Economic Insensitivity

Traders can reduce risk by trading products that aren’t closely tied to unpredictable macroeconomic swings Basing trading decisions on an opinion about the economy isn’t easy. One indicator may signal strength while another indicates weakness. Meanwhile, economists and the Fed hedge their statements. It’s enough to make an investor yearn to be free from economic … Continued

This is No Amazon Delivery

Trading crude oil presents daunting challenges when its price falls into negative numbers and the owner must take delivery. Here’s a look at the high cost of free oil. The COVID-19 pandemic’s major disruptions to the global economy have trickled down to the global stock markets and caused massive spikes in volatility. For reference, the … Continued

How This Sell-Off Stacks Up

Stocks declined in value more quickly this year than ever before Volatility had been slowly declining in the markets for the last 11 years, but then the coronavirus-fueled downturn of 2020 struck like a bolt of lightning. Here is some perspective. Generally, sell-offs in the equity markets cause volatility to increase because markets tend to … Continued

Trading the Gold-Silver Ratio

Here’s the simplest way to reduce portfolio volatility by pairs trading the two heavy metals In the world of pairs trading, the gold to silver ratio ranks as one of the most popular trades because of its stable correlation and tendency to diverge in price. What does all that mean to traders? The gold to … Continued

China’s Neutral Price Action

Testing the strength of a strangle in the FXI  For the past 10 years, U.S. stock markets have tended to move in a single direction: up. This has been a challenge for options sellers with a neutral assumption on the market. Strategies like strangles have been tested on their upper breakevens through the past 10 … Continued

False Prophets Get It Wrong About Profits

New data suggests it pays to concentrate on managing stocks that are gaining value, not the ones in decline  For the last 100 years, Wall Street has been dispensing this advice to investors: “Cut your losses and let your winners run.” The adage formed the basis of trading discipline. The problem is that it’s not … Continued

(Covered) Call to Action

Savvy investors can turn a 401(k) or IRA into a facsimile of a covered call Americans store a big chunk of their investments in 401(k) plans or IRAs for two reasons. First, employer matching funds can add up. Second, participants can’t easily withdraw cash to buy an iPhone or a take a tour of Europe. … Continued

Taking Futures to a New Level

Advanced uses of futures include scalping, pairs trading and delta hedging Futures contracts offer retail traders some strategic advantages that aren’t available with stocks and exchange-traded funds (ETFs), including scalping, pairs trading and portfolio hedging. Scalping may seem obvious, but futures scalping offers two advantages over scalping stocks or exchange-traded funds: tax efficiency and freedom … Continued

11 Trades for 6 Outlooks

By Anton Kulikov & Mike Hart The research team at tastytrade created the options strategy flowchart below to serve as a mental roadmap in the trade decision process. As with nearly everything in the world of  options, the first metric to consider is volatility. Here, the implied volatility rank breaks down into two categories: high … Continued

The Butterfly Payoff

What’s the right environment for the butterfly spread? While short straddles and strangles are great trades when investors want to speculate that a stock will not move much, the risk can seem too great. The long butterfly provides a potential alternative. A butterfly spread has low probability and low risk. That means there’s a low … Continued