Volatility

trading tools of the trade

Investopedia has an article here but it doesn’t seem terribly helpful to me. Here is a document I wrote when I was trying to come to grips with it and also what my software was showing me. Volatility I have been on something of a crusade to understand volatility and how it is calculated in my charting packages Optuma and Beyond Charts Plus. First Historical Volatility. This is the standard deviation of the % change in price for a specified period (sometimes called the Interday return). There are a few different ways this can be calculated. In Microsoft Excel, it



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Risk of Ruin

risk of ruin

Interesting! Just looking at some searches around trading and incredibly (to me at least) there does not seem to be much interest around the absolute most important issues in trading – Risk and the Risk-of-ruin. I’d like to feign surprise but there is a reason most people lose money trading. More on this at a later date. Originally posted 2017-06-28 18:36:59.



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Options

Option Chain

Options can be very confusing for new traders however once you understand a few basics they are really quite straightforward. There are 2 types of options to be considered. A Call Option and a Put Option. If you BUY an option it gives you certain rights. If you BUY a call option, it gives you the RIGHT to buy the instrument at a fixed price on a given date in the future IF you wish to. There is no OBLIGATION on you to proceed with the purchase in the future. If you BUY a put option, it gives you the



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Risk

risk of ruin

This is one of the most difficult things in trading. It almost seems counter intuitive. The only way you can ever hope to be a success is to control your risk. If you are reckless and blow up your account you will run slap bang into the one reality – if you have no money you cannot play. The trick in trading is to preserve your capital so you survive long enough and are able to take that trade that will come along and will make all the difference to your account. I’m going to talk about stops in another



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Covered Calls

Covered Call

My first introduction into trading was by way of covered calls. Covered calls are an income strategy and typically promise a 2% or so return per month. This strategy involves buying a share (or even a CFD) and selling a call against it. Variations of this strategy include buying an option ITM and selling an option OTM at a higher strike both with the same expiry. Covered calls CAN work quite well in a market that is rising or going sideways but can present problems if a market is declining. In addition to buying stock and selling a call, some



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