My last post on the topic of dividends and options explored the terminology of dividends and common questions relating to options trading. In this post, we will understand step-by-step what exactly is meant by ‘possible dividend risk’ when trading options. To illustrate the process, we will use a recent SPY trade that was influenced by…

As an active trader/investor, I spend many hours each day conducting my due diligence on the markets. This involves reading many articles/opinion pieces about the factors influencing the direction of the broader markets as well as my individual equities. I love when I come across information that furthers my understanding of why markets move the…

When I tell people that I trade options, I often get the same response: options are risky. Frankly, options are the opposite of risky – when they are used properly – they give traders the ability to limit risk and also increase their odds of winning. You wouldn’t drive your car without a seat-belt, why…

As an educator in the field of options trading, I’m often asked “what causes a short call or a short put to be assigned?” Before I can answer that question I need to briefly explain what an option is, some of the terminology used, and who the participants in the exercise and assignment process are.…

Introduction Regular and special dividend payments influence the price and the possibility of assignment on options. Although the impact of an ex-dividend date on an option position is usually relatively small, it is important to understand the dynamics of this process for options traders. First, let’s clarify the language in the dividend payment process. There…

How many times have we heard the long-standing trading adage, “Don’t fight the Fed!” when discussing portfolio positioning in the stock market? When studying equity markets across time, one notices that the market heads to higher valuations when our Federal Reserve is in a process of reducing interest rates or keeping them low on a…

In the heart of the hot, lazy days of summer it’s easy to imagine that the warmth will last forever, and all you will ever need are t-shirts and shorts. Bull markets are like summer days. They lull you into believing that they will last forever; that all you will ever need to do is…

There has been no doubt that since March of 2009, the market has been in a consistent uptrend. This has been driven, in large part, by the Federal Open Market Committee’s quantitative easing (QE) through various mechanisms, including maintaining the Effective Federal Funds Rate at near zero – Zero Interest Rate Policy (ZIRP). The Fed…

It should surprise no one when I confidently make the statement that someday the great bull market of the past six years will come to an end. The question we all want to know is – when? While I do not have a crystal ball providing that answer, I can clearly see that 2015 is…