- Tackle Today
- Trade Center
- 50-Day Simple Moving Average
The 50-day Simple Moving Average (SMA) is a very popular technical indicator. Traders and investors use it to analyze price trends. Its calculation is very simple: it’s the security’s average closing price over the last 50 days.
- American vs. European Options
Coach Gino Poore explains the main differences between American and European Options.
- Ascending Channels
An ascending channel is the statistically range bound price action of an ascending price trend contained between upward sloping parallel lines.
Higher highs and higher lows characterize the ascending/uptrend price pattern.
Technical analysts draw an ascending channel by manually drawing a lower trendline that connects the swing low pivot points, and an upper channel line that joins the swing high pivot points, or using a channeling drawing tool.
Some trading software or charting services can automatically plot ascending price channels.
- Asset Allocation
Asset allocation involves dividing an investment portfolio among different asset categories, such as stocks, bonds, and cash. The process of determining which mix of assets to hold in your portfolio is a very personal one. The asset allocation that works best for you at any given point in your life will depend largely on your time horizon and your ability to tolerate risk.
There is no magic formula that determines the right asset allocation for every individual. However, most financial professionals agree that asset allocation is one of the most important decisions that investors make.
Assets are typically allocated in stocks, bonds, and cash and equivalents, which can be one of the principal determinants of your investment results.
- Average True Range (ATR)
Volatility Measurement also known as the ATR.
Used by traders to measure the degree of price volatility. It is generally measured using Daily Candlesticks
The true range is the largest of the:
Most recent periods high – low
Absolute value of the most recent period’s high – previous close
Absolute value of the most recent periods low – the previous close
Many diverse uses by traders:
To determine entry points
To determine stop losses
A key part of building a trading system. You build trades in the past, using historical data, and apply your rules to the trade to determine the outcome of profit or loss. You then compile the data into a data set. The end result is used to determine how effective a trading strategy is in the conditions that were tested.
- Bear Call Spread
A bear call spread, or a bear call credit spread, is a type of options strategy used when an options trader expects a decline in the price of the underlying asset. … The maximum profit to be gained using this strategy is equal to the credit received when initiating the trade.
- Bear Market
A bear market is a condition in which securities prices fall and widespread pessimism & fear cause the stock market’s downward spiral to persist.
Although figures vary, a downturn of 20% or more from a peak in multiple broad market indexes, such as the Dow Jones Industrial Average (DJIA) or Standard & Poor’s 500 Index (S&P 500), over a two-month period is considered a bear market.
- Bear Put Spread
A Bear Put Spread is an options strategy that involves 2 transactions.
A trader initiates a Bear Put Spread by Buying a Put Option, and conversely Selling a Put option in the same expiration month.
The sold put option, also referred to as the short put, must be at a lower priced strike price than the bought put option, also known as the long put.
By selling -1 put, and buying +1 put at a higher strike price the trader initiates a Debit Spread.
- Bearish Down Trends
Beta measures the relative movement, or volatility, of a stock (or security) compared with the overall market. High beta securities move faster than the market on average, and low beta securities move in line with the market, on average.
- Bid/Ask Spread
The bid is the highest price someone is willing to pay for the financial instrument whereas the ask is the lowest price someone is willing to sell the financial instrument. The difference between the bid and the ask is what is referred to as the spread.
- Black-Scholes Model
The Black Scholes model, is a mathematical model of price variation over time of financial instruments like stocks and ETFs that can be used to determine the price of an option.
The Black Scholes Model formula is the first widely accepted model for option pricing. It’s used to calculate the theoretical value of options using current stock prices, expected dividends, the option’s strike price, expected interest rates, time to expiration and expected volatility.
The Black-Scholes Model was first published in the Journal of Political Economy under the title “The Pricing of Options and Corporate Liabilities” by Fischer Black and Myron Scholes and later expanded upon in “Theory of Rational Option Pricing” by Robert Merton in 1973.
- Book Value Per Share
The book value per share formula is used to calculate the per share value of a company based on its equity available to common shareholders. The term “book value” is a company’s assets minus its liabilities and is sometimes referred to as stockholder’s equity, owner’s equity, shareholder’s equity, or simply equity.
- Bull Call Spread
A Bull Call Spread is an options strategy that involves 2 transactions.
