Option Omega Review: The Best Automated Options Backtesting Software

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Option Omega is automated options backtesting software that can produce backtests dating back to 2013 in minutes. 

The software also uses one-minute data, which is crucial, especially when dealing with 0 and 1-DTE options backtests. 

Key Features of Option Omega

  • 1-minute historical data, ensuring accurate results
  • Build portfolios by combining multiple strategies in the same backtest
  • Backtest SPY, SPX, QQQ, IWM, and TSLA
  • Test back to 1/1/2013 – yesterday

The software is normally $99 per month or $599 annually. However, with my affiliate link, you can get Option Omega for just $50 per month

Creating a Backtest Example

Once you sign in, you will see tests and portfolios at the top left. 

option omega tests and portfolios

To begin your first backtest:

1- Click tests

2- Click the new backtest button

option omega new backtest button

3- Begin setting your parameters

4- Be careful not to click off to avoid disrupting your parameters

Setting up Test Parameters

The parameters are incredibly customizable, and I highly recommend you test multi-leg strategies like iron condors and put credit spreads one leg at a time, then combine them in a portfolio. This isn’t necessary, but it can be more efficient and customizable. 

option omega test parameters

You can customize the following in your backtest:

1- Start date: 1/1/2013 is the earliest start.

2- End date: Test as recent as the previous trading day.

3- Ticker: SPX, SPY, QQQ, IWM, TSLA

4- Strategy (optional): Choose a preloaded strategy like iron condor or iron fly

5- Add leg: Customize the entry parameters for each leg, including:

  • Sell or Buy
  • Put or Call
  • Quantity
  • Delta
  • DTE

SPX/SPY 1DTE Backtest Example

In our example, we will test a 1-DTE short-put strategy on the SPX and SPY. To account for the weekend when the market is closed, we will have to run a separate 3DTE test for Friday’s “1-DTE” trades.  

So, in Option Omega, I simply select the start date as 1/1/2013 and the end date of yesterday. Next, I choose SPX, then add a leg. The leg will be:

  • Sell
  • Put
  • 1 QTY
  • 15 Delta
  • 1 DTE (Separate 3DTE Friday only test)
  • Daily frequency 15 minutes before close (Weekly, then click for Friday 3DTE)
  • -600% stop loss
option omega stop loss
  • Early exit at one minute before close
option omega early exit
  • 1 max contract per trade
  • Ignore margin requirements
option omega example backtest parameters

I will check “use exact DTE” to ensure it only does the 1DTE trades. For starting funds, I usually go with a high number, like $10,000,000, for the most flexibility. 

I will use 1 contract per day to remain consistent, and later in Google Sheets, we will be able to adjust the number of contracts sold based on account size. You can do this by exporting the backtest data from Option Omega. You can view my Google Sheet for this SPY/SPX 1DTE backtest and make a copy if you’d like to use the template for your own Option Omega exports. 

You can customize the commissions and fees to your own broker, plus you can control the leverage based on notional value. For example, selling one SPY 400 strike put is $40,000 of notional value. Changing the leverage to the spreadsheet to 1 will sell 1 contract for every $40,000 of net liquidity. You can also change the account net liq size. 

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Google Sheet With Exported Option Omega Backtest Results

My sheet will calculate the following for you based on your Option Omega export results:

  • PCR (premium capture rate): Total profit / Total premium sold
  • Win rate %
  • Total return
  • CAGR: Compound annual growth rate
  • Max drawdown
  • Mar ratio
  • Sharpe ratio
  • Max % stop loss hit
  • Max one contract loss
  • Max daily % drawdown

Combining the Tests in Portfolios

Since I ran two backtests in this case (1 & 3DTE for Friday entries), to combine them into a single test, we can use the portfolios feature. Simply click portfolios at the top left, and then click New Portfolio.

You will be able to customize the starting funds and the start and end dates for the portfolio test. Next, I will check the two backtests I want to combine, then click run. 

This will combine the 1 and 3DTE tests together in a single test. Next, you can click “Trade Log” and then use the export to CSV option if you want to analyze the data in Google Sheets. The Benefit of using Google Sheets is you can easily change commissions and leverage based on net liquidity, which you can do in my Google Sheets template

Key Features of Option Omega

Option Omega stands out in the options backtesting world because it combines automated backtesting with 1-minute historical data. Prior to this software, you’d have to manually backtest with software like OptionNet Explorer for this level of accuracy. 

The ability to run hundreds of 10+ year backtests in minutes is amazing and allows retail traders to build conviction in their options trading. There are tons of ways to modify the test to suit your style, and it is easy to spend hours on Option Omega tweaking your backtests. 

Pricing and Accessibility

Option Omega is accessible to everybody, as you do not have to install any software. It is normally $99 per month, but our readers can get 50% off using our Option Omega affiliate link

Option Omega – Bottom Line

Option Omega is an excellent resource for options traders looking to build conviction in their strategies. Option Omega is definitely worth a shot if you want automated backtesting software with accurate 1-minute historical data.

Disclaimer: Financial Tech Wiz is an affiliate of Option Omega and may receive a commission if you sign up using our affiliate link.

What is the Most Successful Options Strategy

cboe put selling strategy

Options trading may seem complex, but there are various basic options strategies investors can use to enhance their portfolio’s returns.

Many investors jump into options trading with a lack of knowledge of the most successful options strategy.

