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Tuesday, December 30, 2008
Saturday, December 27, 2008
Limit-On-Open (LOO) Order
Limit-On-Open (LOO) is an order that is automatically submitted as a Limit Order (i.e. to buy/sell at the Limit Price or better) at the opening of the market, and to be executed as soon as possible after the market opening only if the price during the opening period is at or better than the Limit Price. Otherwise, the order will be cancelled.As with limit order, while Limit-On-Open (LOO) order can be filled at the Limit Price or better, it does not guarantee a fill.LOO order is useful when traders find that the opening price of a certain security...
Thursday, December 25, 2008
Merry Christmas & Happy Holidays
Dearest all readers,MERRY CHRISTMAS & HAPPY HOLIDAYS!May you have a blessed & wonderful time with family & friends.GOD bless you all always...
Sunday, December 21, 2008
Market-On-Open (MOO) Order
Market-On-Open (MOO) is an order that is automatically submitted as a Market Order (i.e. to buy/sell at the market price) at the opening of the market, and to be executed as soon as possible after the market opening at a price within the opening range of prices.Hence, MOO order can only be executed during the exchange-specified opening period at a price within the opening range of prices; otherwise the order will be cancelled.However, the execution price does not necessarily need to be the opening price (the first price traded), or to be guaranteed...
Sunday, December 14, 2008
Short Trading Videos: FIBONACCI RETRACEMENT RULES
In the earlier post, I’ve shared a trading video that shows an example how to use Fibonacci tools to predict / measure market pullback.If you’re interested to learn more about Fibonacci, there is another trading video (about 8 mins), which explain in much more details about FIBONACCI RETRACEMENT RULES.Click HERE to watch the video.Related Topics:* FREE Trading Educational Videos You Should Not Miss* Learning Candlestick Charts* Learning Charts Patte...
Saturday, December 13, 2008
Limit-On-Close (LOC) Order
Limit-On-Close (LOC) is an order to be executed as a Limit Order (i.e. to buy/sell at the Limit Price or better) as close as possible to the market close.Hence, Limit-On-Close order will be executed at or near the closing price, only if the price is at or better than the Limit Price. Otherwise, the order will be cancelled.Similar to Market-On-Close (MOC) order, for this order, the broker normally set a time deadline for LOC order submission for that day, which is well before the closing of the trading day. After this submission time deadline, the...
Sunday, December 7, 2008
Short Trading Videos: How To Determine MARKET TREND & How To Use FIBONACCI To Measure Market Retracement
Just wanna share some short trading videos that could be helpful for the readers here, particularly for the beginners, to learn few quick, simple yet practical trading tips.Here they are & enjoy:1) HOW TO DETERMINE MARKET TRENDThis five minute video shows some techniques on how determine market trend:* How to determine a downtrend.* How to determine an uptrend.* How to determine when a market is making a change of direction.As you can see in the video, one of the key components to look out for is how a market closes on a Friday or the last...
Saturday, December 6, 2008
Market-On-Close (MOC) Order
Market-On-Close (MOC) is an order to be executed as a Market Order (i.e. to buy/sell at the market price) as close as possible to the market close.Hence, the order will be executed at the market closing price (which may differ with exchanges), or as near as possible to the closing price.For this order, the broker normally set a time deadline for MOC order submission for that day, which is well before the closing of the trading day. After this MOC submission time deadline, the broker will not accept any more MOC order, and the traders also cannot...
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...
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...
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...
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...
Saturday, October 25, 2008
GARTMAN’S RULES OF TRADING – Part 3: Technical Trading System
Go back to Part 2: Trading System & Money ManagementTECHNICAL TRADING SYSTEM16. Keep your technical systems simple.Complicated systems breed confusion; simplicity breeds elegance.17. Establish initial positions on strength in bull markets and on weakness in bear markets.The first "addition" should also be added on strength as the market shows the trend to be working. Henceforth, subsequent additions are to be added on retracements.18. Respect and embrace the very normal 50-62% retracements that take prices back to major trends.If a trade is...
