If you could half your risk and maintain all the upside for a pittance would you be interested? Well read on as I’ve got a couple strategies to share with you.

https://www.cboe.org/publish/InfoCir/IC08-082.pdf
Monday, November 17, 2008 — 2011 LEAP options begin trading for March cycle shares. That’s the last cycle to start trading after the cycles were delayed this year. More info on LEAP cycles.
Thinking of selling covered call and put on 2011 Amgen giving profit in $35 plus range, with profit capped at $85, but $25 of that in the hand now. There is no free lunch. Use of these derivatives increases gearing in portfolio. Money received is for assumption of risk and limiting upside.
Synthetic long on GE, a March cycle, …

option expiration cycles for stocks may seem a bit confusing, but if you take a little time to understand them they become second nature. It can be very important to know what expiration months will become available in the future.

Delta is the change in the price of an option for a small change in the price of the underlying stock. It tells option traders how fast the price of the option will change as the underlying stock/future moves.
Gamma is the rate of change of the delta for a small change in the price of the underlying asset. It is important because it shows how fast delta will change as the market price of the underlying asset changes.
Theta shows how much value the option price will lose for every day that passes.
Vega is the rate of change of the options value with respect to the 1% change in the volatility.

The Fusion Investing and Analysis Fund has sold 5 FDX June $90 Puts (FDXRR) at $4.00.
For an fusion analysis of Fedex see yesterday’s post.
With 28 days to expiration selling at $4.00, gives cost if put of $86, return on total risk of 4.65%, annualised to 60%, return on buying power of 15.5% and a 2.5% discount from the price.
This transaction delivers $2,000 cash to the fund. I anticipate holding until expiration. I’ll update this entry with further details tomorrow.

Don’t loose all your money is manifest, yet too many new options traders find themselves walking home from the track rather than sipping champagne in that limo they dreamed of.

Not understanding that option trades require both speed and direction to be profitable is often quoted as the number one reason why option traders loose money, it make it in to my list at number two.

There’s never enough time to do all the nothing you want. How many times have you heard people lament about not having enough time? There is never enough time, except in those long summer days of youth. Options allow traders to buy enough time and to be successful you must take advantage of this.

Conceptually only buying OTM options is the same as mistake three, not buying enough time. Beginning options traders think that by paying less for their options they are protecting themselves from losing all their money. However, the complete opposite is true. Most things in life that are cheap are pretty worthless and the same goes for options.

The entire options industry is setup to convince you selling covered calls is a conservative strategy. If you look at the option trading levels below you’ll see covered call writing only requires the lowest level of option trading approval, level 1. Most brokers and option advisors will recommend you start option trading by writing covered calls. Despite what your broker wants you to believe, I’m here to tell you that writing covered calls is NOT a conservative strategy.