A trader initiates a Bull Call Spread by buying a Call option, and conversely selling a Call option in the same expiration month.
The bought call option, also referred to as the long call, must be at a lower priced strike price than the sold call option, also known as the short call.
By buying +1 call, and selling -1 call at a higher strike price the trader initiates a Debit Spread. This results in a net debit to the trader’s account and requires a higher trading authority.
- Bull Market
A bull market occurs when a financial instrument has been and expects to continue to appreciate in value over time. There are short term and long term bull markets.
- Bull Put Spread
A BULL PUT SPREAD is an options strategy that involves 2 transactions.
A trader initiates a Bull Put Spread by selling a PUT option and then buying another PUT option in the same expiration month.
The sold put option should be at a higher strike price than the bought put option.
By selling -1Put option and buying +1 Put option in this fashion the trader initiates a CREDIT SPREAD.
- Bullish Up Trends
- Call Calendar Spread
A Call Calendar Spread is an options trading strategy that involves the following:
1st a Trader will Buy a Long Term Option
2nd a Trader will Sell a Short Term Option
3rd Both Options Should be at the same strike price
When building a Call Calendar Spread, you pay a debit price and there is limited risk to the trade.
- Call Option
Call options are a contract that give the buyer of a call option the right, but not the obligation, to buy an underlying asset at a specified price called the strike price, within a specific time period before the expiration date.
A call buyer can profit when the underlying asset increases in price and can be sold at will at the current market value anytime before the expiration date. Call options typically give the holder the right to buy 100 shares of the underlying asset.
- Call Ratio Backspread
When building a Put Ratio Backspread, a trader will sell -1 Put option at a higher strike price, and buy +2 Put Options or more options at a cheaper priced option than the one that was sold. Both strikes should be in the same expiration month.
The strategy has Unlimited Profit potential, limited risk, and is generally used when a trader is aggressively bearish on the underlying chart.
When building a Call Ratio Backspread, a trader will sell -1 Call option at a lower strike price, and buy +2 Call Options or more options at a cheaper priced option than the one that was sold. Both strikes should be in the same expiration month.
The strategy has Unlimited Profit potential, limited risk, and is generally used when a trader is aggressively bullish on the underlying chart.
- Candlestick Charts
Candlesticks are a popular form of charting in trading. The method was originally developed in Japan. The popularity regarding candlestick charts comes from the simple visual relationships they can help a trader understand. Basic Components of a Candlestick Chart:
- Cash Flow Per Share
Cash flow per share can be calculated by dividing cash flow earned in a given reporting period (usually quarterly or annually) by the total number of shares outstanding during the same term.
The Collar is a neutral protective options strategy that involves simultaneously buying OTM Puts and selling OTM Calls against a specific holding in your portfolio (a long position). The Collar is also know as Hedge-Wrapper and is most used during earnings announcements.
Neutral (Goals is protection)
According to personal rules
- Commodities Market
Physical goods like oil, energy, grains, food, metals and materials. Tradable commodities are very popular products and are most used through the Futures market or Exchange Traded Funds (ETF’s).
The most traded commodities include: oil, coffee, natural gas, gold, wheat, cotton, sugar, silver and copper.
- Covered Call
A covered call is a combination strategy in which the trader buys stock in increments of +100 shares and then sells -1 call option contract for each 100 shares of stock. The covered call strategy is used to produce monthly cash flow. It is a great way to create passive income in traditional retirement accounts.
- Covered Put
The Covered Put is bearish strategy that consists in shorting an underlying security while selling an OTM put option against it generating a limited reward/unlimited risk strategy since there is no limit to how high the stock price can be at expiration.
This strategy is also considered the short version of the Covered Call.
- Credit Spreads
A Credit Spread is an options strategy that requires simultaneously buying and selling OTM options contracts on the same underlying security, same expiration date but different strike prices, resulting in a net credit. These strategies are considered Theta strategies as they benefit from time decay.
In terms of directional bias, a Credit Spread can be bullish (Bull Put Spread), bearish (Bear Call Spread) or neutral (Iron Condor).
Bullish, Bearish or Neutral
Bull Put Spread Risk Graph
Bear Call Spread Risk Graph
Iron Condor Risk Graph
- Death Cross
When the short term moving average cross below a longer-term moving average
The typical Death Cross is when the 50-day Simple Moving Average (SMA) crosses the 200-day Simple Moving Average (SMA).
