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.

Sunday, August 31, 2008

Free Trading Educational Videos from Trading Gurus

Do you want to learn some trading tips & techniques from famous trading experts/gurus? Some more, it’s absolutely FREE….. Just want to share with you few wonderful trading educational resources to grab that opportunity.

There are 4 trading educational videos from trading experts/gurus' seminar/conference, which you can watch for free:

1) A New Look at Exit Strategies by Charles Le Beau
Charles Le Beau co-authored a book on futures trading, Computer Analysis of the Futures Market. He is registered Commodity Trading Advisor (CTA) and a noted developer of trading systems.

Many new traders - the majority, in fact - suffer big losses because of a lack of planning and understanding in setting up a sound exit strategy.
In this 90-minutes video, Chuck Le Beau reveals the secrets to gaining bigger profits for trading stocks, futures or options, i.e. the methods he has used for years as a successful institutional trader, particularly in the area of exit strategies.

2) Classic Indicators - Back to the Future by Linda Raschke
Linda Raschke has been a full-time professional trader for over 20 years. She was featured in Jack Schwager's book, The New Market Wizards. In 1995, she co-authored the best selling book, Street Smarts, High Probability Short Term Trading Strategies.

In this 75-minute video of a first-rate keynote address given at a recent international trading conference, Linda shares her favourite trading techniques that you'll watch over and over again! Here, you can definitely learn some valuable trading techniques using classic indicators, how to stay disciplined and what it takes to keep you running at full speed.

3) I Am a Turtle by Russell Sands
A famous trading guru Richard Dennis reportedly made a bet with his long-time friend, William Eckhardt, nearly 25 years ago. Dennis believed that successful trading was an activity that could be learned rather than an innate ability, whereas Eckhardt believed otherwise.
To settle this dispute, in 1983, Dennis recruited and trained 13 people who became known as the "Turtles." The program with the Turtles ended in 1988 and became a legendary trading experiment. Many turtles have gone on to successful careers as commodity trading advisors.

Russell Sands was one of the students trained by Richard Dennis and William Eckhardt, who achieved fame as the "Turtles”.

In this video of his seminar (93 minutes), Russell shows the exact criteria that the Turtles were taught to use in order to get a handle on which breakouts or types of breakouts have a higher probability of succeeding, which have the potential to become the kind of monster trend the Turtles are famous for riding to enormous profits.
He also itemizes a list of approximately 20 different criteria and/or conditions that the Turtles examine every time they look to initiate a trade. He then explains each item carefully and demonstrates the effectiveness of each by looking at current charts of various markets.

4) Avoiding Common Trading Pitfalls by Mark Cook
Mark Cook, with more than 20 years trading experiences, is well-known for his Cook Cumulative Tick™ Indicator, which gained acclaim by winning the 1992 U.S. Investment Championship with an astounding 563.8% return.
His own early trading years were difficult, but as he struggled for success, he gained valuable experience and learned what makes - and breaks - a trader.

In this video (86 minutes), Mark reveals how he uses common sense and hard work in just the right proportions to dramatically improve his trading success. After viewing this video, you'll come away with a realistic perspective on how much money you can expect to earn with your trading and how much time you'll need to spend to achieve your goals.

As mentioned above, the good news is that all the above 4 trading educational videos are FREE.
You can watch these trading videos by following this link.

All you need to do to watch the videos FOR FREE is simply by clicking the “SIGN UP” button on that page in the provided link, and fill up a simple form to register. That’s it!

So, enjoy...! I’d suggest that you grab this opportunity as soon as possible…. while it’s still free! ;)

Update as per 22 Nov 2008:
The 4 videos mentioned above are no longer available for free.
However, don’t worry!
There are 4 new free trading educational videos from other trading experts you can learn from. Don’t miss this chance anymore! :)
Just click the “Sign Up” button in that page and fill up the registration form in order to watch the videos for FREE.
For more info about the new trading videos, read this post: Free Trading Educational Videos You Should Not Miss.

Sunday, August 24, 2008

Trading Quotes from “The Logical Trader” by Mark B. Fisher – Part 2

Go back to Part 1.

There are some more good trading quotes from the book, The Logical Trader.

Hope these can give you some insights for trading psychology.
Why do I like this kind of trading quotes? Because in my opinion, trading psychology plays very important part in trading success.
So, enjoy!

I Have No Clue
If a market is making a substantial move and traders seem to understand why, this market trend is not going to last very long.
However, if the market is moving in one direction and nobody has no clue as to why, then the trend is going to be prolonged.

When a market goes up or down for no apparent reason, it tends to go a lot further in that direction than people can imagine.

Be The House
The more time you spend at the table, the more bets you are going to place, and the greater the probability that you will eventually walk out of the casino as a loser. The casino would rather not have someone make a single large wager and, win or lose, immediately walk away.
What the house wants is for you to keep playing. The passage of time is the casino’s best friend and the player’s worst enemy.

Money Management
If the odds are in your favor of making a profit with your trading system, then keep your trade size consistent, cut your losses short, and know that, over time, you’ll be successful.

