Author name: Nathan Marchand

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: …

Strategies for managing overnight risk in options Read More »

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 …

The relationship between implied volatility and option trading risk Read More »

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 …

How to analyze market trends for option trading risk management Read More »

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. …

Assessing liquidity risks in option trading Read More »

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 …

The impact of news events on option trading risk Read More »

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 …

Training your mind for better option trading risk management Read More »

IN BRIEF Fundamental analysis evaluates an asset’s true value. Consider economic indicators and financial statements for informed trading decisions. Integrate fundamental insights for diversification in options portfolios. Utilize risk management strategies to prevent significant losses. Focus on position sizing to protect capital. Understand the role of market sentiment in options trading. Regularly assess global news …

Incorporating fundamental analysis into option trading risk management Read More »

IN BRIEF Due Diligence is essential in option trading to mitigate risks. financial health is crucial before any investment. Identifying market risks associated with narrow vs. broad indexes. Research helps form educated decisions, enhancing trade confidence. Evaluating potential partners and understanding their strengths and weaknesses. Good due diligence processes can prevent future liabilities and losses. …

The significance of due diligence in option trading risk Read More »

IN BRIEF Backtesting assesses the performance of trading strategies using historical data. risks and potential volatility in options trading. Essential for refining strategies and avoiding pitfalls. Risk management benefits from historical insights to prepare traders for live market conditions. Identifies the most effective options strategies based on past data. Highlights the limitations of backtesting for …

Using backtesting to identify risk in option trading Read More »

IN BRIEF Understanding Emotional Biases: Recognize how emotions can influence trading decisions. Setting Clear Goals: Define investment objectives and time horizons to minimize emotional trading. Meditation Techniques: Incorporate daily meditation to enhance emotional discipline. Utilizing Stop-losses: Implement stop-loss strategies to control potential losses. Adopting a Trading Plan: Create and adhere to a structured trading plan …

Avoiding emotional trading risks in option markets Read More »