The cross signals the start of a new bearish trend. It is thought of as a secondary lagging indidator.
- Debit Spreads
A Debit Spread is an options strategy that requires simultaneously buying and selling OTM options contracts on the same underlying security, same expiration date but different strike prices, resulting in a net debit. These strategies are considered Delta strategies as they benefit from the directional movements of the underlying security.
In terms of directional bias, a Debit Spread can be bullish (Bull Call Spread), bearish (Bear Put Spread) or neutral (Debit Condor).
Bullish, Bearish or Neutral
Bull Call Spread Risk Graph
Bear Put Spread Risk Graph
Debit Condor Risk Graph
- Deep In The Money Options
A deep in the money option has a strike price significantly below the current market price of the underlying asset for a call option or significantly above the current market price of the underlying asset for a put option. The value of such an option is nearly all intrinsic and has minimal extrinsic premium
Delta measures the sensitivity of the option premium to a change in the price of underlying.
Delta is the ratio at which an option premium changes when the price of the underlying asset changes at a $1.00 increment.
- Descending Channels
A descending channel is the statistically range bound price action of a descending price trend contained between downward sloping parallel lines.
Lower lows and lower highs characterize the descending/down trend price pattern.
Technical analysts draw a descending channel by manually drawing an upper trendline that connects the swing high pivot points, and a lower channel line that joins the swing low pivot points, or using a channeling drawing tool.
Some trading software or charting services can automatically plot descending price channels.
- Dividend Per Share (DPS)
Dividends per share = total dividends paid ÷ total shares outstanding
A dividend is the distribution of a token reward from a portion of company’s earnings, and is paid to a specified class of shareholders.
Dividends are determined by a company’s board of directors, and approved by shareholders through voting rights.
Dividends are most frequently issued as a cash payment. Larger, more well established companies with consistent profits are typically the best dividend payers. These types of companies seek to maximize shareholder wealth in addition to normal growth by issuing regular dividends (typically quarterly or annually.)
Individual companies, along with some mutual funds and exchange traded funds (ETF) also pay dividends.
- Earnings Per Share (EPS)
The Earnings per Share (EPS) is calculated by dividing the company’s profits or earnings by the total number of outstanding shares of stock.
Earnings per Share is usually abbreviated as EPS and the “ttm” that follows stands for Trailing Twelve Months. This means that EPS (ttm) is the total earnings or profits the company has made over the last 12 months.
EPS = Earnings ÷ Outstanding shares
- Exercise & Assignment
The implementation of the holder’s right to buy (call) or sell (put) the underlying security at the strike price of the option contract.
Assignment occurs when the option seller is notified that the contract is being exercised. The option seller must fulfill this obligation by selling the underlying security at the agreed upon strike price if the call was sold or buying the underlying security at the agreed upon strike price if the put was sold.
- Financial Markets
- Financial Trading Products
Financial markets have many instruments and products you can trade or exchange. These products are traded physically or on-line thru brokers, banks and financial exchanges. The most common products that are traded include stocks, commodities, forex, funds, bonds and options.
Also known as the FX market as well as the the foreign exchange market. The Foreign Exchange market, is a decentralized global market where all the worlds currencies trade and is the largest, most liquid market in the world with an average daily trading volume exceeding $5 trillion.
That’s a ton of cabbage moving through the foreign currency exchanges every day. The primary function of the forex market is to facilitate global commerce and trade and there are many ways to trade and invest in currencies with controlled risk as well as speculate on the future value of currencies.
- Free Cash Flow Per Share
Free cash flow per share is a measure of how much cash per share a business generates after accounting for capital expenditures like equipment or buildings. Free cash flow is available to be used for expansion, dividends, debt reduction, or other purposes.
The option’s gamma is a measure of the rate of change of its delta.
The gamma of an option reflects the change in the delta in response to a one point ($1.00) movement of the underlying stock price.
Options that are deep in the money and or way out of the money have low gamma and values close to 0. Which means that deep ITM/OTM options have very low rate of change for delta or in other words, low velocity.
Options 1 or 2 strike prices OTM have the highest rate of gamma.
- Gross Profit Margin
Calculated by dividing gross profit by revenues.