To stand a chance of making consistent income, you must focus on selling option premium.

You can buy put options as stock insurance to hedge your portfolio, but this is not the most successful options strategy due to factors like theta working against you. 

The Best Options Strategies

Selling options is the most successful options strategy, and there are backtests performed by the CBOE to prove this point. The first strategy on the list is selling puts and the cash-secured put.

Selling Cash-Secured Puts

When you sell a cash-secured put, you are paid a cash premium for promising to buy 100 shares of stock at the put’s strike price.

For example, if you sell a $100 strike put on $AAPL, you are promising to buy 100 shares of $AAPL at $100 per share and collect a cash premium.

There are various backtests on selling put options, showing that selling puts provides similar returns to the S&P 500 index with less volatility.

You can also use the S&P 500 futures options to sell premium with span margin.

If you want a broker built for options traders, consider signing up for a tastytrade brokerage account.

cboe put selling strategy
Source: CBOE

The image above shows the ticker symbols $PUT, $WPUT, and $SPY.

$PUT is the CBOE put write index that sells ATM one-month options and invests the proceeds into T-Bills.

$WPUT sells weekly put options and rolls each week.

$SPY is the S&P 500 index. This chart also uses total return, so the $SPY line includes dividends.

While the $SPY returns are higher, this is because of the massive bull run that has occurred since 2009.

However, it is critical to notice that selling puts drastically outperformed the market in the 2008 financial crisis.

The stock market does not always rally, and selling put options will give you similar returns with less risk in the long run.

Selling Covered Calls

The covered call strategy is when you own 100 shares of a stock and promise to sell them by writing a call option.

For example, if you own 100 shares of $AAPL at $100 per share, you can sell a $110 call option and promise to sell these shares at $110.

You will get paid a premium to do this, and in the worst case, you are forced to sell your shares at a profit and collect a premium.

If you cannot afford 100 shares of a stock, you can utilize the poor man’s covered call strategy.

Selling covered calls comes with the same risk profile as selling cash-secured puts. The difference is that you must own shares to sell covered calls.

Therefore, investors who already own shares of stock can easily sell covered calls to generate income in their portfolios.

You can also combine the cash-secured put and covered call strategy, which is the wheel option strategy.

Delta-Neutral Options Strategy: Iron Condor

The iron condor is a delta-neutral options strategy, meaning you want the stock to trade sideways after selling an iron condor.

Iron condors attract beginner options traders because it may seem like the iron condor will make money regardless of how the stock moves.

However, bullish premium-selling strategies are generally better since the stock market has a positive drift and goes up in the long term.

The jade lizard options strategy is similar to the iron condor, except without a long put.

Delta-Neutral Options Strategy: Put Broken Wing Butterfly

A put broken wing butterfly strategy is one of the least risky put selling strategies.

A put broken wing butterfly is created by selling a bullish put spread and buying a bearish put spread to hedge.

Since the bullish put spread is further OTM, it will decay quicker than the bearish put spread, providing steady returns with low volatility.

Pros and Cons of Options Trading

When deciding whether you want to employ options trading in your portfolio, consider the following pros and cons. These will primarily be based on option selling strategies and not buying options.

Pros:

  • Better risk-adjusted returns than holding index funds
  • Your capital is more liquid
  • You can trade 1256 contracts for tax advantages

Cons:

  • Tax treatment is worse than long-term investing
  • Commission fees
  • Active management is required

Learn the Most Successful Options Strategy

There are various options available if you want to learn how to trade the most successful options strategies.

Join a Trading Community

If you join a trading community, you can actively ask other traders questions to improve your strategies and trading mindset.

There are amazing communities like HaiKhuu Trading, full of like-minded stock traders who help each other become profitable on the stock market.  

Read Options Trading Books

If you read the best options trading books, you can learn from the greatest traders ever.

Knowledge is power, and reading books is one of the best ways to improve your knowledge about trading options.

Learn Technical Analysis

Technical analysis involves studying chart patterns using indicators and volume. Using technical analysis with your options trading will allow you to find optimal entry and exit points using charts.There are free charting tools like TradingView that allow you to start today with just an internet connection. If you sign up using our affiliate link, you can get a free trial and a discount on your subscription.

Initial Margin vs. Maintenance Margin: A Guide for Traders

initial margin vs maintenance margin compared in a table

Margin trading is a vital concept in the world of finance, offering traders the ability to leverage their positions for potentially higher returns.

However, with increased potential comes increased risk, making it crucial to understand the concepts of initial margin and maintenance margin. These terms are fundamental to managing risk and maintaining a healthy trading portfolio.

What is Initial Margin?

Initial margin refers to the minimum amount of equity a trader must provide to open a leveraged position. It’s a form of security deposit, ensuring that the trader has enough skin in the game.

The initial margin requirement, often a percentage of the total trade value, varies based on the asset and the broker’s policies. This upfront investment helps mitigate the risk of loss for the broker.

What is Maintenance Margin?

Maintenance margin comes into play after a position is opened. It’s the minimum amount of equity a trader must maintain in their account to keep a trade open.

If the account’s value falls below this threshold due to losses, the trader receives a margin call, requiring them to deposit more funds or close positions.

