Good Till Date/Time (GTD)

Contingency Order is an order that is to be executed only if one or more specified conditions are met.
Possible conditions may include quantity, price (of that security or another security), or the completion of another order.

Even though some brokers accept contingency orders, they are actually not obligated to do so. However, if they do accept such orders, they must abide by the terms of the order.

Examples of contingency orders are listed below.

Contingency Orders with Conditions related to QUANTITY / SIZE of Order and TIMING of Execution:
When submitting Market or Limit Orders, it is also possible to attach conditions that are related to the ability of the broker to fulfill the quantity / size of the orders and timing of execution.
Contingency orders with such conditions are as follow:

1) Fill-Or-Kill (FOK)
2) Immediate-Or-Cancel (IOC)
3) All-Or-None (AON)

Contingency Orders with Conditions related to PRICE
Contingency orders with conditions related to price are very useful, particularly when you cannot monitor the market all the time. These orders allow traders to open or close position in the market automatically once certain conditions are met.
Examples of Contingency orders with conditions related to Price are as follow:

For Automatic OPENING of a Position:
The following are some types of orders that allow you to open a position in the market automatically once a certain condition is met, particularly when you cannot monitor the market all the time:

1) Market-If-Touched (MIT) Order
2) Limit-If-Touched (LIT) Order

For Automatic CLOSING of a Position:
The following are some types of orders that allow you to close the position automatically once certain condition/s is/are met, in order to protect your position, particularly when you cannot monitor the market all the time:

1) Stop Order ***
2) Stop Limit Order
3) Trailing Stop Order ***
4) Trailing Stop Limit Order

More COMPLEX Types of Contingency Orders
1) Conditional / Contingent Order
2) Bracketed Order
3) One-Cancels-Other (OCO) & One-Cancels-All (OCA) Orders
4) One-Triggers-Other (OTO) & One-Triggers-All (OTA) Orders

Related Topics:
* Free Trading Educational Video: Learn Technical Tips from Dan Gramza
* Options Trading Basic – Part 1
* Options Trading Basic – Part 2
* Understanding Implied Volatility (IV)
* Option Greek
* Understanding Option’s Time Value
* Learning Candlestick Charts
* Learning Charts Patterns
* Getting Started Trading