Check out the pros and cons of three ways to protect a portfolio amid the uncertainties of a race for the presidency Buy a put This is the least favorite approach to “portfolio insurance,” but it does provide a high degree of protection. Say, for example, that Advanced Micro Devices (AMD) is trading for … Continued
Have a directional assumption about a stock? With options, traders have a much larger range of possibilities than with stocks. Instead of being just “bullish” or “bearish,” options provide ways to create trades with high and low probabilities of making money. Some of the strategies listed on this page have pre-determined levels of risk and … Continued
Why use standard deviation to look at past stock prices when options provide a window into what’s to come? One of the easiest ways to quantify risk is by observing standard deviation, which is a fancy way of quantifying how much a stock has moved. To calculate a stock’s standard deviation, take all the prices … Continued
Differing tick sizes and varying dollars per tick can make futures trading confusing. This handy crib sheet can help. Keep an eye on the “Median Day-to-Day Movement” column, and don’t trade too big for the account. Don’t fret about the cacophony of contract sizes, notional values and futures-trading ticks. Save this! Sign up for free … Continued
Real estate investment trusts tend to pay dividends that can ease the pain of a bad trade Got a bad trade? Tell everyone you bought the stock for the dividend. It’s an old joke among traders and provides cover for a mistake. But in all seriousness, dividends do add a nice buffer to lackluster stock … Continued
When the markets are in turmoil, money tends to flow out of stocks and into “safer” investments. The market’s definition of “safe” changes, but when stocks declined in March, money went into bonds and gold. The results? Let’s look at how diversification played out during the height of the turmoil. Gold has a history of … Continued
Because of coronavirus fears, the only seats filled these days are the ones in front of TVs. With very few people traveling, airline stock prices have declined an average of 50% during the past few months, prompting long-term investing maven Warren Buffet to make the unusual announcement that he was exiting his positions in the … Continued
Many commodity ETFs represent bad long-term investments Investors often want part of the action when commodities start to move around, especially when prices decline. It’s logical then that they often head to exchange-traded funds (ETFs). What’s not to love? They’re easy trading vehicles that don’t require special trading permissions, and the prices are affordable for … Continued
The fast and furious COVID-19 downturn provides the perfect prelude for this options strategy What made the 2020 COVID-19 market downturn unusual wasn’t the magnitude—the markets have been down more than 30% before. Instead, it was the speed. The plunge occurred in two months, while previous declines have occurred over several months or even more … Continued
Perhaps some traders are looking to “tiptoe” back into the market and make some cautious purchases. Anyone seeking lower-volatility assets could consider two exchange-traded fund (ETF) sectors: Consumer Staples (XLP) and Healthcare (XLV). Both currently have lower volatility than the S&P 500. The options market’s volatility—a statistical measure based on an option’s price—is ranked … Continued