This mechanism is designed to prevent excessive losses that could affect both the trader and the broker.

initial margin vs maintenance margin compared in a table

Key Differences Between Initial Margin and Maintenance Margin

  • Purpose:
    • Initial Margin: Required to open a leveraged position; acts as a security deposit.
    • Maintenance Margin: Ensures ongoing solvency of the position after it is opened.
  • Timing:
    • Initial Margin: Calculated and required at the time of opening a trade.
    • Maintenance Margin: Monitored continuously after the trade is opened.
  • Function:
    • Initial Margin: Determines the maximum leverage a trader can use.
    • Maintenance Margin: Protects against excessive losses from leveraged positions.
  • Response to Market Movements:
    • Initial Margin: Remains constant once the position is opened.
    • Maintenance Margin: Can trigger a margin call if the account value falls below a certain level due to market losses.
  • Calculation Basis:
    • Initial Margin: Percentage of the total trade value, set by the broker or regulatory authority.
    • Maintenance Margin: Typically a lower percentage than initial margin, reflecting ongoing risk.
  • Implications for Traders:
    • Initial Margin: Higher initial margin means lower leverage and potentially lower risk.
    • Maintenance Margin: Falling below maintenance margin can lead to forced liquidation of positions if additional funds are not added.

While both initial and maintenance margins are related to leverage and risk management, they serve different purposes. The initial margin is about starting a trade and ensuring enough capital is put down.

In contrast, the maintenance margin is about sustaining a trade and ensuring ongoing solvency. Understanding these differences is key to effective margin management.

Real-World Scenarios: Margin Calls and Trading

Consider a futures trader who has a $500 account. The dynamics of initial and maintenance margin in this context would unfold as follows:

  • Choosing a Contract:
    • The trader opts to trade a futures contract where the total contract value is $5,000.
    • The initial margin requirement for this contract is 10%, which amounts to $500.
  • Utilizing the Entire Account for Margin:
    • To meet the initial margin requirement, the trader commits their entire account balance of $500.
    • This is a high-risk move as the entire account value is used to open a single position.
  • Market Moves Against the Trader:
    • After entering the contract, the market moves unfavorably, and the value of the futures position declines.
    • A 5% market drop reduces the contract value by $250, lowering the equity in the trader’s account to $250.
  • Triggering a Margin Call:
    • The maintenance margin requirement is 5% of the contract value, which is $250 in this case.
    • Since the account balance has fallen to the maintenance margin level due to the market decline, the trader faces an immediate margin call.
  • Critical Decision Point:
    • The trader must now either deposit additional funds to maintain the position or close the position to meet the margin call.
    • If the trader is unable to add funds, the broker might liquidate the position, potentially resulting in a loss.

This example illustrates the significant risks involved in using a high proportion of an account’s balance to meet margin requirements, especially in volatile markets.

It underscores the importance of understanding margin requirements and the potential impacts of market movements on trading positions.

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Regulatory Aspects of Margin Requirements

Margin requirements are not just broker-imposed but are also subject to regulatory oversight.

Bodies like the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) set guidelines to ensure market stability and trader protection.

These regulations have evolved, especially in response to financial crises, to further safeguard market integrity.

Conclusion

Understanding the nuances of initial margin and maintenance margin is imperative for any trader engaged in margin trading.

These concepts are not just financial requirements but tools for risk management and strategic planning.

Awareness and adherence to these margins can make the difference between a successful trading career and a costly lesson in market dynamics.

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The Best Indicators for Options Trading

best indicators for day trading volume profile

Learn how technical analysis can benefit your options trading.

Magic options trading chart indicators do NOT exist

Technical analysis for options trading is a somewhat controversial topic, as many hedge funds have proved that it is tough to time the market accurately.

There are no magic indicators out there that will be able to give you perfect buy and sell signals consistently. However, this does not mean there is no merit in studying options trading chart indicators.

There is a wide range of technical indicators, such as moving averages, volume profile, fibonacci retracements, pivot points, and much more.

Technical analysis provides context for options trading

To become a successful options trader, you are not required to learn any of this, but technical indicators can be a great way to provide context to what is happening in the market.

If you simply look at a candle chart of two different stocks with no indicators, it could be challenging to determine how the market is pricing these stocks.

Keep it simple

Using a common indicator such as the 200-day moving average, you can compare different stocks based on this line alone.

Let’s say you notice a stock index like the Nasdaq is trading below its 200-day moving average and an oil ETF is trading above its 200-day moving average.

You can conclude that stocks are not doing as well as oil, providing that context.

If you are looking for universal charting software, I highly recommend Tradingview. Since Tradingview is not tied to a specific broker, you can always rely on it if you decide to switch brokers. You can try Tradingview out for 30 days free with my affiliate link.

Best Indicators for Options Trading

1- Moving Averages

There are two types of moving averages: a simple moving average (SMA) and the exponential moving average (EMA). They are one of the best indicators for options trading because they provide support and resistance levels.

Both require a length input, which determines how far back in time the indicator covers. One of the most common SMAs used is the 200 SMA on a daily timeframe.

When a 200 SMA line is plotted on a daily chart (each candle represents one day), this is also known as the 200-day moving average.

best indicators for options trading moving averages
$GLD with moving averages and volume profile plotted.

When a stock is trading above this 200-day moving average, it is considered to be in an uptrend; if it is trading below this line, the stock is generally considered to be down trending.

2- Volume Profile

The volume profile is not as well-known as other indicators, but it is one of the best indicators for options trading.

