- Trade Center
Average True Range calculates the average true price range over a period of time.
- 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 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.
- 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.
- 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.
- 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.
- Covered Call
The covered call is the financial markets version of the real estate rental agreement. Whereas in a rental agreement the investor will find a property to invest in and create monthly cash flow through renting out the property. The covered call is similar in that an investor will find a different asset class called a stock and create monthly cash flow through selling calls options against the stock that is owned.
- Differences Between American and European Options
Coach Gino Poore explains the main differences between American and European Options.
- Dividend Per Share (DPS)
Dividends per share = total dividends paid ÷ total shares outstanding
A company’s profits or earnings are divided by the total number of outstanding shares of stock to calculate the Earnings per Share (ttm). 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.
- 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.
- Gross Profit Margin
calculated by dividing gross profit by revenues
The action or process of investing money for profit or material result.
A thing that is worth buying because it may be profitable or useful in the future.
- 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 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.
a range of investments held by a person or organization.
- Return on Assets
net income divided by total assets
- Return on Equity
Return on equity (ROE) is the amount of net income returned as a percentage of shareholders equity. Return on equity measures a corporation’s profitability by revealing how much profit a company generates with the money shareholders have invested.
- 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 ratio that computes the total revenue earned per share over a 12-month period. It is calculated by dividing total revenue earned in a fiscal year by the weighted average of shares outstanding for that fiscal year: Also known as “revenue per share“.
- 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.
- 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
- 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 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.
- 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.
© Tackle Trading 2018 All rights reserved