- Higher Highs And Higher Lows
Trends are a core concept in the world of technical analysis and can lead to many profitable trading opportunities. Higher highs and higher lows are one way to help identify a stock that is in an uptrend and once identified can provide entry signals to your trades. These higher price highs and higher price lows can continue for an extended period of time as trends have a tendency to continue.
- Implied Volatility
Implied Volatility – IV is a very important metric of an option price.
IV is calculated by taking an option price, inputting it into the Black Scholes mathematical formula to solve for the value of the volatility.
IV is determined by the current option prices to calculate expected future volatility or range of the stock price.
IV is the expected or implied volatility of an annualized stock move of one standard deviation.
Ex: A stock trading at $100 per share with an IV of 23% implies the stocks volatility range (or one standard deviation) is $23 for the next 12 months. That is 23 points up or 23 points down from its current price.
Implied volatility is always changing and is influenced by many factors.
When a stock has a low IV, it implies that the stocks future volatility is expected to be low, but that is a result of the option prices are priced low.
The opposite is also true, when a stock has an IV that is in the higher range, it reflects higher volatility is expected and that is because the option prices are higher or on the expensive side.
– Low IV = cheaper option prices
– High IV = expensive option prices
- In the Money Options (ITM)
An in-the-money option is an option contract that would be worth exercising at the strike price. Any call with a strike price lower than the current price of the underlying security is in-the-money while any put with a strike price higher than the current price of the underlying security is in-the-money. In-the-money options hold intrinsic value and have higher deltas than out-of-the-money contracts.
- Inventory Turnover Ratio
The ratio of annual sales to average inventory is a common method used to measure the speed at which inventory is produced and sold. A high turnover ratio is considered a good sign and low turnover is an unhealthy sign, indicating excess inventory or poor sales.
The inventory turnover ratio indicates how many times a company has sold and replaced inventory during a given period. Analysts can divide the days in the period by the inventory turnover to estimate the days it takes to sell the inventory on hand.
Calculating inventory turnover can help businesses make better decisions on pricing and manufacturing runs, how and when to purchase new inventory as well as when to leverage/move excess inventory.
The action or process of investing money for profit or material result or a thing that is worth buying because it may be profitable or useful in the future.
- Investment Portfolio
An investment portfolio is a collection of your investments including:
Stocks, Bonds, Cash, Real State, Metals, between other assets.
- LEAPS Call
A LEAPS Call is an acronym in Options for Long-Term Equity Anticipation Security.
Long-Term has generally been defined as 8 months or more, and can extend to years of time for the contract.
- LEAPS Put
A LEAPS Put is an acronym in Options for Long-Term Equity Anticipation Security.
Long-Term has generally been defined as 8 months or more, and can extend to years of time for the contract.
Leverage, also known as Financial Leverage, refers to the use of debt, i.e. borrowed money, to acquire assets and increase the potential return of a specific investment.
Leverage also refers to the amount of debt a company uses to finance assets purchasing programs.
In trading, the most common usages of leverage are:
- Through a margin account.
- Through options trading
- Through futures contracts.
- Though leveraged ETFs.
- Long Call
A Long a call option is a position in which a trader/investor purchases or “Buys to Open” a Call Option Contract thereby securing the right to purchase the underlying asset or security at the pre-determined “strike Price” on or before the pre-determined date “Expiration Date”.
The term “going long” refers to buying a security (not selling one), and applies to any tradable instrument that a trader/investor “buys to open” including options.
A trader/investor would buy “Long Calls” in anticipation of the price of the underlying asset rising in value.
- Long Put
A Long a Put option is a position in which a trader/investor purchases or “Buys to Open” a Put Option Contract thereby securing the right to sell the underlying asset or security at the pre-determined “strike Price” on or before the pre-determined date “Expiration Date”.
The term “going long” refers to buying a security (not selling one), and applies to any tradable instrument that a trader/investor ”buys to open” including put options.
A trader/investor would buy “Long Puts” in anticipation of the price of the underlying asset falling in value.
- Long Term Debt to Capital Ratio
Long Term Debt to Capital Ratio is a slighlty different definition of the traditional debt-to-equity ratio and shows the financial leverage of a firm. It is calculated by dividing long-term debt by total available capital (long-term debt, preferred and common stocks).