Usually, we can view the amount of volume traded on a stock per day as a vertical bar. This is great, but it does not tell us what price the most volume was occurring at.

The volume profile will show you volume by price and is plotted horizontally on the chart.

You will notice that there is a lot more volume occurring at certain prices than others.

This price is known as a high volume node or an area of value. It is the price in which shares have traded hands most times, so it is viewed as an area of value to both the buyers and the sellers.

best indicators for options trading volume profile
TradingView High and Volume Volume Nodes (HVN/LVN)

From this information, we can gather that these high-value areas are where most people’s cost basis will be, whether short or long.

The price of a stock generally tends to revert to these points of value often, so people often try to fade the extremes of the value area.

For example, when the price falls below the high volume area to another area with a lower volume, they will buy here to fade the shorts and attempt to ride the shares back up to the value area. This is just one strategy, and this indicator has many nuances.

3- Ichimoku Cloud

Ichimoku cloud trading strategies rely on stocks to be trending up or down. The Ichimoku cloud will be green when a stock is trending up, as you can see in the chart of $XLE below.

When the conversion line crosses over the tenkan-sen line, this is called a TK-crossover, and it is a buy signal.  This happened on the weekly chart of $XLE in October, above a green cloud, indicating a strong buy.

best indicators for options trading ichimoku
Chart from TradingView

Technical Analysis for Options Trading: Bottom Line

Trading with technical analysis should come second to developing an options strategy that is expected to have a positive expectancy in the long run.

It can be advantageous to find areas of value and determine that one price might be a better spot to buy than another. Still, this can become useless information without a strategy to manage your risk and take profits.

What I mean by this is that support levels are only valid until they are broken, and you are left with an unrealized loss. One way to combine technical analysis with an options strategy is to go long at support areas and set a stop loss below this area in case it breaks.

If you put the risk to reward in your favor each time and have a strategy of where to cut losses and take profits, then technical analysis can be a fantastic tool to improve your win rate and profitability.

Options Trading for Dummies by Joe Duarte: A Complete Review

options trading for dummies review

Options trading is a versatile and rewarding skill that can help you control a large amount of stock with a small investment, hedge against market fluctuations, and leverage your returns. However, it also involves risks and challenges, such as the complexity and volatility of the options market and the need to understand various factors that affect option prices.

One resource that seeks to guide you through this complex subject is Joe Duarte’s Options Trading for Dummies. This review will delve into the book’s content, reader reviews, and its overall value for those embarking on their options trading journey.

Disclosure: This post contains affiliate links from Amazon and TradingView. As an Amazon Associate, I earn from qualifying purchases. This means that if you click on these links and make a purchase, I will receive a small commission at no extra cost to you.

Unveiling the Author: Joe Duarte

Joe Duarte is a trusted expert and author in the financial world, bringing a wealth of knowledge and credibility to the field of options trading.

Diving into the Content

Options Trading for Dummies provides a comprehensive guide to options trading. It covers a broad range of topics, from the basics to advanced strategies. The book also includes many examples, charts, and tips that illustrate and explain the concepts and applications of options trading.

Key topics you can learn from the book are:

  • The types of options and how they work
  • The risk-reward structure of options trading and how to weigh option costs and benefits
  • The factors that influence option prices and how to use them to your advantage
  • The tools and resources that you need to trade options successfully
  • The common mistakes and pitfalls that you should avoid when trading options
  • The basic and advanced strategies for combining options to create spreads, straddles, strangles, butterflies, condors, and more

Positive Feedback

Many readers have found the book helpful, comprehensive, easy to read, and informative. Here are a couple of highlights from the positive reviews:

  • “One of the best books that I’ve read on trading options. If you’re just starting out or even if you have experience this book will help you learn. From basics to more advanced strategies.” – Kindle Customer
  • “I’ve been options trading for a few years, this is comprehensive for first timers and a good refresher for someone already trading.” – LJ.

Critiques and Concerns

However, not all feedback has been positive. Some readers have voiced concerns about the book’s style, quality, and production:

  • “The concepts presented are inadequately explained, the flow is painfully disjointed, and any helpful visual aids are sparse and blurry. This book was a waste of money.” – J.R. Fisher
  • “What a mess the publisher has produced! Chapter 7 is missing…Wiley! Please fix this!” – A. E. Jones.

Despite these critiques, many readers find the book’s comprehensive approach and accessible content make it a worthwhile read.

The Right Reader for the Right Book

This book is particularly suitable for those new to options trading or those looking to refresh their knowledge. Experienced traders may also find value in the book’s presentation of advanced strategies.

Beyond One Book: More Options Trading Resources

For those looking to expand their learning beyond this single book, there are many other resources available. One such resource is this curated list of The Best Options Trading Books to further your journey into options trading.

Final Thoughts: Is Options Trading for Dummies Worth Your Time?

Joe Duarte’s Options Trading for Dummies is a valuable resource for anyone interested in options trading. While it has its flaws, the book’s comprehensive approach and accessible content make it a valuable addition to any financial library. If you’re looking to start or enhance your journey in options trading, this book is a worthy consideration.

Remember, no single book can cover everything about options trading. It’s essential to supplement your learning with other resources, practice your skills, and continually monitor your performance.

