{"id":1886,"date":"2010-02-10T01:30:14","date_gmt":"2010-02-10T05:30:14","guid":{"rendered":"http:\/\/club.ino.com:80\/trading\/?p=1886"},"modified":"2010-02-09T12:45:43","modified_gmt":"2010-02-09T16:45:43","slug":"the-4-cornerstones-of-etf-options-trading","status":"publish","type":"post","link":"https:\/\/wwwtest.ino.com\/blog\/2010\/02\/the-4-cornerstones-of-etf-options-trading\/","title":{"rendered":"The 4 Cornerstones of ETF Options Trading"},"content":{"rendered":"

\"\"Today I'd like everyone to welcome Andrew Hart from ETFTradr.com. I asked Andrew to tackle ETF option's as these markets have been growing in popularity and complexity! Please enjoy the article, comment below with questions for Andrew, and visit ETFTradr.com<\/a>.<\/p>\n

==================================================================<\/p>\n

Here's one for you new and intermediate options traders (though frankly, I think traders of all experience levels can benefit by getting back to basics). Want to know what I think are the four cornerstones of sound options investing? They aren't complicated, yet they seem to be elusive too much of the time. They are\u2026<\/p>\n

1.\u00a0\u00a0\u00a0 Invest in options that respond well to the underlying stock's movement (high delta)
\n2.\u00a0\u00a0\u00a0 Minimize time decay (the natural erosion of an option's value over time)
\n3.\u00a0\u00a0\u00a0 Buy enough time to capitalize on major moves (you don't have to hold it the whole time)
\n4.\u00a0\u00a0\u00a0 Minimize volatility (since volatility can shake up your confidence and your account balance)<\/p>\n

<\/p>\n

Don't worry \u2013 you won't need a PhD in mathematics, nor will you need to be a seasoned options trading veteran to apply these four principles. All you need is a little willingness.\u00a0 In addition to these four cornerstones of option trading, I\u2019ve also made my newest report, \u2018The Next Generation ETF Portfolio\u2019 available to INO readers today\u2014you will find my complete model portfolio (a specific mix of 19 ETFs to revolutionize your portfolio) along with my favorite options strategy from ETFTradr.com<\/a>.<\/p>\n

1) Invest in options that move well with the underlying stock.<\/strong><\/p>\n

If you've ever heard the term 'delta' as it pertains to options trading, this is what they're talking about. Delta is the degree to which each individual option changes with respect to every $1 change in the underlying stock's price.<\/p>\n

For instance, a call option with a delta of 0.30 (30 cents) would increase in value by 30 cents for every dollar's worth of gain for the stock. That would be a relatively low delta. A relatively high-delta call option might move by 90 cents (a delta of 0.90) when the underlying stock gained a buck.<\/p>\n

Obviously high-delta options are more desirable if you're making a directional forecast for a stock.
\n(Note that the delta can change as an option moves deeper \"in the money\" or deeper \"out of the money\", and as time passes. For our purposes though, you just need to understand the concept.)<\/p>\n

2) Minimize your time decay right off the bat<\/strong><\/p>\n

Have you ever noticed you pay a little more for options than they're mathematically worth? For instance, a call option with a strike price of $30 on a stock that's trading at $35 is intrinsically worth $5. However, you may have to pay $7 to own the call option.\u00a0 That additional $2 is considered to be 'time premium'. As time passes - even if the underlying stock's price doesn't change by a penny - an option's time premium will sink. As expiration approaches, the time premium will eventually be whittled away to zero\u2026meaning the option will eventually only have intrinsic value (or what the option is mathematically worth).\u00a0 Option traders call this time decay 'theta'. Needless to say, keeping theta to a minimum is critical to your long-term profitability.<\/p>\n

\"\"<\/p>\n

3) Give yourself enough time to take advantage of a big, drawn-out move.<\/strong><\/p>\n

A quick rhetorical question \u2013 Realistically, can a stock move farther in a month, or in six months? Certainly there are overnight-sensation stocks, but those one-day surges are few and far between. By and large, the more time you give a stock to move, the further it can travel up or down a chart.
\nThat's probably not news to anyone, but it's a point we want to make since it's easy to forget\u2026particularly for options traders.<\/p>\n

ETFTRADR systems are looking for major, sustained moves from the universe of optionable ETFs. That's where the real power is \u2013 a sector or country will work its way into a positive trend, and stays there for quite a while\u2026perhaps month or years. (Or, we can buy bearish put options on ETFs that can't find their bearings and are seeing their value sink.)<\/p>\n

With this in mind, we've found owning options with plenty of time gives us an opportunity for enormous gains. Here's the best part of all though \u2013 we don't necessarily have to use that time. If we do get a nice short-term burst and decide to take profits well before the option expires, we always have that choice. You don't have that flexibility if your option expired before a major move.<\/p>\n