Fear and Greed
The two key ingredients that every trader needs to posses in the right combination in order to be successful – namely, fear and greed.

You need to have enough fear in you, meaning a healthy amount of respect for the market that you are participating in.
Allowing yourself that you are always right, especially when the market is clearly dictating that you are dead wrong, is a sure path toward trading disaster.

However, fear is not enough.
A trader must also have a healthy amount of greed.
You must be willing and able to press winning trades and allow these once-in-a-blue-moon occurrences to develop into large scale winners.
Sometimes it takes an iron will and a great deal of patience to be able to max out on these particular trades.

Staying Out Of The Penalty Box
The key to the whole puzzle is discipline, the more you have, the better you’ll trade.
The best traders have incredible amounts of discipline when they have a trading position on. They cut their losses and run. That’s the hardest thing on the world for a lot of other traders.
Maybe you’re bullish on the market, but your indicators say to get out. After you do, the market goes up this one time. Then you question your system. But if you stick with the system, you’ll be a lot better off.

Saturday, August 16, 2008

Trading Quotes from “The Logical Trader” by Mark B. Fisher - Part 1

Recently, I just read a book authored by Mark B. Fisher, The Logical Trader.
Although this book is not really one of my favourites, there are some good trading quotes that I like from that book. So, I think it may be good to share them here too.

Here are the trading quotes:

Have A Plan
In trading, as in life, you need a plan. This plan includes not only the micro – a strategy for each and every trade you make – but also the macro – meaning why you trade, how you intend to reach that goal (your means to the desired end), and what you’ll do as an alternative if that doesn’t work out.

Know what you want to accomplish, how you intend to get there, and what you will do if it does – or does not – work out. Have a plan and stick with it. That works in trading, as well as in life.

I Know Who I Am
Coming to term with who I am as a trading, knowing my limitations, and doing what I do well – and not doing those things that I have no clue about – has brought me continued success.
Too many people want to be who they are not, and professionally – whether in trading or in another field of business – that’s where they run into trouble.

Discipline and Comfortable With Yourself
You don’t need complicated Einstein formulas to make money in the markets.
You do need to be disciplined and comfortable with yourself.
No matter how good of a trader you think you are, the markets are always going to screw with your head and test your mental fortitude.
Remember, the survivors are also the ones who make up the market’s success stories.

Time Stop
An important rule of trading is that time is much more important than price.
Successful trading is a matter of seeking out immediate gratification. If the market doesn’t move your way within a short time of putting on a trade, just get out.
Most people trade just with Price Stops and not with Time Stops. They think they have to endure some initial pain. You, however, should not.

Get Out When You’re Wrong
Successful traders know that discipline is what allows them to enter their trades when the odds are in their favor and, more importantly, to get out when they’re wrong.
Being right is not the problem. What you do when you’re wrong is the crucial issue.

There are a lot of traders who buy then pray while the market goes against them, because they think that it will eventually go their way.
Most traders average down and wait for the market to turn their way.
Trading my way, I always have defined amount of money that I am willing to lose.
I let the market decide how much money I’m going to make.

Good News/Bad Action
When the news is good but the market just does not rise correspondingly, sell.

Continue to Part 2.

Sunday, August 3, 2008


The Impact of Implied Volatility (IV) on DELTA
Assuming all other factors constant, when Implied Volatility increases, the time value portion of an option will increase.
As a result, the delta of OTM (Out-of-The-Money) options will go up, whereas the delta of ITM (In-The-Money) options will go down.
Nevertheless, the delta of ATM (At-The-Money) options will always remain at around 0.5.

Why is it so?
As discussed previously, IV has a very big impact on the option price. However, IV would affect only the time value component of an option's price, not on the Intrinsic Value.
Therefore, when there is significant movement in Implied Volatility, ATM and OTM options will be greatly affected as compared to ITM options.

However, although ATM will be significantly affected by IV movement, the delta of ATM options will always be around 0.5.

The Effect of Implied Volatility (IV) on THETA
When Implied Volatility (IV) decreases, Theta will be lower, especially when it is approaching expiration.
On the other hand, when IV increases, Theta would be higher.

Why is it so?
As discussed earlier in this post, Time Value as the price that people are willing to pay for the chance / uncertainty as to whether or not an option will finish ITM.
The more uncertain, the higher the time value will be.
An option that is far OTM has almost no chance of finishing ITM. As such, it will not command a high time value.
An option that is already deep ITM is almost certain that it will finish ITM, hence time value is smaller.
But ATM or near ATM options have more uncertainty as to whether or not the options will finish ITM, and therefore these options have a higher time value.

When IV decreases, such uncertainty will be lower, particularly when the option is nearing to expiration. This lower uncertainty will then be reflected in lower time value. Since Theta is the decrease of time value due to the passage of time, Theta will naturally be lower because it has less time value to lose over the remaining time to expiration.

For more detailed discussion, go to: Options Greek.

Related Topics:
* Options Trading Basic – Part 1
* Options Trading Basic – Part 2
* Understanding Implied Volatility (IV)
* Understanding Candlestick Charts
* Learning Charts Patterns
* Trading Videos from Trading Experts You Should Not Miss