Trading Educational Videos: Option Greeks, Learn Technical Analysis from John Murphy, and Market Wizard

The video to learn some technical tips from Dan Gramza for free is no longer available.
Nevertheless, there are other new free trading educational videos, which are even more interesting. Don�t miss this chance anymore! Summaries on what the videos are all about are below.
To watch all the videos mentioned below, just click the �Sign Up� button in that page and fill up the registration form in order to watch the videos for FREE.

How much do you know about the �Greeks�?
No matter what the investment, an investor needs to know and fully understand the potential risks of the investment prior to committing capital to that investment. In the options market, the Greeks define and quantify the risks of your position before you commit to the investment. Understanding the Greeks is a must for proper risk management. Further, the Greeks can also help you identify and select not only the proper strategy to fit the opportunity you selected, but also which specific options to use to create that specific strategy.

Without a full understanding of the risks of an investment, an investor should never commit hard earned money. If you do not know your Greeks, you have no business being in the options market! So, option traders or those who are keen to learn options, don't miss this video.
Learn more about Greeks from the option expert in this video. Grab it now before it's no longer available for free.

Learn Technical Analysis from Award Winning Author
John Murphy has written 8 highly touted technical analysis books and today you�ll be sitting in on one of his seminars for no expense. His expertise is known the world over, his teaching style is impeccable, and he�s agreed to give access to a limited number of people for one of his most sought after seminars!

John�s seminars are usually reserved for an elite few, so please take advantage of the chance to learn from a man with over 30 years successfully trading using technical analysis, by watching this video.

What makes a Market Wizard?
How much do you think you could learn if you had a chance to sit down with over 15 of the most successful day, value, and long term investors of all time? Do you think you�d finally get that one piece of advice that takes your trading from OK to extraordinary? Today you have the chance to pick the brain of one man who has sat down with experts and got your top questions answered.

The key ingredient with �super-traders� isn�t as complicated as you think, as most of them share the same traits and behavioral patterns, but it�s how they put them to work in the markets that sets them apart.
So, find out what sets �super-traders� apart in this video.

Read more »

Relationship between OPTION GREEK with DEGREE of MONEYNESS, IMPLIED VOLATILITY and TIME TO EXPIRATION: Summary � Part 2

Go back to Part 1.

THETA
Theta is an options greeks that measures of the rate of decline of option�s time-value resulting from the passage of time (time decay).
Theta provides an estimate of the dollar amount that an option price would lose due to 1 day decrease in the time remaining to expiration, assuming other factors remain constant.

Theta of ATM, ITM & OTM Option
Theta is typically highest for ATM option, and is progressively declining as an option moves to ITM or OTM.
This makes sense because ATM options have the highest time value component, so they have more time value to lose over time compared to ITM or OTM options.

Effect of Time Remaining to Expiration on Theta
For ATM option, Theta will be higher as an option is approaching the expiration date.
In contrast, for ITM & OTM options, Theta will be lower as an option gets closer to expiration. The above effects are particularly observed in the last few weeks (about 30 days) before the expiration.

Impact of Implied Volatility (IV) on Theta
When Implied Volatility (IV) decreases, Theta will decrease, especially when it is approaching expiration.
On the other hand, when IV increases, Theta would also increase.

VEGA
Vega measures how sensitive an option�s price to the changes in Implied Volatility (IV). Vega estimates how much an option price will change as a result of 1% change in volatility.

A change in IV will have the same effect on both Calls and Puts options:
An increase in IV would increase an option�s price, whereas a decrease in IV will decrease an option�s price.
This is because higher volatility implies greater expected fluctuations in the stock price, which means a greater possibility for an option to move into your favor by the expiration date.

Vega of ATM, ITM & OTM Option
Vega will be the highest for ATM options, and would gradually get lower as options become more ITM and OTM.
That means, when there is a change in volatility, the value of ATM option would change the most. This makes sense because ATM option has the highest time value component, and that the changes in IV will only affect the time value portion of an option�s price.

Comparing between ITM & OTM options, the impact of volatility changes will be greater for OTM options than it is for ITM options.

Effect of Time Remaining to Expiration on Vega
Assuming all other things constant, Vega decreases when as time passes (as the option gets closer to the expiration).
Vega is relatively higher when there is more time remaining to expiration. This is because options with more time remaining to expiration have larger portion of time value, and it is the time value component that will affected by the changes in volatility.

Effect of Implied Volatility on Vega
Vega will be lower when IV decreases, especially for ITM and OTM options.
However, Vega is relatively stable / unchanged for ATM option.

Related Posts:
* Option Greeks
* Options Trading Basic � Part 1
* Options Trading Basic � Part 2
* Understanding Implied Volatility (IV)
* Understanding Option�s Time Value
* Learning / Understanding Candlestick Charts
* Learning Charts Patterns

Read more »

Market Analysis Video: Is S&P 500 Getting Ready to Skyrocket or Collapse?

The market has been moving sideways recently, developing a Rectangle pattern.
Is S&P 500 market getting ready to skyrocket or collapse?
What are the key price levels to watch this week?
Find out more detail in this video for the S&P 500 market updates.