4) You don't get paid any extra for surviving volatility.<\/strong><\/p>\n

It's a generally accepted idea in the trading world that higher returns are probably going to be accompanied by greater volatility. We don't disagree with the notion \u2013 to a point. In our observation though, there does come a time where you do stop getting paid for extra risk and extra volatility you're assuming.<\/p>\n

Though we're striving to maximize gains in our more conservative options services, we also seek to minimize swings in a portfolio's value. Part of that effort has to do with remaining psychologically comfortable; another part of it has to do with sheer capital preservation \u2013 not losing is more important than a string of monster-sized winning trades. You can always look to the future if you have enough capital. If you wipe all or most of it out though, then you're out of the game.<\/p>\n

Final Thoughts<\/strong>
\nIn many ways, all of the ideas above are centered around one basic concept \u2013 value. All options have risk, but the risk has to make sense compared to the reward. Just like stocks, options can be overvalued or fairly valued. It's all about balancing the risk and reward. Getting a handle on delta, theta, and time can help you do just that.<\/p>\n

Trade well,
\nAndrew Hart
\nYou can learn more about my free report at ETFTradr.com<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Today I'd like everyone to welcome Andrew Hart from ETFTradr.com. I asked Andrew to tackle ETF option's as these markets have been growing in popularity and complexity! Please enjoy the article, comment below with questions for Andrew, and visit ETFTradr.com. ================================================================== Here's one for you new and intermediate options traders (though frankly, I think traders […]<\/p>\n","protected":false},"author":41,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[2933,2935,2934,2936],"class_list":["post-1886","post","type-post","status-publish","format-standard","hentry","category-general","tag-andrew-hart","tag-etf-option-strategies","tag-etftradrcom","tag-the-next-generation-etf-portfolio"],"yoast_head":"\nThe 4 Cornerstones of ETF Options Trading - INO.com Trader's Blog<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/wwwtest.ino.com\/blog\/2010\/02\/the-4-cornerstones-of-etf-options-trading\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"The 4 Cornerstones of ETF Options Trading - INO.com Trader's Blog\" \/>\n<meta property=\"og:description\" content=\"Today I'd like everyone to welcome Andrew Hart from ETFTradr.com. I asked Andrew to tackle ETF option's as these markets have been growing in popularity and complexity! Please enjoy the article, comment below with questions for Andrew, and visit ETFTradr.com. ================================================================== Here's one for you new and intermediate options traders (though frankly, I think traders […]\" \/>\n<meta property=\"og:url\" content=\"https:\/\/wwwtest.ino.com\/blog\/2010\/02\/the-4-cornerstones-of-etf-options-trading\/\" \/>\n<meta property=\"og:site_name\" content=\"INO.com Trader's Blog\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/inocom\/\" \/>\n<meta property=\"article:published_time\" content=\"2010-02-10T05:30:14+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2010-02-09T16:45:43+00:00\" \/>\n<meta name=\"author\" content=\"The INO.com Team\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"The INO.com Team\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"5 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\/\/wwwtest.ino.com\/blog\/2010\/02\/the-4-cornerstones-of-etf-options-trading\/#article\",\"isPartOf\":{\"@id\":\"https:\/\/wwwtest.ino.com\/blog\/2010\/02\/the-4-cornerstones-of-etf-options-trading\/\"},\"author\":{\"name\":\"The INO.com Team\",\"@id\":\"https:\/\/www.ino.com\/blog\/#\/schema\/person\/d86a8cce826b7bd105200d88bb28a280\"},\"headline\":\"The 4 Cornerstones of ETF Options Trading\",\"datePublished\":\"2010-02-10T05:30:14+00:00\",\"dateModified\":\"2010-02-09T16:45:43+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\/\/wwwtest.ino.com\/blog\/2010\/02\/the-4-cornerstones-of-etf-options-trading\/\"},\"wordCount\":970,\"commentCount\":8,\"publisher\":{\"@id\":\"https:\/\/www.ino.com\/blog\/#organization\"},\"keywords\":[\"Andrew