- Lower Lows and Lower Highs
Lower low and lower high is a technical pattern and is considered a continuation pattern. It is similar to to the higher high/higher low pattern except in reverse where a downtrend is occurring. Continuation patterns have a tendency to repeat themselves until a reversal pattern occurs. Once support breaks, a lower low/lower high pattern can begin as the price goes down to a new support level which is lower than the previous level of support and new highs established are also lower than previous highs.
- Market Cap
Market capitalization is the total dollar market value of a company’s outstanding shares. Commonly referred to as “market cap,” it is calculated by multiplying a company’s current market price by the total number of shares outstanding. Investors use this figure to determine a company’s size, as opposed to other metrics using sales or total asset figures.
- Moving Averages
- Net Profit Margin
Percentage of revenue left after all expenses have been deducted from sales.
- Operating Profit Margin
What proportion of a company’s revenue is left over after paying for variable costs of production.
- Option Pricing
Option pricing refers to the amount of the option premium per share at which an option contract is traded in the live market.
Premium is the price paid or received when buying/selling options. This price can be split into two components.
Intrinsic value = Equity for In the Money Options
Extrinsic value = Time, Volatility, Risk-Free Interest Rates
The option price is calculated using the option pricing model known as the Black Scholes Option Pricing Model.
- Option’s Extrinsic Value
Join Coach D., to learn how to identify and measure the extrinsic value of options contracts. You’ll learn that Extrinsic Value is simply the difference between the current market price of an option, called the premium, and its intrinsic value. In other words, Extrinsic value is the portion of the option premium value based on factors other than the underlying asset’s price, such as time until expiration, the implication of volatility and the risk-free rate of interest.
- Option’s Intrinsic Value
Join Coach D to learn how to identify and measure intrinsic value of in the money options contracts. You’ll learn that Intrinsic Value is simply the difference between the current market value of the underlying asset and the strike price of the option contract.
- Options Contract
An options contract represents an agreement between a buyer and a seller.
This agreement gives the buyer the right to buy or sell a particular asset at a specified date at an agreed upon price (Strike Price).
On the other hand, this agreement gives the seller the obligation to buy or sell a particular asset at a specified date at an agreed upon price.
Options contracts can be traded on stocks, ETFs, and futures contracts. These are called underlying securities.
- Options Expiration Dates
- Options Greeks
Options traders know how to read the “Greeks” which help them to evaluate option positions and to determine option pricing sensitivity to the mathematical variables of the options pricing model.
The “Greeks” are a collection of statistical values that measure the risk involved in an options contract in relation to certain underlying variables.
The Black Scholes Option Pricing Model incorporates the “Greeks” in the option pricing calculations which include Delta, Gamma, Theta, Vega and Rho.
- Options Market
The options market is a derivative market that is traded in contracts. Each contract controls 100 shares of the underlying stock. It is a contract between a buyer and seller, that gives the purchaser of the option the right, but not the obligation, to buy / Sell a specific stock at a specific price on or before a specific date.
There are two types of options:
Call Option: gives the buyer the right to buy the stock at a set price on or before a set date. The set price is referred to as the strike price while the set date is referred to as the expiration sate.
Put Option: gives the buyer the right to sell the stock at a set price on or before a set date. The set price is referred to as the strike price while the set date is referred to as the expiration date.
- Options Open Interest
Open interest indicates the total number of option contracts currently open – contracts that have been opened/traded but not yet liquidated by either an offsetting trade or an exercise or assignment
Open interest = total number of open or outstanding options contracts at the given time.
If a buyer and a seller combine to initiate a new position/contract, then open interest will increase by one contract. If a buyer and a seller both exit a position/contract, then open interest decreases by one contract.
If a buyer or seller passes off their current position to a new buyer or seller, then open interest remains unchanged.
- Options Premium
Option Premium is the credit or income received by an investor who “writes” or sells an option contract to another party. The option premium may also refer to the current market price of any specific option contract that actively being traded and has yet to expire.
The premium is the total trade price of an option contract. The premium is paid to the seller of the option and is quoted on a per-share basis.
The premium of an option contract quoted at $6.50 per share, represents a premium/payment of $650 ($6.50 x 100 shares).