Sorry, it�s been some time since I posted an update on the market analysis.
I was quite held up with things lately. However, when I saw this video, I can�t wait to share it with you. Not only is it informative, but also educational for both experienced & beginner traders. Happy watching! :)

Related Topics:
* Free Trading Educational Video: Learn Technical Tips from Dan Gramza
* Learning Candlestick Charts
* Learning Charts Patterns
* Understanding Implied Volatility (IV)
* Understanding Option Greeks
* Understanding Option�s Time Value

Analysis Tool:
Get Free Trend Analysis for your favorite symbols

Read more »

Relationship between OPTIONS GREEK with DEGREE of MONEYNESS, IMPLIED VOLATILITY and TIME TO EXPIRATION: Summary � Part 1

Option Greeks have been one of the main topics that I have previously shared in details in this blog.
I�ve tried to explain each of option greek in a simple way for easy but yet deep understanding. It�s really not easy doing this, but I was very encouraged by many compliments and positive feedback from my readers. I'm happy that many people in fact have benefited from these Option Greeks articles. I'd really like to thank my readers for their continuous support. :)
Here I tried to summarize the main understanding of Options Greeks:

DELTA
Delta is an option greek that measures of the change in the option price due to a change in the underlying stock price.

Delta of ATM, ITM & OTM Options
The delta values for long position will be positive for Calls (0 to 1) & negative for Puts (0 to -1).
At-the-money (ATM) options have deltas around 0.5 (Calls: +0.5, Puts: -0.5).
Out-of-the-money (OTM) options have deltas between 0 to 0.5 (Calls: 0 to +0.5, Puts: 0 to -0.5).
In-the-money (OTM) options have deltas between 0.5 to 1 (Calls: +0.5 to +1, Puts: -0.5 to -1).

Effect of Time To Expiration on Delta:
As the time to expiration is nearing, the delta of ITM options increases (i.e. ITM option�s delta gets closer to 1 for Calls or to -1 for Puts) and the delta of OTM options decreases (i.e. OTM option�s delta gets closer to 0).

Impact of Implied Volatility on Delta:
When Implied Volatility (IV) increases, delta of OTM option will increase, whereas the delta of ITM option will decrease.
However, the delta of ATM option will always remain at around 0.5.

GAMMA
Gamma is an options greek that measures the rate of change of delta due to a one-point change in the price of the underlying stock.
In other words, Gamma estimates how much delta would change if the price of the underlying stock changes by $1.
So, gamma indicates how �stable� its corresponding delta is.
A high gamma means that the delta can change considerably for even a small move in the stock price.
Unlike delta, gamma for long position is always positive for both Calls and Puts. That means delta will increase as the underlying price increases, and delta will decrease as the underlying price decreases.

Gamma of ATM, ITM & OTM Options
Gamma is the largest for ATM options, and gradually decreases as it moves furthers towards ITM and OTM.
This means that the delta of ATM options changes the most when the stock price moves up or down, as compared to ITM & OTM options.

Effect of Time To Expiration on Gamma
As the time to expiration gets nearer, the gamma of ATM options increases (is relatively higher), whereas the gamma of deep ITM and deep OTM options normally decreases (is relatively lower).

Impact of Implied Volatility (IV) on Gamma
When the Implied Volatility decreases, the gamma of ATM options increases, whereas the gamma for deep ITM or OTM options decreases.
When the Implied Volatility is very low, the gamma of ATM options is relatively high, while the gamma for deep ITM / OTM options is relatively low (close to 0).
This is because when the volatility is low, the time value portion of an option is low. However, time value of ATM option is still higher relative to ITM & OTM options, hence the gamma of ATM option is higher as compared to ITM & OTM options.

On the other hand, when IV is high, gamma tends to be stable for ATM option as well as ITM and OTM options. This is because when volatility is high, the time value of deep ITM / OTM options are already quite substantial. As a result, the increase in the time value of deep ITM / OTM options as they go nearer the money will be less dramatic. Therefore, gamma tends to be stable across all strike prices in this case.

Continue to Part 2.

Related Posts:
* Free Trading Educational Video: Learn Technical Tips from Dan Gramza
* Options Trading Basic � Part 1
* Options Trading Basic � Part 2
* Understanding Implied Volatility (IV)
* Understanding Option�s Time Value
* Learning / Understanding Candlestick Charts
* Learning Charts Patterns

Read more »

TRIPLE BOTTOM PATTERN � Part 2: Important Characteristics

Re-visit Part 1: Triple Bottom Formation

Important Characteristics of Triple Bottom Pattern

Existing Trend:
There should be an established existing DOWNWARD trend prior to the pattern.

Shape of Triple Bottom Pattern:
1) The Three Bottoms:
The bottoms should be sharp and distinct / well separated. The price bottoms do not have to be exactly the same, but it should appear reasonably equivalent to each other.
If the last bottom (3rd bottom) is higher than the middle bottom (2nd bottom), there is a relatively higher chance of stronger price increase. A higher bottom in the last bottom might indicate weaker selling pressures, as the sellers attempt to push the price down to the previous low or make a new low but fail, suggesting that the selling pressures might have started to subside.

