Derivatives: Making a Good Trader a Better Trader

01/11/2016 8:00 am EST


Fred Oltarsh


Fred Oltarsh, at Options Strategy Network, outlines how trading calls and puts, straddles, strangles, and fences—while understanding implied volatility and the skew of those options—can be as important as analyzing which options market is worth trading due to liquidity issues.

Whether it’s stock, futures, or options trading, there are those who are excellent analysts and those who are terrific traders. Once in a while the skills overlap. However, if one doesn’t have both skills, take the one you have and do your best to learn the other. Traders have directional ideas all of the time, while analysts and educators can aid them in the implementation of those ideas.

Options trading provides stock traders with a strong directional bias to enhance their positions in a manner that would be impossible without derivative markets. Using that leverage in an effective manner, with reasonable risk/rewards, is what can elevate a good trader to a more effective trader who uses derivatives productively. The complexity of these derivative products, however, can have unforeseen effects.

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By Fred Oltarsh, Proprietary Trader and Editor, Options Strategy Network

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