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All-Star Option Traders


You’re an All-Star if you’re an advanced option trader. All-Stars have been making five or more options trades per month for several years. As an All-Star, you have depth of knowledge of implied volatility and use it to anticipate risk and opportunity. You live by the Greeks for risk-reward analysis and position management. Although these analytics provide forecasts for option price behavior, you take them with a grain of salt since they may not always be reliable. All-Stars possess excellent risk management skills and do not hesitate to adjust or exit a position when necessary. You roll options with proficiency. You’re very comfortable using the three-way interplay of risk, reward and probability of success to analyze trade opportunities and manage risk of your existing positions. You rarely short naked single-leg options, rather opting to trade a spread for improved potential return on investment and lower risk. All-Star trades can be quick, mid-range, or long in duration, using time to his or her best advantage depending on the opportunity. Traders at this skill level are proficient at running two-, three- or four-legged trades such as butterfly spreads and condors, and trades with multiple expiration dates. You track industry news and adapt as the marketplace evolves. Monitoring the relevant news of any holdings and their sectors is second nature for All-Stars. Even though you already know a great deal, an All-Star Options Trader is always learning, always adjusting, always growing as a forever student of the market.

As an All-Star Option Trader, here’s how you can round out your skills:

  • Hone your trading strategies and your order-entry placement
  • Understand synthetic option positions and use this to aid in your analysis of current trading opportunities

All-Star Option Traders can improve by:

  • Reviewing option strategies geared towards the All-Star skill level
  • Continuing to use TradeKing’s Options Scanner and Options Strategy Scanner, both from iVolatility.com, to find potential option trades
  • Continuing to analyze potential option trades and holdings with TradeKing’s Profit + Loss Calculator
  • Anticipating and planning for all possible outcomes for your investments, not just the positive scenarios
  • Inquiring members of the Trader Network to explain their trading analysis
  • Challenging members of the Trader Network with an alternative point of view
  • Journaling your trades with Trade Notes to record your trading thought process
  • Attending or watching TradeKing’s free educational webinars, geared to the All-Star skill level

All-Star Option Traders should steer clear of the following:

  • Resist the urge to buy low-priced options because they “seem cheap”
  • Do not be cavalier if holding an options position within one week of the underlying company’s earnings announcement, or other planned news event
  • Resist the temptation to ignore any worthless options you may hold since they can come back to haunt you
  • Do not be careless if holding options positions through expiration week
  • Neglecting to manage your potentially unlimited risk aggressively on a short option position
Option strategies entail risk and are not appropriate for everyone. Before trading options, you should review Characteristics and Risks of Standardized Options. Some option strategies involve multiple positions simultaneously. These multi-leg strategies incur additional commissions and may invoke special treatment when preparing your taxes. If you are unsure about how a particular strategy may impact your financial picture, please consult a tax professional before trading.





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All-Star Analysis

What happens if an account does not have sufficient funds to participate in a recommended trade? on 05/18/2011
That trade will not be placed.

Credit on 05/16/2011
any funds received in an account, from the sale of an option or stock position, that results in an increase in the cash balance.

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