In addition to Options Trading For Dummies, consider checking out other highly recommended options trading books to expand your knowledge and skills in this area. If you’re interested in reading Options Trading For Dummies or learning more about options trading, you can check out the book on Amazon.

This article contains affiliate links I may be compensated for if you click them.

Understanding Options: Book Review and Insights for Traders

understanding options book image

Welcome to our deep dive into Understanding Options, a best-selling book that aims to simplify the often complex world of options trading for novice investors.

Understanding Options Book Overview

In this enlightening read, author Michael Sincere pens an approachable guide divided into four comprehensive sections.

  1. The Basics of Options Trading: Here, terminology, types of options, pricing models, and risk management are brought into focus.
  2. Strategies for Buying and Selling Options: This section delves into covered calls, naked puts, straddles, strangles, and butterflies.
  3. Advanced Topics: This part covers volatility, the Greeks, technical analysis, and trading psychology.
  4. Practical Tips and Resources: Online tools, brokers, newsletters, and additional reading materials are presented.

The author expertly employs real-world examples and ends each chapter with quizzes to reinforce key concepts.

Buy Understanding Options on Amazon

Disclosure: This post contains affiliate links from Amazon and TradingView. As an Amazon Associate, I earn from qualifying purchases. This means that if you click on these links and make a purchase, I will receive a small commission at no extra cost to you.

From Text to Trade: The Pedagogical Review

What stands out about Understanding Options is its pedagogical approach. It makes options trading accessible and engaging by explaining complex concepts with simple language and a dose of humor.

This pedagogical masterpiece caters to beginners seeking fundamentals and intermediate traders wanting to up their game.

Reader Reviews

Hear it straight from the readers themselves. Here are a few reviews that highlight the strengths and potential areas for improvement:

“This is a great book for someone just starting out getting into investing/day trading. It clearly explains what options are and delves into strategies as well.” – Matt K.

“This is a very basic book that does not have much to offer a trader that understands the stock market already. I was disappointed. There are no great secrets in this book, and it does not address advanced strategies like butterflies in enough detail to help me.” – WillPrimeMem.

Understanding Options vs. Other Trading Books

The Understanding Options book is excellent, but checking out other options trading books to expand your knowledge is always informative.

For a look at other notable trading books, we invite you to explore our article on the best options trading books.

Weighing the Pros and Cons: Is Understanding Options for You?

Understanding Options is a versatile book that breaks down the complexities of options trading for novices while providing insightful knowledge for intermediate traders. However, seasoned traders might find the information basic.

If you’re a beginner or intermediate trader looking to level up, this book is a worthy addition to your reading list.

Take the Next Step: Your Trading Journey Awaits

Whether you’re considering stepping into the world of options trading or are looking to brush up your existing knowledge, Understanding Options is a brilliant place to start.

Dive into the book for yourself, or explore other trading resources and materials on options trading.

This article contains affiliate links I may be compensated for if you click them.

Options as a Strategic Investment Review and Edition Comparison

options as a strategic investment review

Options trading can be a complex and challenging field. Among the plethora of resources available to navigate it, Lawrence G. McMillan’s Options as a Strategic Investment stands out as an invaluable guide.

This article will take a closer look at the pros and cons of this acclaimed book and delve into the key differences between its 4th and 5th editions.

Disclosure: This post contains affiliate links from Amazon and TradingView. As an Amazon Associate, I earn from qualifying purchases. This means that if you click on these links and make a purchase, I will receive a small commission at no extra cost to you.

About the Author: Lawrence G. McMillan

Lawrence G. McMillan is a renowned expert in options trading. With a reputation for conveying complex trading strategies in a digestible format, he has significantly contributed to the field, making options trading accessible to a wide range of investors.

options as a strategic investment review

Overview of Options as a Strategic Investment

Options as a Strategic Investment offers a comprehensive guide to understanding and implementing options trading strategies. It explores a broad range of topics, from the basics of options contracts to complex trading strategies, making it an essential resource for anyone interested in trading options.

Pros of Options as a Strategic Investment

  • Comprehensive coverage: The book provides a broad overview of options trading, making it a one-stop-shop for traders of varying levels of expertise.
  • Practical examples: McMillan employs numerous real-world examples, reinforcing theoretical concepts with practical applications.
  • Expert guidance: Given McMillan’s respected position in the field, the book brings authoritative insights to the reader.

Cons of Options as a Strategic Investment

  • Length: As a comprehensive guide, the book is quite extensive, which may be overwhelming for beginners.
  • Currency: While still highly relevant, the book could benefit from updates to reflect the latest options trading innovations.
  • Nuances: Certain intricate aspects of options trading are not covered as extensively as others.

Reader Reviews and Reception

The book has been well-received by readers and reviewers alike. Here are a few notable quotes:

  • “This is the ultimate book on options and well worth the cost and effort to read it.” – Amazon reviewer
  • “Options as a Strategic Investment is an excellent resource for anyone who wants to learn more about options trading.” – Investopedia
  • “This book is a must-read for anyone who is serious about options trading.” – The Options Industry Council

Options as a Strategic Investment – 4th vs. 5th Edition Compared

When it comes to choosing between the 4th and 5th editions, it’s important to note the key updates introduced in the latter:

  • Latest market changes: The 5th edition reflects recent changes in the options market and introduces new options products and margin rules.
  • New chapters: Topics such as volatility skew and portfolio margin are covered in the 5th edition, offering readers more in-depth knowledge.
  • Expanded explanations: The 5th edition includes more detailed discussions of concepts and strategies, making it beneficial for both beginners and seasoned traders.

