How Does Vega Work? Vega is typically expressed as the amount of money per underlying share that the option's value will gain or lose as volatility rises or falls by 1%. Owned options (both calls and puts) have positive vega, which means they typically increase in value when volatility ...
How Does ‘Catching a Falling Knife’ Work in Investing? Traders looking to time the market and buy stocks that are falling, hoping the stocks will rebound and gain in value, are often left catching falling knives.1 When stock prices continue to fall, that leaves those traders staring at ...
The Average Daily Range indicator (ADR) calculates the average daily high-to-low distances. It shows how much the price of an asset moves per day on average, and it is very similar to the Average True Range (ATR) indicator, with the difference that it does not consider any gaps with th...
This helps ensure that the trader in question understands the key risks and rewards associated with a given position. When does an IV crush happen? Implied volatility can spike for a wide range of reasons. And anytime implied volatility spikes, there’s theoretically a chance that it could ...
Z-score = (Observation - Mean) / Standard Deviation The Altman Z-score, developed in the late 1960s, modifies basic Z-scores to illustrate how financially healthy a business might be and to try to quantify its creditworthiness. The model is named after professor Edward Altman, who developed ...
How Does Buy the Rumor, Sell the News Work? Buy the rumor, sell the news is an adage that describes a common occurence in most markets, particularly financial markets. Traders sometimes turn this idea into a trading strategy that draws upon what they believe will happen in the future. ...
I do not mean cashing out & go to a cave to wait it out (although that might be wise). I also do not mean speculating or gaming CH to guess when cash in the chips (and declare victory) Some of these bubble markets seem interrelated and/or impact others that appear less...
Understand the Business: What does the company do? How does it make money? Evaluate the Management: Look at their track record, past performance, and strategies for the company. Assess Competitive Advantage: Where does the company stand in the competitive landscape, does the company have a compe...
Waiting too long for additional profits could mean stock price movement, which can be bad for the position. We never route calendar spreads in volatility instruments. Each expiration acts as its own underlying, so our max loss is not defined. WHEN TO MANAGE Since this is a debit spread with...
While taking a short position is legal, the U.S. Securities and Exchange Commission (SEC) does have some restrictions in place when it comes to who can sell short, which securities can be shorted, and how those securities are shorted.2 ...