Tackle Today: The Options Heuristics Series – Absolute Truth n.4
October 18, 2018
≈ Keep it in your pocket. ≈
Today, the Absolute Truth n.4 is about option pricing, a key concept in options trading.
Absolute Truth n.4: Options are multidimensional beings. Their price is determined by the current price of the underlying asset, strike price, volatility, time until expiration, and risk-free interest rate.
What that means is that for you to put a price tag on an option contract you will have to take into consideration not just supply and demand but many other variables. Options don’t belong inside the regular price definitions, instead, they are calculated by mathematical models, the most famous being the Black-Scholes, developed and introduced in 1973 by Fischer Black, Myron Scholes, and Robert Merton.
Don’t get too caught up in calculating the price of a contract, instead, try to focus on the influence that all variables we’ve cited previously have on options pricing. This is what will help you become a successful trader.
You can download and print the flashcard HERE.
Chart of the Day
ABSOLUTE TRUTH N.4
You can download and print the flashcard HERE.
Video of the Day
Trading Journals
Coach Tim shows exactly where to find the Tackle Trading Journals and what to use them for: Trade Journal, Tackle Theta Research Journal,and Portfolio Journal
Today’s Lineup
ROOKIE CORNER
Let’s go hunting Part VII
Last week tested the constitutions of even the most seasoned traders and was especially tough on a lot of rookie traders. I had more than a few phone calls from rookie traders asking me what to do about this increased volatility and what might be happening next? These questions and more importantly the feelings that come along with this type of market action usually stems from trading things we don’t truly understand or trading bigger than we are ultimately comfortable with.
Coaches Lounge 11am EST
Join the coaches in this live lounge, ask questions, discuss ideas or just sit back and listen to veteran traders discuss market conditions.
Cashflow Club 8:30PM EST
Held every Thursday before Friday’s option contract expirations, this show helps you perfect your favorite cashflow strategies.
Halftime Report 12:30pm EST
The Halftime Report starts at 12:30 EST and covers what news is driving the market, chart analysis from the movers and shakers of the day and fun in a way that only Matt and Tim can deliver.
Market Recap 4:30pm EST
The Market Recap is designed to give you a quick overview of the day that was. While brief, this report is designed to cover all of the major events that drove the markets that day and help you plan for the trading day ahead.
