Women Option Traders

P3 System: Putting Profit Probablility on Your Side -New Book on the Squeeze Trade

September 29th, 2010 | Author: Wendy

Within the next two weeks or so the new Squeeze Trade book will be out and direct mail advertising will start. Ultimately, ads will appear in the IBD and USA Today newspapers. The price of the book will be considerably more than the e-book I have been selling. TradeWins, the publisher, will also be handling the Squeeze Alert Newsletter that list stocks that are forming squeezes each week. Those who have already signed up through me will continue to get the newsletter at the lower price.

Once I have the information on the book purchase site and newsletter sign-up location, I will post the information here.

Squeezes unfolding has been a fabulous way to trade options during this uptrend. They are the most reliable chart signal I have found.

Posted in Book | Tags: squeeze plays, Women Option Traders, womenoptiontraders.com | No Comments »

The Puzzle of Deltas

March 20th, 2010 | Author: Wendy

For years I have been telling traders to strive to purchase in-the-money options that have high Deltas, preferably 1. if possible. Recently, Bev, a friend and fellow trader and I had a dicsussion about Deltas and she explained that she understood it to be advantageous to have a high Delta, but not necessarily as high as 1. My goal has always been to achieve dollar option profit for every dollar stock profit.

Well, Bev gave me the particulars in a way that I could really understand and I stand corrected.

So here are the details.

Let’s take two different strike prices for the same option.

Ford Underlying is $13.73 (at time of Buy)

1. The 1.0 Delta, premium is $5.80

When the stock moves to $14.73 (1 dollar gain),

the premium moves to $6.80 (1 dollar gain.)

If you divide 5.80 by 6.80, you get a 17% gain.

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2. The .71 Delta premium is $1.16

When the stock moves to $14.73 (1 dollar gain)

the premium moves to $1.87 (1.16 plus .71 cents))

If you divide 1.16 by 1.87, you get a 62% gain.

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The cheaper the premium, the lower the Delta, but out-of-the-money gets very risky (as far as winning), but the rewards get

higher as the delta gets lower. You’d just have to luck out.

I still suggest buying at-the-money or in-the-money by a two levels with Delta between .55 and .80. these will have likelier wins.

Now admittedly, the difference in this shared example seems out of proportion. .71 Delta with premium of $ 1.16 and 1. Delta and premium for $5.80. Big span between $5.80 and $1.16 and little span between 1. and .71. But they’ve been used to illustrate the math involved. As you now look at the option chains, trying to determine which of the in-the-money options holds the best percentage, you now have the knowledge and skills to answer the question for yourself.

I thank Bev for bringing this advantage to my attentions and I am happy to share it with you.

Posted in Tools | Tags: Deltas, options, Women Option Traders | No Comments »

Posts Tagged ‘Women Option Traders’

P3 System: Putting Profit Probablility on Your Side -New Book on the Squeeze Trade

The Puzzle of Deltas