While the 5th edition provides a more current and comprehensive resource, the 4th edition remains a valuable introduction to those new to options trading.

Options as a Strategic Investment Review | Bottom Line

Options as a Strategic Investment by Lawrence G. McMillan is a comprehensive guide to understanding and implementing options trading strategies. While it’s a substantial read, its depth of coverage and practical examples make it a valuable resource. If you’re serious about options trading, the 5th edition, with its latest updates and in-depth discussions, would be a worthwhile investment.

Further Reading

Interested in exploring more resources on options trading? Check out our listicle on “The Best Options Trading Books,” which provides an array of resources for both beginners and advanced traders in the field of options trading.

Options Charts | How to Chart Options in Real Time

how to chart an option on thinkorswim

If you trade options, having access to a real-time options chart can help you determine optimal entry and exit prices. You can view real-time options charts on Thinkorswim and Tastytrade, so let’s dive into how.

How to Chart Options on ThinkorSwim (TOS)

ThinkorSwim is a widely-used platform known for its versatility and customizable features. Follow these steps to chart options on ThinkorSwim:

  1. Go to the trade tab
  2. Next, open the option chain and pick a stock, expiration, and strike price you want to chart
  3. Right-click the option, and click copy
  4. Go to the chart tab, paste the copied text, and the option chart will appear
how to chart an option on thinkorswim

How to Chart Options on Tastytrade

Tastytrade is another popular platform that offers options charting capabilities. Here’s how you can chart options on Tastytrade:

  1. Go to the trade tab
  2. Enter a stock, pick an expiration date and strike price of an option you want to chart
  3. Right-click the option and click view option in chart
how to chart an option on tastytrade

How to View Options Charts on TradingView

TradingView is a widely-used charting platform known for its extensive range of tools and indicators. However, it is not possible to chart options on TradingView as of 2023.

Comparing Options Charting Platforms

To choose the most suitable options charting platform for your trading needs, it’s essential to compare their features and capabilities. Let’s take a closer look at ThinkorSwim, Tastytrade, and TradingView:

  • ThinkorSwim: Known for its versatility and customizable features, ThinkorSwim offers in-depth options charting capabilities. It provides a wide range of technical analysis tools and allows for extensive customization.
  • Tastytrade: Tastytrade is a platform specifically designed for options traders. It offers comprehensive options charting features and focuses on simplifying the options analysis process.

Consider your trading style, preferences, and the specific features offered by each platform when choosing the options charting platform that best suits your needs.

Best Practices for Options Charting

To make the most of options charts, consider the following best practices:

  • Conduct thorough research: Familiarize yourself with the basics of options trading and technical analysis. Stay updated with market trends and news that may impact options prices.
  • Utilize multiple time frames: Analyze options charts across multiple time frames

to gain a comprehensive understanding of the trends and patterns. This allows you to identify both short-term and long-term opportunities.

  • Combine options charts with other indicators: Enhance your options analysis by incorporating other technical indicators such as moving averages, volume indicators, and oscillators. This provides additional confirmation and insights into potential trade setups.
  • Keep track of your trades: Maintain an options watchlist to monitor and track the performance of the options you are interested in. This helps you stay organized and identify promising opportunities more efficiently.
  • Learn from experience: Practice analyzing options charts and gain experience over time. Observe how different patterns and indicators play out in real market conditions. This will help you refine your charting skills and improve your trading decisions.

Remember, options charts serve as a valuable tool in your trading arsenal, but they should be used in conjunction with other forms of analysis and research.

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Additional Resources

For more in-depth information on related topics, check out these articles:

By exploring these additional resources, you can deepen your knowledge and expand your understanding of options charting and related topics.

This article contains affiliate links I may be compensated for if you click them.

The 9 Best Options Trading Books You Must Read

options trading books

If you want to understand options trading on a higher level, these books allow you to learn from the greatest options traders ever.

Educate yourself about options

Learning how to trade options can seem impossible for a beginner. However, these option trading books make learning how to trade options a breeze. Dedicate some time to reading these books, and you will surely be able to confidently place trades in no time.

Benefits of reading options trading books

The benefit of reading the best books on options trading is learning from the greatest traders of all time. Unfortunately, options are a complex financial instrument, and it can be challenging for beginners to grasp how they work.

  • Learn from the greatest traders of all time
  • There are great options trading books for beginners and advanced traders
  • Improve your trading psychology

Short-term options trading is much different than stock investing. Therefore, you must spend much more time researching options trading than investing in stocks or index funds. If you want to improve your knowledge about trading options, these are the best options trading books available.

The Best Options Trading Books:

1- Options as a Strategic Investment

Lawrence McMillan’s book Options as a Strategic Investment is arguably the most popular book about trading options and is often referred to as the bible of options trading. If you are interested in options, this book is the first place many experienced traders would urge you to start learning.

This book is over 1,000 pages long and covers some trading strategies and which type of market they work the best in. McMillan also detailed index and futures options and the tax treatment of profits and losses as an options trader.

Check out my review of Options as a Strategic Investment for more information.