2) The Two Peaks:
The highs of the peaks can appear more rounded.

Duration:
Triple Bottoms pattern can be considered a long term pattern.
The duration of the formation of the pattern can take several months, normally range from 3 to 6 months, with an average of about 4 months. Normally, the formation of Triple Bottoms should take longer time and less volatile in price swing than Triple Tops. Hence, bottoms tend to be wider (due to longer duration to develop) and flatter (as a result of less volatile price swing) than tops.
Basically, the longer the time duration the pattern takes to develop, the more likely the pattern could work out as a reversal pattern or the stronger the price might move once the breakout occurs.

Breakout:
Even when the price has risen from the 3rd bottom, the pattern is not completed yet. The chances that the existing downtrend will continue are still higher than the chances of reversal to take place, as it is normal during a downtrend for the price to test a support level a few times, and then bounce up, and then resume the downtrend again.

Triple Bottom pattern is only completed and confirmed when the price increases and closes above the highest highs of the peaks in between the 3 bottoms, which serves as the key resistance level in this pattern. This highest high is called the �Confirmation Point�.

Remember that we should always assume the existing trend (i.e. in this case is downtrend) is in force unless proven otherwise.
Therefore, it is important to wait for the price to make a decisive breakout by breaking through and closing above the Confirmation Point, accompanied with an increase in volume, in order to avoid jumping the gun and/or prevent deceptive Triple Bottoms pattern.

In addition, as Triple Bottoms is forming, the formation may also resemble few other patterns. Before the 3rd bottom is formed, the pattern may look like Double Bottoms (reversal pattern). The three equal lows may also be seen in Rectangle pattern (neutral pattern) or Descending Triangle pattern (bearish continuation pattern).
Nevertheless, all these patterns have similar principle to follow, which could help differentiate between the above patterns or avoid jumping the gun: Always wait for the decisive breakout to occur before entering into any trade.

Breakout Confirmation:
Sometimes, the price may also make a deceptive/invalid breakout whereby it touches above the Confirmation Point, but then it moves back down again & resumes downtrend.
One possible way to prevent this is by having certain criteria to confirm if the breakout is a valid one.
A minimum penetration criteria for a breakout should be the price closes ABOVE the Confirmation Point, not just an intraday penetration.
Some traders may apply certain price criteria (e.g. 3% - 5% break from the Confirmation Point depending on the stock�s volatility) or time criteria (e.g. the breakout is sustained for 3 days) to confirm the validity of the breakout.

Volume:
Volume should be higher during the formation of the 1st bottom and then get lighter as the pattern develops the subsequent two bottoms, showing an indication that the selling pressures are getting weaker.
The volume may sometimes pick up when the price hits each of the bottoms, but overall, volume tends to be diminishing as the pattern is forming.
During & after the breakout of the Confirmation Point, the volume should significantly increase again.
When during the increase from the 3rd bottom, the price experiences an accelerated rise, perhaps with a gap up or two, accompanied by an expansion in volume, this might give a good sign, as the price increase tends to rise further, and hence it may provide higher chances that the pattern is bullish reversal pattern.

Potential Price Target:
1) Compute the height of the pattern: The distance between the lowest low of bottoms (which serves as the support) and the highest high of the peaks (i.e. the Confirmation Point, which serves as the key resistance).
2) To compute the potential price target: Add the result to the Confirmation Point (i.e. the highest high of the peaks).

In general, any price target should only be used as a rough guide. To determine the price target, other factors, such as previous support / resistance levels, Fibonacci retracements, or long-term moving averages, should be considered as well.

Return to Breakout Level:
After the breakout occurs, it is common that prices may return to the breakout level for an immediate test of this new support level before continuing their moves in the direction of the breakout. (Remember that the resistance now has become a new support level).
This could actually offer an opportunity to participate in the breakout with a better reward to risk ratio.

To find out more about other Chart Patterns, please refer to:
Learning Charts Patterns

Related Topics:
* Free Trading Educational Video: Learn Technical Tips from Dan Gramza
* Learning Candlestick Charts
* Options Trading Basic � Part 1
* Options Trading Basic � Part 2
* Understanding Option Greek
* Understanding Implied Volatility (IV)
* Understanding Option�s Time Value

Analysis Tool:
Get Free Trend Analysis for your favorite symbols

Read more »

Market Analysis Video: Has the S&P Index Broken Final Support?

In the previous video on the S&P 500 last week, it was indicated that this market may have topped out for the year.
As a follow up, this latest video shares some ideas that could potentially come into play for this market, such as potential downside targets and pattern that may evolve in the next several weeks.
Hope you can benefit from this. :)

Related Topics:
* Free Trading Educational Video: Learn Technical Tips from Dan Gramza
* Learning Candlestick Charts
* Learning Charts Patterns
* Understanding Implied Volatility (IV)
* Understanding Option Greeks
* Understanding Option�s Time Value

Analysis Tool:
Get Free Trend Analysis for your favorite symbols

Read more »