The Premium is non-refundable, and secures the buyer’s rights to either buy or sell the underlying asset according to the terms of the specific option contract.
“Writers” or sellers of options, receive the premium in exchange for “underwriting” or promising to sell or buy the underlying asset according to the terms of the specific option contract.
In some strategies that lay out buying and selling options on the same security, the selling portion of the theory is to collect premium for either cash flow or to defray the cost of the purchase.
- Options Volume
Volume is the total number of option contracts bought and sold for the day, for a particular strike price.
Trading volume on an option is typically relative to the volume of the underlying stock. Higher volume stocks usually have higher average daily volume on options contracts.
Options trading volume measures the number of options contracts being exchanged between buyers and sellers, identifying the level of activity for that trading day for each specific contract, strike price & expiration date.
- Out Of The Money Option (OTM)
An Out-of-the-Money option is an option contract that is not worth exercising at the strike price. Any call with a strike price higher than the current price of the underlying security is out-of-the-money while any put with a strike price lower than the current price of the underlying security is out-of-the-money. Out-of-the-money options carry no intrinsic value and have lower deltas than in-the-money-options.
A range of investments held by a person or organization.
- Protective Put
The Protective Put is a protective options strategy that involves buying OTM Puts to protect against a potential downside risk of a specific holding in your portfolio (a long position).
It differs from the Long Put strategy in the sense that the latter is a bearish directional strategy and it does not require the investor to hold any underlying security in the portfolio.
- Put Options
Put options are a contract that give the buyer of a put option the right, but not the obligation, to sell an underlying asset at a specified price called the strike price, within a specific time period before the expiration date. A put buyer can profit when the underlying asset decreases in price and can be sold at will at the current market value anytime before the expiration date. Put options typically give the holder the right to sell 100 shares of the underlying asset.
- Put Ratio Backspread
When building a Put Ratio Backspread, a trader will sell – 1 Put Option at a higher strike price, and buy +2 Put Options or more options at a cheaper priced option than the one that was sold. Both strikes should be in the same expiration month. The strategy has unlimited profit potential, limited risk, and is generally used when a trader is aggressively bearish on the underlying chart.
- Quick Ratio
The quick ratio is a measure of a company’s short-term liquidity, and ability to meet its short-term debt obligations with its most liquid assets.
The quick ratio excludes inventories from current assets because this metric is only concerned with the most liquid assets,
Quick ratio calculation:
Quick ratio = (current assets – inventories) / current liabilities)
Quick ratio = (cash and equivalents + marketable securities + accounts receivable) / current liabilities
A price level or price zone where traders and investors are willing to sell a security, thereby creating supply at that price level, causing the price to stop rising and start falling.
Resistance is an downward movement in price caused by supply.
Historic price resistance levels or historic price resistance/support zones are key price levels on price charts that tend to act as a catalyst for the anticipated change in the direction of price.
Price resistance zones are a naturally occurring part of the price cycle pattern and frequently a self fulfilling prophecy.
- Return on Assets
ROA = Net Income/Average Total Assets
This tells you how effective the company is using their assets to produce earnings.
It’s useful to look at this number when analyzing competing companies in the same industry.
- Return on Equity (ROE)
Return on equity (ROE) is the amount of net income returned as a percentage of shareholders’ equity. Return on equity, (also known as “return on net worth” or RONW) measures a corporation’s profitability by revealing how much profit a company generates with the money shareholders have invested.
The calculation for Return on Equity is relatively simple,
ROE = Net Income/Shareholders’ Equity.
ROE is typically expressed as a percentage.
ROE is typically measures an entire fiscal year and is calculated before dividends are paid to common stockholders but after dividends to preferred stock holders.
Shareholders’ equity may not include preferred shares, and is sometimes called return on common equity (ROCE) = net income – preferred dividends / common equity.
Rho is the rate at which the price of an option changes relative to a change in the risk-free interest rate.
Rho is the measure of an option’s sensitivity to interest rate changes.
Rho measures the sensitivity of an option or an entire portfolio of options to a change in interest rate.
- Risk Graph
A graphical representation that displays the range of profit or loss potential for an equity or an option.
The x-axis represents the price of the underlying security and the y-axis represents the potential profit/loss of the position.
Often called a P&L graph or a profit/loss diagram, this graph provides an easy way to understand and visualize the effects of what may happen to an equity an option based on estimated or known variables.
