In stock trading, you measure stock market activity & liquidity by volume. In options trading, there are two measurements: Open Interest & Volume.Unlike in stock trading, whereby there is a fixed number of shares to be traded (i.e. number of outstanding shares), in options trading, new option contracts need to be created when a trade is placed and there is no existing contract yet. When a new expiration month initiated, there is no open interest because there are no option contracts being traded for that month yet. As trading builds up,...
Monday, July 30, 2007
Saturday, July 28, 2007
Links Of The Week
Check out some great posts on the analysis / view of the past week's market action:* Trader Mike provided his perspective & analysis on Thursday’s market sell-off.* Kirk’s Report & Dr. Duru’s opinion on market condition of the past week.And here are some trading educational posts:* How to Trade the Piercing Candlestick Pattern by TAZ Trader.* When Traders Lose Confidence – Part 1 & Part 2 – by Dr. Brett Steenbarg...
Thursday, July 26, 2007
Link: The Fear Of Losing Money
Chris Perruna recently wrote a good article on “The Fear of Losing Money”.I believe all traders, both successful and unsuccessful traders, will have this kind of fear. I think this fear is normal, particularly for those who trade using their own hard-earned money. However, what differentiate between successful and unsuccessful traders are the way they handle it.Like what Chris said in that article:“Many investors fail in this world due to their fear of losing money.Brilliant people continue to fail at trading the markets because of theiremotions,...
Tuesday, July 24, 2007
Why Trading Psychology Is Very Important
When ones start learning about trading, normally they will focus more on learning trading set-ups, entry and exit strategies, and spend less time on studying the psychological aspect of trading.Until they started real trading, they will realize that trading psychology is in fact one of the most important aspects for trading success, because it concerns the most crucial part of trading – the trader itself.People can learn the same, best trading system....
Friday, July 20, 2007
Good Readings
Here are some good readings for you to check out:* Corey from Afraid To Trade blog demonstrated with a simulator and some examples that “you do not have to be perfect to make a lot of money in the markets. The key is consistently letting your average wins be larger than your average losses”.* Dr. Brett Steenbarger assembled a collection of his great articles in this post. An invaluable trading education for all traders.* Turtle Trader compiled a number of articles on money management, an aspect of trading that is believed to be one of holy grails...
Tuesday, July 17, 2007
5 Tips For A More Effective Virtual / Paper Trading
In the earlier post, we discussed the advantages & disadvantages of virtual / paper trading. Whether paper trading will be useful for you or not depends on how you treat it: will you treat it seriously, or will you do it just for a fun game and/or self-satisfaction.The following are 5 tips for you to have a more effective & fruitful paper trading:1) Develop your trading system and write down the rules of the system in details.Having detailed...
Monday, July 16, 2007
Update on PLXS and UTHR
Let’s see what's happened to the stocks with interesting patterns discussed on the other day. Both PLXS and UTHR have done well. But it took patience to wait for the decent entry signals.Hope you can learn something from ...
Thursday, July 12, 2007
Links For Your Reading
Check out the following good readings for the week:* Corey from Afraid To Trade blog has an excellent example on why you should set a stop loss targets and honor them; believe only the market, and not news or your own opinion.* So, you want to know the holy grail of trading? Chris Perruna tells you here.* Wanna learn what stock buyback is and its impacts? Option Pundit shared it in this article.* Interesting opinion & discussion about Stochastics indicator in Move The Market and TAZ Trader blogs.* And another excellent post by Dr. Brett Steenbarger...
Wednesday, July 11, 2007
Should You Do Virtual / Paper Trading?
For beginners, before starting real trading, it is recommended that you should prepare yourself first by spending some time to do virtual / paper trading. For those who may be unfamiliar with the term, paper / virtual trading is a trading simulation, where you can “buy” or “sell” a security with real price, but not using real money. You will be given a certain amount of “virtual money” as your “capital”, and you can place a trade through your online...
Monday, July 9, 2007
Things To Consider Before You Decide To Take A Trading / Investment Course
When you are interested in learning stock / options trading, you might be considering whether you should take a course or just learn it by yourself. Taking a course might help you to have a jump start in learning. However, some people are better learning it by themselves by reading books or trading websites / blogs. It all depends on your learning style / preference, whether you are the kind of people who can learn on their own, or you are better learning by listening to people (mentors) who teach you in person.As for me, I mentioned before in...
Thursday, July 5, 2007
More Understanding about Options Time Value
As we know, an option’s price comprises of 2 components: Intrinsic Value + Time Value.Assuming all other things remain constant (i.e. no changes in the underlying stock price and volatility), the time-value component of an option is affected by 2 variables (both for Call & Put Options):* Time remaining until expiration.The longer the time to expiration, the more time value the option will have.* The closeness of the option Strike Price to the...
Wednesday, July 4, 2007
Firefox Saves My Days
Few weeks ago, I encountered some problems with New Blogger, such as unable to upload pictures / images in a post, unable to add new page element as the “Add a Page Element” links disappear from the “Layout”, and also cannot edit the existing page element.After spending some times trying to find the solutions in the Blogger Help Group, I managed to fix the problems. One suggestion from the Blogger Help Group to solve such problems is to change the browsers. For instance, if you use Windows IE, try to change to Mozilla Firefox, and vice versa.Normally,...
Monday, July 2, 2007
OPTION GREEKS
Find out more about what each of the Options Greek means and understand further its behaviours / characteristics. (And find out why a reader commented that: “These explanations of the greeks are shorter and clearer than any of the other descriptions I have found on the internet so far…”) :-)
Click the following links to read each of the articles on Options Greeks in this blog:
1) Option Greeks - Introduction
2a) DELTA - Part 1 - Understanding what it is
2b) DELTA - Part 2 - Factors that affect Delta
2c) DELTA - Part 3 - Interpretation of Delta
3)...
Option Greeks: RHO
Rho is a measure of the change in an option's price due to a change in interest rate. Rho estimates how much the option’s price will change when interest rates changes by 1%.Rho is seldom used because interest rates are normally pretty stable. Therefore, the chance that option’s price will change drastically due to a rise or a drop in interest rate will be quite low.Example:The current price of ABC May 50 Call is $3 with a Rho of +0.03 and interest rate at 5%.If interest rates increase to 6%, the value of ABC May 50 Call will increase to $3.03.If...