Hart\",\"ETF Option strategies\",\"etftradr.com\",\"The Next Generation ETF Portfolio\"],\"articleSection\":[\"General\"],\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"CommentAction\",\"name\":\"Comment\",\"target\":[\"https:\/\/wwwtest.ino.com\/blog\/2010\/02\/the-4-cornerstones-of-etf-options-trading\/#respond\"]}]},{\"@type\":\"WebPage\",\"@id\":\"https:\/\/wwwtest.ino.com\/blog\/2010\/02\/the-4-cornerstones-of-etf-options-trading\/\",\"url\":\"https:\/\/wwwtest.ino.com\/blog\/2010\/02\/the-4-cornerstones-of-etf-options-trading\/\",\"name\":\"The 4 Cornerstones of ETF Options Trading - INO.com Trader's Blog\",\"isPartOf\":{\"@id\":\"https:\/\/www.ino.com\/blog\/#website\"},\"datePublished\":\"2010-02-10T05:30:14+00:00\",\"dateModified\":\"2010-02-09T16:45:43+00:00\",\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\/\/wwwtest.ino.com\/blog\/2010\/02\/the-4-cornerstones-of-etf-options-trading\/\"]}]},{\"@type\":\"WebSite\",\"@id\":\"https:\/\/www.ino.com\/blog\/#website\",\"url\":\"https:\/\/www.ino.com\/blog\/\",\"name\":\"INO.com Trader's Blog\",\"description\":\"Expert Charts, Trading Tips and Technical Analysis from INO.com\",\"publisher\":{\"@id\":\"https:\/\/www.ino.com\/blog\/#organization\"},\"potentialAction\":[{\"@type\":\"SearchAction\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\/\/www.ino.com\/blog\/?s={search_term_string}\"},\"query-input\":{\"@type\":\"PropertyValueSpecification\",\"valueRequired\":true,\"valueName\":\"search_term_string\"}}],\"inLanguage\":\"en-US\"},{\"@type\":\"Organization\",\"@id\":\"https:\/\/www.ino.com\/blog\/#organization\",\"name\":\"INO.com Trader's Blog\",\"url\":\"https:\/\/www.ino.com\/blog\/\",\"logo\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/www.ino.com\/blog\/#\/schema\/logo\/image\/\",\"url\":\"https:\/\/www.ino.com\/blog\/wp-content\/uploads\/2018\/12\/inologo-400.jpg\",\"contentUrl\":\"https:\/\/www.ino.com\/blog\/wp-content\/uploads\/2018\/12\/inologo-400.jpg\",\"width\":400,\"height\":472,\"caption\":\"INO.com Trader's Blog\"},\"image\":{\"@id\":\"https:\/\/www.ino.com\/blog\/#\/schema\/logo\/image\/\"},\"sameAs\":[\"https:\/\/www.facebook.com\/inocom\/\",\"https:\/\/www.linkedin.com\/company-beta\/1056449\/\"]},{\"@type\":\"Person\",\"@id\":\"https:\/\/www.ino.com\/blog\/#\/schema\/person\/d86a8cce826b7bd105200d88bb28a280\",\"name\":\"The INO.com Team\",\"image\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/www.ino.com\/blog\/#\/schema\/person\/image\/\",\"url\":\"https:\/\/secure.gravatar.com\/avatar\/cb06ce065c1db526fc31f4d08d898a30?s=96&d=identicon&r=pg\",\"contentUrl\":\"https:\/\/secure.gravatar.com\/avatar\/cb06ce065c1db526fc31f4d08d898a30?s=96&d=identicon&r=pg\",\"caption\":\"The INO.com Team\"},\"url\":\"https:\/\/wwwtest.ino.com\/blog\/author\/the-ino-com-team\/\"}]}<\/script>\n<!-- \/ Yoast SEO Premium plugin. -->","yoast_head_json":{"title":"The 4 Cornerstones of ETF Options Trading - INO.com Trader's Blog","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/wwwtest.ino.com\/blog\/2010\/02\/the-4-cornerstones-of-etf-options-trading\/","og_locale":"en_US","og_type":"article","og_title":"The 4 Cornerstones of ETF Options Trading - INO.com Trader's Blog","og_description":"Today I'd like everyone to welcome Andrew Hart from ETFTradr.com. I asked Andrew to tackle ETF option's as these markets have been growing in popularity and complexity! Please enjoy the article, comment below with questions for Andrew, and visit ETFTradr.com. ================================================================== Here's one for you new and intermediate options traders (though frankly, I think traders […]","og_url":"https:\/\/wwwtest.ino.com\/blog\/2010\/02\/the-4-cornerstones-of-etf-options-trading\/","og_site_name":"INO.com Trader's Blog","article_publisher":"https:\/\/www.facebook.com\/inocom\/","article_published_time":"2010-02-10T05:30:14+00:00","article_modified_time":"2010-02-09T16:45:43+00:00","author":"The INO.com Team","twitter_card":"summary_large_image","twitter_misc":{"Written by":"The INO.com Team","Est. reading time":"5 