Author name: Nathan Marchand

IN BRIEF Behavioral finance affects trading decisions. Emotions like fear and greed influence options pricing. Automatic risk controls enhance long-term trading performance. Understanding biases can improve risk management strategies. Adopting a well-defined investment strategy aids rational decision-making. Risk management techniques include position sizing and hedging. Identifying inefficiencies in markets is crucial for traders. Incorporate fundamental …

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IN BRIEF Options spreads are strategies that combine buying and selling options. They can effectively limit potential losses while facilitating gains. Vertical spreads are cost-effective for speculating on market direction. Utilizing bull, bear, and butterfly spreads enhances risk control. Position sizing is crucial for managing exposure in trading. Options act as a hedge against falling …

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IN BRIEF Options Assignment is a process where obligations of an options contract are fulfilled. Assignment Risk arises when an option may be exercised, impacting trading strategies. When an option is exercised, the seller must either buy or sell the underlying security. The risk profile changes post-assignment, potentially increasing margin requirements. Assignment risk increases with …

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IN BRIEF Profit Targets: Define desired returns on investments. Risk Management: Essential for maintaining trading discipline. Stop-Loss Orders: Limit potential losses by setting predetermined exit points. Automated Exits: Use orders to exit trades efficiently at set price thresholds. Percentage Returns: Set targets based on acceptable risk/reward ratios. Market Analysis: Evaluate market conditions to adjust profit …

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IN BRIEF Overnight Positions: Understanding risks from price movements after market hours. Diversification: Spread your positions across various assets to minimize exposure. Stop-Loss Orders: Implementing limits to prevent excessive losses. Global Market Awareness: Stay informed about international events that may affect positions. Strict Risk Management Rules: Establish guidelines for trading to ensure safety. Advanced Strategies: …

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IN BRIEF Implied Volatility (IV) indicates market expectations for price fluctuations. Higher IV generally leads to increased prices for call and put options. Volatility plays a crucial role in assessing trading risk. The relationship between implied and realized volatility affects option profitability. Understanding Vega can aid in navigating changing IV levels. Aligning trading strategies with …

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IN BRIEF Identify key market trends relevant to option trading. Utilize technical analysis for trend detection. Evaluate price fluctuations of underlying assets. Monitor volatility metrics like the VIX. Assess the risk-reward balance before trading. Incorporate position sizing to mitigate risk. Use predefined exit strategies to protect profits. Stay informed of market maker influences on option …

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IN BRIEF Liquidity Risk: Challenges faced in the option market due to market inefficiencies. Trading Volume: Traditionally used but not a reliable indicator of liquidity. Daily Volume vs. Open Interest: Key metrics for evaluating option liquidity. Bid/Ask Spread: Essential measurement for assessing liquidity. Illiquid Options: Risks and difficulties in trading options without an active market. …

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IN BRIEF Economic and political events significantly influence options trading. News events can cause increased market volatility and affect asset correlations. Binary options are heavily impacted by trading sentiment. Event risk is crucial for understanding price movements in the markets. Strategies should consider the timing of corporate announcements. Be cautious with overnight positions due to …

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IN BRIEF Psychological preparation is essential for trading success. Practice mindfulness techniques to enhance focus. Establish a daily routine for improving mental clarity. Learn to recognize and manage emotional triggers. Utilize visualization techniques to enhance decision-making. Engage in education through books and courses. Understand the impact of psychological factors on risk assessment. Create a risk …

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