Are You Buying The Right Options? These Four Areas Will Tell You…

In last week’s issue, I covered the profitable and simplistic world of LEAPS trading – a simple way to trade, using long-term options that have an expiration date of one to three years.

And it’s this time component that is a critical factor when it comes to valuing the price of a LEAP option and the amount of risk involved.

An option’s price is determined by a computer program – either the Options Pricing Model or the Black-Scholes Model. Black, Scholes and Merton developed the latter model in the 1970s, winning a Nobel Prize for it.

Essentially, though, both models take the same main…

Options Investing: Readers’ Questions Answered

The message boards from Investment U have been lighting up with comments and questions on options investing. And while we can’t give specific investment advice, I can answer some of the general questions that have popped up.

For example, one reader wanted to know how options can work with short positions – and referenced doing so on Yamana Gold (NYSE: AUY). We talked about protecting against downside risk with long positions the other day, so let’s look at the other side.

In this case, I’m assuming that you’re short on Yamana and trying to manage the position in order to not take a big…

Deep In The Money Covered Calls: Lower Cost, Risk & Win 75% Of The Time

Last week, I explained the nuts and bolts of covered call investing – a bullish strategy that focuses more on returns than it does on risk.

In my column, I used the example of Yamana Gold (NYSE: AUY), showing you how to reduce your cost when buying stocks – and thereby increasing your upside potential if the shares move higher.

Today, we’re going to kick things up a notch and explain how you can cleverly take the same covered call strategy and add a twist, by using deep-in-the-money covered calls. When you do so, you can achieve more consistent returns over time, while also…

The Options Market: Overcome Your Fear And Embrace These Lucrative Instruments

Stock market-wise, I wish we were back in July 2008.

At that time, a 1% swing in the market was an anomaly. Today, it’s the norm. And even though we’ve seen volatility calm down somewhat in recent weeks, don’t be fooled. As we enter another earnings season, we’ll see volatility pick up again.

So what are you going to do?

Paralysis is not an option. Neither is making 1% or less on your cash every year when there is a high probability of out-of-control inflation in the years ahead.

You need to have a plan that can take advantage of what the market offers.…

Short Selling Strategies: How To Avoid The Short Squeeze With Put Options

“Investors are worrying that a three-month surge in stocks might be overdone.” - So read a piece of market commentary from the Associated Press a few days, as the Dow, S&P 500 and Nasdaq all slumped.

Thanks for the heads-up, guys. You’re about two months too late. Not only did we call the bear market rally before it began, we’ve also spent the past couple of months warning you not to get swept away by the sudden surge of optimism and over-confidence as stocks have pushed higher.

Bear market rallies are fun while they last. But they’re only temporary. And the last week of…