Risk graphs can be drawn to show the potential gains/losses for single options as well as for multiple leg strategies like spreads or any other combination strategies.
- Sales Per Share
Sales per share is a simple ratio that calculates the total revenue earned per share over a designated period, typically quarterly, annually or most commonly a TTM (trailing 12 months metric)
The formula to use for this calculation is simple, take the yearly sales revenue and divide by the average shares outstanding for the designated time frame.
A higher ratio is preferable and this data can be interpreted as a company that has successfully used its resources to produce sales.
The sales-per-share ratio is more reliable/significant when coupled with other share value metrics like EPS (Earnings Per Share) to more effectively assess the profitability of a company.
- Short Call
A Short Call Option is a position in which a trader/investor Sells or “Sells to Open” a Call Option Contract thereby promising to sell the underlying asset or security at the pre-determined “Strike Price” on or before the pre-determined date “Expiration Date” in exchange for receiving the premium.
The term “going short” refers to opening a position by selling a security (not buying one), and applies to any tradable instrument that a trader/investor ”sells to open” including call options.
A trader/investor would sell “Short Calls” in anticipation of the price of the underlying asset falling in value, or staying range bound, or simply to get paid to sell the asset at a desired price.
Short calls are often sold to receive the premium and thereby get paid to sell the security in advance. A covered call involves owning the underlying and selling a short call.
- Short Put
A Short Put Option is a position in which a trader/investor Sells or “Sells to Open” a Put Option Contract thereby promising to buy the underlying asset or security at the pre-determined “strike Price” on or before the pre-determined date “Expiration Date” in exchange for receiving the premium.
The term “going short” refers to opening a position by selling a security (not buying one), and applies to any tradable instrument that a trader/investor ”sells to open” including put options.
A trader/investor would sell “Short Puts” in anticipation of the price of the underlying asset rising in value, and short puts are often sold to receive the premium and thereby acquire the security at a discount.
- Sideways Trends
A sideways trend is defined by range bound price action contained between established support and resistance price zones.
Equal or repeating lows and equal or repeating highs characterize a sideways trend.
Sideways price trends or range bound price action typically cycles or oscillates between the established support/resistance price zones in a repetitive pattern.
The Straddle is a bidirectional options strategy that involves simultaneously buying (in case of a Long Straddle) or a selling (in case of a Short Straddle) an ATM Put and a ATM Call at the same strike price, same expiration date and on the same underlying security.
Long Straddle risk graph
Short Straddle risk graph
The Strangle is a neutral options strategy that involves simultaneously buying (in case of a Long Strangle) or a selling (in case of a Short Strangle) an OTM Put and a OTM Call at different strike prices, same expiration date and on the same underlying security.
Long Strangle risk graph
Short Strangle risk graph
A price level or price zone where traders and investors are willing to buy a security, thereby creating demand at that price level, causing the price to stop falling and start rising.
Support is an upward movement in price caused by demand.
Historic price support levels or historic price support/resistance zones are key price levels on price charts that tend to act as a catalyst for the anticipated change in the direction of price.
Price support zones are a naturally occurring part of the price cycle pattern and frequently a self-fulfilling prophecy.
- Tackle 25
The Tackle 25 is a list of the 25 best equities to perform covered calls on. In creating the list Tackle Trading took into account the following: PE ratios, PEG, Earnings Growth, Earnings Projections, ROE, Profit Margins, Market Cap, Volume in both the stock and options, technical trends and many other factors.
- Tax Rate
Tax Rate is the percentage of tax paid for different levels of income.
Tax Rate is the percentage at which an individual or corporation is taxed. The tax rate is the tax imposed by the federal government and some states based on a corporation’s earnings or an individual’s taxable income.
The current U.S. IRS Tax Code implements a progressive tax rate system, where the percentage of taxes paid increases as taxable income increases.
Theta is the amount of decay an option price has as time moves forward.
Options prices have a rate of decline for every day that passes.
The rate is a number based in value or cents of the amount it will theoretically drop from one day to the next.
This is what is know as time decay of an option price, or “Theta”
- Ticker Symbol
Stocks, Options, Futures & Forex all have unique ticker symbols which are also known as “hard-code” for traders and a sure way to identify that we are buying and selling the correct security
- Total Asset Turnover Ratio
The ratio of net sales to total assets.