2- Options Volatility and Pricing: Advanced Trading Strategies and Techniques

Sheldon Natenberg is a well-known veteran in the options trading community with over three decades of options experience. His journey started as an independent floor trader at the Chicago Board Options Exchange (CBOE), so you know he has plenty of hands-on experience with options.

This book is one of the few that stands a chance of being compared with Options as a Strategic Investment and is a must-read for anybody aspiring to learn about trading options.

3- Options Trading Crash Course

If you are a beginner and want an easy-to-understand book, this one may be right for you. Frank Richmond’s Options Trading Crash Course is an excellent choice if you are not entirely familiar with options trading terminology.

The simplicity of this book makes it much easier to read than the others on this list, but the content is also not as rich. It is an excellent book to consider if you are still undecided about options and do not feel like learning all of the terms.

4- Trading Options Greeks: How Time, Volatility, and Other Pricing Factors Drive Profits

If you want to master the option greeks, Trading Options Greeks: How Time, Volatility, and Other Pricing Factors Drive Profits is a great place to start. Option pricing is dependent on many factors, including the greeks. To have in-depth knowledge about options, one must understand how each of the greeks will affect an options price.

This book will demonstrate multiple options trading strategies that profit as the greeks change. It also covers how the greeks can spot profitable opportunities in the market.

5- The 3 Best Option Trading Strategies for Beginners: The Ultimate Guide by Freeman Publications

While this book is targeted toward beginners, the options trading strategies that the book lays out are helpful for all levels of options traders. The strategies covered include iron condors, covered calls, and credit spreads.

The book covers picking the right strategy for your portfolio and managing your risk while trading options. The three methods within this book perform well in all types of markets and are easy to implement.

6- Options Trading: The Bible: 4 in 1

This 4-in-1 options trading book set teaches advanced strategies in a way that even beginners can utilize. If you are interested in day trading options, this series will cover it in depth.

It also covers the psychological aspects of trading, which is crucial to becoming a profitable options trader. Additionally, this set will cover all technical definitions of terms every trader should know.

7- Options Trading For Dummies (Fourth Edition)

Options Trading For Dummies is a fantastic guide on options trading for all types of traders, regardless of your experience level. The author, Joe Duarte, covers the options trading approach from start to finish, ensuring new traders do not feel left behind.

The book covers all the options trading basics, such as the different option types and how to use technical analysis to improve your options strategies. Regardless of the market conditions, this book will educate you on how to improve your portfolio returns trading options.

Check out our full review of Options Trading for Dummies for more insight on this book.

8- Understanding Options

This book is an excellent guide that provides practical options trading advice. It covers risk management and executing various options strategies, making it great for beginners who want to improve their skills.

The book also includes many charts and statistics to provide the reader with real market data. If you are looking for a simple guide to improve your options trading knowledge and trading profitability, Understand Options is a great choice. Consider our full review of Understanding Options as part of your research.

9- The Options Playbook

This book is written by Brian Overby and covers many practical options trading topics. It also discusses common mistakes that beginners can easily avoid.

The book also covers risk management, which is a crucial topic, especially for new traders who have never experienced market volatility. This book is an excellent choice if you want to learn about easily implementable options trading strategies.

The Best Options Trading Books

Options Trading BookSummaryAmazon Links
1- Options as a Strategic InvestmentBest for moderate to advanced options traders.BUYONAMAZONpng
2- Options Volatility and PricingBest for mastering volatility. BUYONAMAZONpng
3- Options Trading Crash CourseBest for beginners. BUYONAMAZONpng
4- Trading Options GreeksBest for understanding options greeks.BUYONAMAZONpng
5- The 3 Best Option Trading Strategies for BeginnersBest for learning basic strategies.BUYONAMAZONpng
6- Options Trading: The BibleBest for comprenhensive options knowledge. BUYONAMAZONpng
7- Options Trading For DummiesBest for easy-to-understand basics.BUYONAMAZONpng
8- Understanding OptionsBest for foundational options concepts.BUYONAMAZONpng
9- The Options PlaybookBest for a practical strategies guide.BUYONAMAZONpng

The Best Options Trading Books: Bottom Line

These books allow you to learn from the greatest options traders of all time. However, options knowledge is only as valuable as the trader behind the execution.

Understanding trading strategies is entirely different from being able to trade profitably. When you enter trades, emotions rush in and can hinder your actions. Learning how to use technical indicators is another crucial aspect of trading options efficiently.

You can also check out my posts about the best trading books and the best Robert Kiyosaki books!

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Before you go

Disclosure: This post contains affiliate links from Amazon and TradingView. As an Amazon Associate, I earn from qualifying purchases. This means that if you click on these links and make a purchase, I will receive a small commission at no extra cost to you.

If you want to keep educating yourself about personal finance, you must check out these posts as well:

What is the Most Successful Options Strategy

Options Trading for Income: The Complete Guide

Mark Minervini’s Trading Strategy: 8 Key Takeaways

TradingView Pricing Guide

The Best Laptops and Computers for Trading

The Best Monitors for Trading

How to Get a TradingView Free Trial

The Best TradingView Indicators

The Best Technical Analysis Books

What is OpEx in Stocks and Finance Explained

what is opex in stocks

OpEx is a term that has several different meanings in stocks and finance. Depending on the context, it can refer to option expiration, operating expenses, or operating expenditures.

In this article, we will explain what OpEx means in each of these scenarios and how it affects traders, investors, and businesses.

