How Much Volatility Is Too Much?

Risk increases if a stock is too volatile or makes price moves far outside of what’s expected Options traders often gravitate toward highly volatile stocks. With volatility, they have greater expectations for the stock price and, if played correctly, a greater expectation of profitability.  But if a stock is too volatile or makes price moves … Continued

Options With Futures

Why trade E-mini S&P 500 futures when Micro E-mini S&P 500 futures is also liquid and more appropriate for smaller accounts? Trading the /ES on the Chicago Mercantile Exchange (CME Group),  for example, is the equivalent of holding $197,000 worth of stocks in the S&P 500, whereas the micro version of this symbol, /MES, holds 1/10th … Continued

More Than Semi-Tough

Stocks and exchange-traded funds offer opportunity in the semiconductor sector In keeping with this issue’s focus on intelligence, let’s explore the recent history of stock in companies that manufacture the brain of the computer: semiconductors. It’s one of the best-performing sectors of 2020.  Some of the best semiconductor exchange-traded funds (ETFs) and an assessment of … Continued

Volatility “Sweet Spot”

Securities are ranked on this page according to their forward-looking volatility from last year. Traders seeking safer investments—at least those expected to move less—might lean toward the exchange-traded funds (ETFs) and stocks near the bottom.  Options traders looking to add a bit more volatility should consider the symbols or sectors near the top of the … Continued

More Bang for Your Buck

As a trading vehicle, nothing beats futures in terms of cost efficiency, liquidity and, for some, tax treatment. Take a look below.   First, note the “Futures USD Notional,” which is the true (unmargined) size of each product. The profit/loss of a 10% move in the /ES futures would be a $176,800 x 10% = … Continued

Make History Work For You

Google provides historical stock prices traders can study or use to create a personalized portfolio tracker  Anyone with a Google account can easily download historical stock prices for free.   First, head to Google’s version of a spreadsheet, Google Sheets, and start a new document: docs.google.com/spreadsheets. In Cell A1, type the following and then hit … Continued

Three Election-Day Hedges

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

All Your Options

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

The Limits of Standard Deviation

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

Futures: Ticked Off

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