Return on Capital vs. Return of Capital

return on capital

When most traders get started they come into the market with one thing on their mind; make money fast! Return on capital becomes more important than the return of capital. Wait did you catch the subtle difference there? You see risk management and protecting your portfolio becomes an afterthought to making money and earning a high…

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Why “Cheap” Options Aren’t Always A Good Investment For Traders

cheap options

Too often I hear new traders talk about how they like to buy options that are cheap because they think it’s a good investment. I can understand where they are coming from because they relate option pricing to how stocks are priced. Cheap stocks are seen as a good investment because they can quickly rise…

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Short Selling Stock: How It Works And Why We Desperately Need It

short selling stock

I often have a hard time trying to explain how short selling stock works and more importantly, why we need it to keep the market alive. Now I understand completely the biggest hurdle that people have to overcome when we talk about short selling stock and it’s the ability to sell something you don’t own…

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How To Use Price Target Alerts To Be A More Productive Trader

stock price targets

Setting and managing price target alerts through your broker’s platform can help you be a far more productive trader. Whether you work a full-time job already or have made the leap over to trading, price target alerts can help you manage the hundreds of charts and trading opportunities each week. Narrow Your Watch List Instantly…

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Your Simple Checklist Before Adjusting An Options Trade

options trading checklist

Whenever we go to buy or sell an option it is vital to take the time to make sure we are entering the trade correctly in the first place. It is 100 times more important to enter it correctly than to be able to properly adjust it later on as changing a trade that was…

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Does History Support The Santa Claus Stock Market Rally?

santa claus stock market rally

Black Friday sales reports showed a considerable gain over the weekend. Naturally investors are hoping that Santa Claus will make for a very Merry Christmas and Happy New Year with a big end of year rally. So before you start listening to all the news stories that will come out around this time, let’s see if…

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Do You Secretly Want To Lose All Your Money?

professional trader

Especially when dealing with money, traders can sometimes develop self-destructive habits. As stocks jump up and down in price throughout the day, they can take hold of your mind and begin to play you like a fiddle if you are not careful. That’s why it’s so important to learn how your emotions will react to…

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When High Frequency Trading Becomes Destructive To Your Portfolio

high frequency trading

Each month Option Alpha has seen it’s readership and members grow – which is great. As always, I’ve never done any advertising or marketing for this blog. I’d rather have it grow via word of month and social media which to me is “real” growth and not “paid” growth. So thank you all and keep…

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Now You Can Profit From Volatility Skew With Put Ratio Spreads

volatility skew

With the recent market volatility I wanted to cover a new topic and strategy. It’s another tool to put in your box and a great way to take advantage of volatility skew in options pricing. As we all know implied volatility levels should really drive your trading strategy, and having a way to profit from…

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How To Analyze Trend Changes Using Ribbon Studies And Multiple Moving Averages

multiple moving averages

Ribbon studies and multiple moving averages are becoming more and more popular among trend traders. The basic idea behind the technical indicator is that you are using roughly 12-16 different moving averages on the same exact chart (instead of using just 1 or 2 on your chart). How Do You Build This Indicator? Typically ribbon…

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