Saturday, October 18, 2008
GARTMAN’S RULES OF TRADING – Part 2: Trading System & Money Management
Go back to Part 1: Trading PsychologyTRADING SYSTEM & MONEY MANAGEMENT7. Never, under any circumstance add to a losing position.... ever!Nothing more need be said; to do otherwise will eventually and absolutely lead to ruin!8. Trade like a mercenary guerrilla.We must fight on the winning side and be willing to change sides readily when one side has gained the upper hand.9. The objective is not to buy low and sell high, but to buy high and to sell higher.We can never know what price is "low." Nor can we know what price is "high."Always remember...
Saturday, October 11, 2008
GARTMAN’S RULES OF TRADING – Part 1: Trading Psychology
22 Trading Rules by Dennis Gartman, Editor/Publisher of The Gartman Letter:(I was just trying to group the rules based on their topics)TRADING PSYCHOLOGY1. Capital comes in two varieties: Mental and that which is in your pocket or account.Of the two types of capital, the mental is the more important and expensive of the two. Holding to losing positions costs measurable sums of actual capital, but it costs immeasurable sums of mental capital.2. "Markets can remain illogical longer than you or I can remain solvent", according to our good friend,...
Monday, September 29, 2008
Reading Links
* All-Time High Volatility: What’s a Trader or Investor to Do? by IITM.com* The VIX Stretch by Optionetics:* VIX Options as Catastrophe Insurance by Vix and More.* Stock Market Trading Method by Kevin’s Market Blog.* How to Recognize Market Capitulation by Trading Market.* Forex Buyers Guide - Forex Guides and Tips.* Trader’s Blog: This blog provides many trading educational articles. Check out many of great articles under the Categories of Traders Toolbox, Technical Indicators, and Trading Tips & Techniques.FYI, if you want to get alerts on...
Tuesday, September 23, 2008
Options Transactions
In stock trading, there are only 2 types of transactions: To buy or to sell.In option trading, there are 4 different types of Option Transactions:1) Buy To Open2) Buy To Close3) Sell To Open4) Sell To Close.The type of transaction that an option trader will make depends on whether he/she is an Option Buyer or Option Seller/Writer.For an Option Buyer, the following are the types of transaction he/she will make:1) Buy To OpenWhen an Option Buyer wants to open / enter a “long” position on a certain option contract, he will need to do a “Buy To Open”...
Sunday, September 7, 2008
Main Factors that Affect Option’s TIME VALUE
As mentioned in “Option Price Components”, option price or premium consists of:For ITM Option:Option Price = Intrinsic Value + Time ValueFor ATM and OTM Options:Option Price = Time ValueWhereas:Intrinsic Value of ITM CALL Option:Intrinsic Value = Current Stock Price – Strike Price.Intrinsic Value of ITM PUT Option:Intrinsic Value = Strike Price – Current Stock Price.As you can see from the above formula, Intrinsic Value of an option is very straightforward.It’s simply the difference between option’s strike price and current stock price.Time Value...
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 BeauCharles 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...
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 ClueIf 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...
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 PlanIn 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,...
Sunday, August 3, 2008
The Impact of IMPLIED VOLATILITY (IV) on OPTIONS GREEKS: Summary
The Impact of Implied Volatility (IV) on DELTAAssuming 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...
Sunday, July 27, 2008
The Impacts of TIME REMAINING TO EXPIRATION on OPTIONS GREEKS: Summary
The Effect of Time Remaining To Expiration on DELTADelta is a measure of the change in the option price resulting from a change in the underlying stock price.An option’s Delta does change as one trading day passes. This is often called as “Delta Decay”.As the expiration is nearing (time to expiration gets shorter), the time value portion of an option is declining (time decay effect).This causes the delta of ITM (In-The-Money) options to increase...
Sunday, July 20, 2008
Reading Links
Another few good readings:* Stock Bandit: Trading With Objectivity* Trader Psychology: Who Should Not Be A Trader?* Chris Perruna: 10 Steps to Profitable Trading* Stock Trading To Go: Timeline of 17 Recessions and World Crises Since Great Depression* Afraid To Trade: Confirmed Bear Market Rally Under...
Saturday, July 12, 2008
Options Greeks and Position in the Market (Long vs. Short): Summary
DELTA and the position in the market:* Long calls have positive delta; short calls have negative delta.* Long puts have negative delta; short puts have positive delta.* Long stock has positive delta; short stock has negative delta.Positive delta means that the option’s value will increase when the underlying stock price increases, and will decrease when the stock price decreases (positive relationship).Negative delta means that the option’s value will increase when the underlying stock price drop, and will decrease when the stock price rises (negative...
