Demystifying the World of Options
Most ETFs pay dividends. Some, like the SPDRs (SPY), pay out on a quarterly basis on the last business day of the month; others, like the Diamonds (DIA), make monthly distributions. The point is, knowing the basic rules by which the various vehicles operate will help you avoid potentially costly surprises.
Options Pricing: While option-pricing models can be very complex and one does not need to understand all the math involved, the two components that I think are essential to have a basic understanding of are implied volatility and time decay. For example, be aware that before an earnings or news report, the implied volatility of the near-term or front-month options usually increase to a higher level than the later-dated months. If you think Google (GOOG) will hit $400 in the next year, it makes no sense to buy calls that have only two weeks remaining until their expiration and only two days before the company is scheduled to report earnings. Instead, buy some LEAP options.
Pick the Right Tool: Make sure you understand the strengths, weaknesses and risks involved in each specific strategy. More importantly, make sure you then pick the strategy that best aligns with your investment thesis and will help accomplish the specific goal set for each trade or investment decision.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV