Where do you start when you want to start trading stocks and covered calls?

That is the topic is this video. In it I go over how to get started, how to calculate how much money you need to get started, what you can make, and some simple guidelines I wish I knew when I got started.

Here is a pretty good video of a segment done by Jim Cramer in which he talks about what to invest in inside your retirement accounts.

Now it is possible to sell options inside your IRA and many people do. I do not recommend it for the most part. Why?

Because it is still more riskly than just owning a bunch of boring dividend paying stocks. If you are an OptionGenius member you can see how I invest my own funds and the allocation. But in my retirement accounts, I am mainly invested in stocks. I do sell covered calls and sometimes some puts, and the occasional credit spread/condor/ or butterfly. But those are the exception.

I use my normal trading accounts for the bulk of my option selling trades.  Several reasons.

1. I like to take the gains out to live on and enjoy. Can’t take your profits out of an IRA and [...]

Many readers liked the MCD butterfly I posted on Friday. Here’s the link if you missed it:

http://optiongenius.com/blog/mcd-butterfly/

One reader posted an excellent comment that I decided to create a new post about. Here is what he asked:

As of Friday’s close, the 75 fly would cost $3.15 for a BE range of 73.16 76.86. Max profit at the 75 strike (if held to exp day)is approx $180 for a 57% ROI.

With a April/May 75 Calender Call Spread, (with a +1 IV skew),the cost is .83 for a similar BE range: 73.4576.46. Max profit at 75 strike is only $62 (compared to $180 for 75 fly), but the ROI is 75% (compared to 57% ROI for fly).

So here’s the $64 question: given these two ‘range-bound’ option strategies that offers nearly identical BE profit ranges, would it not make ‘more’ sense to go for the 75 Cal, given it’s purported superior Risk/Reward profile, in [...]

Part Four: Iron Condor Trading Strategy

There are as many iron condor trading strategies as there are iron condor traders. Everyone has their own preferences and style.

To create your own iron condor strategy you have to first choose the underlying. You don’t really need an iron condor screener or software program to find suitable candidates for you. Stick to Indexes and ETFs at first. As you become more experienced you can move into stocks.

Indexes and ETFs have the benefit of being composed of several companies and so the news, good or bad, of any one company will not affect the price as much. Pick one that you feel is relatively stable. Some good candidates are: SPX, SPY, RUT, IWM, DIA, QQQQ, NDX, MNX, XLE, XLF, and RTH.

Step two in creating your own iron condor strategy is to decide how far out from the money do you want to go. The farther [...]

Part Two: Philosophy of the Iron Condor

Incase you missed Part One: http://optiongenius.com/blog/iron-condor-option-trading-mini-course/

Stocks move up and they move down. Very rarely do they move in only one direction for an extended period of time. Since most of the time, stocks trade in a range, why don’t we make money from the range, instead of trying to determine if they are going up or down?

That in essence is the philosophy of the iron condor spread. No need to determine which way the market will move, because within a 30-50 day time period chances are that the market will stay in a range. Over time, it may move in one direction. But in a short period of time it probably won’t.

So let’s sell options that are far out of the money, which have very little probability of hurting us, and make money by selling time. As days go by, the options lose value, [...]

Iron Condor Option Trading

In this multi-part mini course, I plan on explaining the major facets of the Iron Condor Option Trade. First I will go over the basics of the trade, the philosophy, the risk, putting the trade on, and possible adjustments

Part 1: Iron Condor Spread Basics

The iron condor is an option trading strategy that uses two credit spreads.

The strategy is simple: Sell credit spreads out of the money: both puts and calls thus creating a “box”. As long as the underlying, stock, etf, or index stays within this box, the trade makes money.  Since you are selling options the trade results in a credit, and this credit is the maximum amount you can make on your iron condor trade.

When you place an iron condor trade, you will be selling the condor. In most circles this is considered a short iron condor. I myself do not know too many traders [...]

Greetings fellow option trader!

Do you have any questions I can answer for you?

I was wondering if you had any questions about options, option trading, or other related topics that you have not been able to find answers to either on my site or anywhere else. If you do, great! I am ready to answer (if I can). But please read this entire post to find out how to submit your question.

I had an idea to make myself available to answer any and all questions as well as I could. No question is out of bounds and I will try to answer all questions submitted whether you are a member of the OptionGenius site or not. There is no charge for this.

But I do ask the following:

Please give me enough time to answer.
Please do not ask me anything that would require a specific answer. I am not a licensed investment advisor and cannot [...]

What is option time decay and how does it work in the context of stock options?  Option time decay is denoted by using the Greek word theta. Theta continues to be one of six indicators in option trading known as the Greeks. 

Options are a decaying asset. Option time decay is a feature of all options that basically means that an option will lose value as time goes on and it gets closer to expiration. So when you are looking to buy an option, the more time until expiration means the more the option will cost versus an option that has less time to expiration in which the underlying can move.

Theta specifically measures the sensitivity of an option’s value according to the passing of time.  Another way of saying this is that theta is the ratio of change in an option price according to the fleetingness of time before the expiration.  [...]

What are Some Good Books on Option Selling?

What should you do if you are interesting in learning more about option selling?

The best way to get started is to read a few good books on the subject.

When I first got started I went to an expensive seminar. After two days I knew enough about options to be dangerous – to my myself. After trying to trade options based on what I had learned at the seminar I realized, after losing a lot of money, that there was more to it.

So I started researching books on options, videos online, websites, etc. Here are some of the best books I found on options and trading in general.

Options Books

One of the most advertised books is The Complete Guide to Options Selling: How Selling Options Can Lead to Stellar Returns in Bull and Bear Markets by James Cordier and Michael Gross. It goes into detail [...]

Are you wondering which is better: option trades that result in a credit or trades that result in a debit?  Simply put, you’re asking whether you should choose a credit spread or debit spread strategy.  Let’s consider both options in more detail. 

A credit spread (also called a net credit spread) involves the investor selling one option then buying another option.  The second option is in the same class and also shares the same expiry date.  However, there are different strike prices between the two options.  In this instance, the new investor gets a net credit for entering this position.  He is looking forward to the spreads either narrowing or expiring in order to get a profit.  A credit spread is basically a conservative strategy in investment.  It is designed to earn a moderate level of income while also limiting your potential loss.  In this circumstance, you are buying and selling [...]