Saturday, July 5, 2008
Options Greeks vs. OTM, ATM & ITM Options: Summary
1) Option Greeks: DELTADelta is a measure of the change in the option price resulting from a change in the underlying stock price.The delta values will be positive for Calls & negative for Puts.At-the-money (ATM) options have (absolute) deltas around 0.5.Out-of-the-money (OTM) options have (absolute) deltas between 0 to 0.5.In-the-money (OTM) options have (absolute) deltas between 0.5 to 1.2) Option Greeks: GAMMAGamma is a measure the rate of...
Sunday, June 29, 2008
“Deeper OTM Puts are considered as ‘most expensive’ options”: What Does This Really Mean?
In my post “Volatility Smile and Volatility Skew – Part 1”, it is mentioned as follows:For Put options, the Implied Volatility is typically the highest for deep OTM options and then is decreasing as it moves towards ITM options.In other words, generally the “most expensive” options are deep ITM Calls and deep OTM Puts.For Put options, the possible reason why people are willing to buy an “expensive” deep OTM Puts are that they are viewed as a form of “insurance” against market crash. The lower cost in terms of dollar might also offer another reason...
Sunday, June 15, 2008
Volatility Smile and Volatility Skew – Part 5: Strike Skew vs. Time Skew
Go Back to Part 4: Volatility Smile and Skew ImplicationsStrike Skew vs. Time SkewActually, there are 2 types of volatility skews: Strike Skew and Time Skew.1) Strike Skew, or sometimes called Vertical Skew, is obtained by plotting Implied Volatility of an option with the same expiration month across various strike prices.This is the most common type of Volatility Skew.The volatility skew that has been discussed so far in the previous posts is Strike Skew.2) Time Skew, or sometimes called Horizontal Skew, is obtained by plotting Implied Volatility...
Saturday, June 7, 2008
Volatility Smile and Volatility Skew – Part 4: Implications
Go Back to Part 3: Why Volatility Smile and Skew Happen.Implications of Volatility SmilesIn some cases, volatility charts of an option may shift over time from Volatility Skew to Volatility Smile, or vice versa.When volatility charts of a particular stock’s options show a shift from Volatility Skew to Volatility Smile, this may signal an increased speculators’ interest into that stock, implying a possibility of volatile price movements for that stock due to certain reasons. (Please refer to Part 3 for more explanation).For an options trader, this...
Saturday, May 31, 2008
Educational Reading Links
Good readings for trading education:Van K. Tharp in IITM.com: Understanding Market TypeLibby Adams in IITM.com: YOU are the Holy GrailAfraid To Trade: Revisiting Stop-Loss and Profit Target Affect on Win RateThe Stock Bandit: Patient ProgressSwing Trade Stocks: How to Get More Winners by Combining Chart Patte...
Sunday, May 25, 2008
Volatility Smile and Volatility Skew – Part 3: Why Volatility Smile and Skew Happen
Go Back to Part 2: Understanding Volatility Smile & Volatility SkewWhy Do Volatility Smile & Volatility Skew Happen?As mentioned in Part 1, in more recent years, Volatility Skew pattern are more commonly observed than Volatility Smile pattern.For Call options, the Implied Volatility (IV) typically displays a Volatility Skew pattern, whereby IV is the highest for deep ITM options and then is decreasing as it moves towards OTM options.As discussed earlier, traders/investors are willing to buy an “expensive” deep ITM Calls because they can...
Saturday, May 17, 2008
Volatility Smile and Volatility Skew – Part 2: More Understanding
Go Back to Part 1: DescriptionWhat Do Volatility Smile and Volatility Skew Mean?As you know, an option’s price comprises of Intrinsic Value and Time Value.In options pricing, there are 6 factors that affect an option’s price: option’s strike price, underlying stock price, implied volatility, time to expiration, interest rate, and dividend.An Intrinsic Value of an option is determined by the option’s strike price and the underlying stock price.And the major determinant of option’s Time Value is Implied Volatility and time remaining to expiration.Since...