Asset turnover ratio is a measure of the value of a company’s sales or revenues generated relative to the value of its assets.
The Asset Turnover is an indication of the efficiency with which a company is deploying capital assets in generating revenue.
Asset Turnover = Sales ÷ Average Total Assets
- Trade Center
The Tackle Trading Trade Center is your home base for getting an overview on the market and diving into Tackle Trading’s great content. It should be the foundation for your Daily Routine and the first stop when you’re about to do some trading.
- Trading Gaps
A gap on a chart is simply an empty space on the chart where the opening price today is different than the closing price yesterday. This is caused by economic reports, earnings reports, company news or differences in overnight supply/demand
- Trading Journal
One of the most important things you can do as a trader is to journal your trades. The more data you have, the better you can identify if you’re doing a good job, or not, and then make corrections and adjustments to your trading and your system.
- Trading Liquidity
Liquidity is a description of the degree to which an asset, security or contract can be quickly bought or sold in the market without affecting the asset’s price.
Market liquidity is measured against how quickly an individual or firm can buy or sell an asset with a minimal effect asset’s price.
Liquidity is about the speed of the transaction and the agreed upon price. In a liquid market, the trade-off is mild: selling quickly will not reduce the price much.
In a relatively illiquid market, selling it quickly will require discounting or cutting price to attract a buyer.
A trendline is a line drawn from pivot to pivot and extends to the right, typically drawn under swing pivot lows or over swing pivot highs or to show the prevailing direction of the price trend.
Trendlines can be used on any timeframe and are a commonly used technical tool, to identify and forecast price trends by using past support and resistance zones to geometrically forecast potential trend price zones. Trendlines can be used to identify the direction and speed of the trends rate of change and are an integral part of many chart patterns.
- Types of Trends
A trend can be defined as the overall direction of a stock. For simplicity sake, there are three sweeping categories of trends:
- Uptrends – a series of higher highs and higher lows
- Downtrends – a series of lower lows and lower highs
- Sideways – trading horizontally between floors and ceilings or a channel
- Vertical Spreads
Vertical Spreads are options strategies that involve the simultaneous purchase and sale of the same type of option, either Calls or Puts on the same underlying asset, with the same expiration date, but different strike prices.
The term “vertical” comes from selecting the desired option strike prices/positions from the same vertical column within the option chain.
A vertical spread, involves buying and selling puts, for a put spread, or buying and selling a calls, for a call spread. A vertical spread by definition requires buying/selling of the same type of options with the same expiration date but different strikes. A vertical spread can be bullish or bearish and can be either debit or credit trade.
Volatility is a statistical measure of the dispersion of price for a given security or market index. Volatility can be measured by using the standard deviation or variance of price from that same security.
The more volatile the price variance, the more potential risk for the security.
There are two distinct types of volatility that traders need to understand.
Historic Volatility: Is the statistical volatility, or the measured historic price volatility of the underlying security. H.V. is ”known volatility” because it is based on actual price changes in the underlying.
Implied Volatility: Is the projection or “implication” of potential volatility primarily used for option pricing. Higher estimates of implied volatility will increase options premium and lower estimates of implied volatility will decrease options premium on average.
- Volume in Trading
Volume is the number of shares or contracts that indicates the overall activity of a security or market for a given period.
How do Trader’s use volume when trading?
1st – Establish a minimum amount of volume you need to trade the underlying product
Generally, a million shares traded per day on a stock or Exchange Traded Fund (ETF) will indicate a liquid and tradable company. The more liquid the stock, the more likely the options contracts will be liquid as well
2nd – Use it as a Technical Confirmation
Volume confirms price. Strong moves – up or down – with a higher amount of volume indicate that traders are making decisions with more conviction. A large volume bar, on big candlesticks, tends to indicate that institutional players are moving in or out of a market.
Increasing volume and decreasing volume patterns give us information about the underlying price action, and the strength or weakness of those moves.
3rd – Use a Volume Indicator
There are many volume-based indicators that are popular with traders. On Balance Volume (OBV) and the Chaikin Money Flow (CMF) are two of the more popular ones. Consider adding a volume indicator to your chart, to help you understand the volume characteristics of the underlying.
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