What is OpEx in Stocks (Option Expiration)

In the context of stocks, OpEx stands for option expiration. Options are contracts that give the buyer the right, but not the obligation, to buy or sell an underlying asset at a specified price before or on a certain date.

There are several types of derivatives that expire, including stock options, index options, futures, futures options, and more. OpEx is generally used to describe monthly expiration dates, which occur on the third Friday of each month.

However, there are also options that expire each day, called 0DTE options (zero days to expiration), as well as weekly options. This means that practically every day is technically an option expiration day. However, the main ones are the monthly OpEx and triple witching OpEx.

What is Triple Witching (Formerly Quadruple Witching)

Triple witching is when stock index options, stock index futures, and stock options expire simultaneously on the same day. This event occurs four times a year, once each quarter, on the third Friday of March, June, September, and December.

Trading volume may surge during a triple witching date since many traders are rolling option contracts forward or closing their positions before expiration. The most common trade that people refer to during triple witching is the JPM quarterly collar trade, which is rolled once a quarter to hedge one of its funds.

Triple witching used to be called quadruple witching when single stock futures were also part of the mix. However, single stock futures stopped trading in the U.S. in 2020 due to low liquidity and regulatory issues. Therefore, quadruple witching is now referred to as triple witching since then.

What Happens on OpEx Days?

Monthly expiration and triple witching dates are significant for traders because there will be a lot of trading volume and activity due to people managing options positions. You can use tools like the max pain to determine which option strike price has the most value open. The max pain is best used on a large stock index like the SPX or SPY.

The max pain is the point where the stock’s price inflicts the most financial damage on all the options holders who own the contracts with that strike price when they expire. This scenario occurs when the stock’s price (the underlying asset) matches the strike price of the options contract at the expiration date.

Generally, it is known that the market makers want the SPY or SPX to expire at or near max pain so that the most options possible expire worthless, causing the maximum amount of pain for traders.

The market makers are the ones who create and sell options contracts to traders and investors. They hedge their risk by buying or selling shares of the underlying stock according to the demand and supply of options.

The HaiKhuu Trading Discord has a free tool that updates the max pain on SPY so you can stay on top of it. You can also use TradingView to track and analyze any market on any device with powerful charts and tools.

What is OpEx in Finance

In finance, OpEx stands for operating expenses or operating expenditures. These are the costs that a business incurs while running its normal operations.

OpEx includes expenses such as salaries, rent, utilities, marketing, maintenance, etc. OpEx does not include costs that are related to capital investments or financing activities.

Capital Expenditures vs. Operating Expenditures (CapEx vs. OpEx)

Capital expenditures (CapEx) are costs that often yield long-term benefits to a company. CapEx assets generally provide value to the business for at least a year. Examples of CapEx include buying property, plant, equipment, software, etc. CapEx assets are recorded as assets on the balance sheet and depreciated over time.

Operating expenses (OpEx) are costs that often have a much shorter-term benefit. OpEx is typically categorized as costs that provide benefits to a company for less than a year. Examples of OpEx include wages, rent, utilities, marketing, maintenance, etc. OpEx expenses are recorded as expenses on the income statement and reduce net income.

Understanding OpEx | Bottom Line

OpEx is a term that has multiple definitions in stocks and finance. Depending on the context, it can mean option expiration, operating expenses, or operating expenditures. Each of these scenarios has different implications and effects for traders, investors, and businesses. Understanding OpEx can help you make better decisions and optimize your performance in the markets.

If you want to learn more about OpEx and other market concepts, you should sign up for TradingView. TradingView is a platform that can help you track and analyze any market on any device with powerful charts and tools. Plus, you can get a free trial and a discount when you use our link to sign up.

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FAQ

What is OpEx?

OpEx is a term that has several different meanings in stocks and finance. It can refer to option expiration, operating expenses, or operating expenditures.

What is OpEx in stocks?

In stocks, OpEx stands for option expiration. It is the date when options contracts expire and cease to exist. There are monthly expiration dates and triple witching dates that occur four times a year.

What is OpEx and CapEx?

OpEx and CapEx are two types of costs that businesses incur. OpEx stands for operating expenses or operating expenditures, which are costs that have a short-term benefit. CapEx stands for capital expenditures, which are costs that have a long-term benefit.

What is OpEx in finance?

In finance, OpEx stands for operating expenses or operating expenditures. These are the costs that a business incurs while running its normal operations.

What is OpEx in real estate?

In real estate, OpEx refers to the expenses that owners or property managers incur while maintaining and operating a property. They include costs such as property taxes, insurance, repairs, utilities, etc.

What is OpEx week?

OpEx week is the week when monthly options contracts expire. It usually occurs on the third week of each month. Trading volume may increase during this week as traders adjust their positions before expiration.

What is OpEx day?

OpEx day is the day when monthly options contracts expire. It usually occurs on the third Friday of each month. Trading activity may be higher on this day as traders close or roll their positions before expiration.

What is OpEx options?

OpEx options are options contracts that expire on a monthly basis. They are also known as monthly options or standard options. They have more liquidity and volume than weekly or daily options.

What is OpEx in trading?

In trading, OpEx refers to option expiration. It is the date when options contracts expire and cease to exist. Traders need to be aware of OpEx dates because they can affect the price and volatility of the underlying assets.