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"Article","@id":"https:\/\/wwwtest.ino.com\/blog\/2010\/02\/the-4-cornerstones-of-etf-options-trading\/#article","isPartOf":{"@id":"https:\/\/wwwtest.ino.com\/blog\/2010\/02\/the-4-cornerstones-of-etf-options-trading\/"},"author":{"name":"The INO.com Team","@id":"https:\/\/www.ino.com\/blog\/#\/schema\/person\/d86a8cce826b7bd105200d88bb28a280"},"headline":"The 4 Cornerstones of ETF Options Trading","datePublished":"2010-02-10T05:30:14+00:00","dateModified":"2010-02-09T16:45:43+00:00","mainEntityOfPage":{"@id":"https:\/\/wwwtest.ino.com\/blog\/2010\/02\/the-4-cornerstones-of-etf-options-trading\/"},"wordCount":970,"commentCount":8,"publisher":{"@id":"https:\/\/www.ino.com\/blog\/#organization"},"keywords":["Andrew Hart","ETF Option strategies","etftradr.com","The Next Generation ETF Portfolio"],"articleSection":["General"],"inLanguage":"en-US","potentialAction":[{"@type":"CommentAction","name":"Comment","target":["https:\/\/wwwtest.ino.com\/blog\/2010\/02\/the-4-cornerstones-of-etf-options-trading\/#respond"]}]},{"@type":"WebPage","@id":"https:\/\/wwwtest.ino.com\/blog\/2010\/02\/the-4-cornerstones-of-etf-options-trading\/","url":"https:\/\/wwwtest.ino.com\/blog\/2010\/02\/the-4-cornerstones-of-etf-options-trading\/","name":"The 4 Cornerstones of ETF Options Trading - INO.com Trader's Blog","isPartOf":{"@id":"https:\/\/www.ino.com\/blog\/#website"},"datePublished":"2010-02-10T05:30:14+00:00","dateModified":"2010-02-09T16:45:43+00:00","inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/wwwtest.ino.com\/blog\/2010\/02\/the-4-cornerstones-of-etf-options-trading\/"]}]},{"@type":"WebSite","@id":"https:\/\/www.ino.com\/blog\/#website","url":"https:\/\/www.ino.com\/blog\/","name":"INO.com Trader's Blog","description":"Expert Charts, Trading Tips and Technical Analysis from INO.com","publisher":{"@id":"https:\/\/www.ino.com\/blog\/#organization"},"potentialAction":[{"@type":"SearchAction","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/www.ino.com\/blog\/?s={search_term_string}"},"query-input":{"@type":"PropertyValueSpecification","valueRequired":true,"valueName":"search_term_string"}}],"inLanguage":"en-US"},{"@type":"Organization","@id":"https:\/\/www.ino.com\/blog\/#organization","name":"INO.com Trader's Blog","url":"https:\/\/www.ino.com\/blog\/","logo":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/www.ino.com\/blog\/#\/schema\/logo\/image\/","url":"https:\/\/www.ino.com\/blog\/wp-content\/uploads\/2018\/12\/inologo-400.jpg","contentUrl":"https:\/\/www.ino.com\/blog\/wp-content\/uploads\/2018\/12\/inologo-400.jpg","width":400,"height":472,"caption":"INO.com Trader's Blog"},"image":{"@id":"https:\/\/www.ino.com\/blog\/#\/schema\/logo\/image\/"},"sameAs":["https:\/\/www.facebook.com\/inocom\/","https:\/\/www.linkedin.com\/company-beta\/1056449\/"]},{"@type":"Person","@id":"https:\/\/www.ino.com\/blog\/#\/schema\/person\/d86a8cce826b7bd105200d88bb28a280","name":"The INO.com Team","image":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/www.ino.com\/blog\/#\/schema\/person\/image\/","url":"https:\/\/secure.gravatar.com\/avatar\/cb06ce065c1db526fc31f4d08d898a30?s=96&d=identicon&r=pg","contentUrl":"https:\/\/secure.gravatar.com\/avatar\/cb06ce065c1db526fc31f4d08d898a30?s=96&d=identicon&r=pg","caption":"The INO.com Team"},"url":"https:\/\/wwwtest.ino.com\/blog\/author\/the-ino-com-team\/"}]}},"_links":{"self":[{"href":"https:\/\/wwwtest.ino.com\/blog\/wp-json\/wp\/v2\/posts\/1886"}],"collection":[{"href":"https:\/\/wwwtest.ino.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/wwwtest.ino.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/wwwtest.ino.com\/blog\/wp-json\/wp\/v2\/users\/41"}],"replies":[{"embeddable":true,"href":"https:\/\/wwwtest.ino.com\/blog\/wp-json\/wp\/v2\/comments?post=1886"}],"version-history":[{"count":0,"href":"https:\/\/wwwtest.ino.com\/blog\/wp-json\/wp\/v2\/posts\/1886\/revisions"}],"wp:attachment":[{"href":"https:\/\/wwwtest.ino.com\/blog\/wp-json\/wp\/v2\/media?parent=1886"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/wwwtest.ino.com\/blog\/wp-json\/wp\/v2\/categories?post=1886"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/wwwtest.ino.com\/blog\/wp-json\/wp\/v2\/tags?post=1886"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}