Articles
Plain writing on how options actually behave, written for people who sell them. The groups are in reading order: if you're new, start at the top.
Start here
- A short put is a standing order to buyYou collect the premium today; the strike is the price you've agreed to pay later. One trade walked through every ending.
- Assignment, from the exercise notice to your accountWho decides, how the OCC hands it out, when it shows up, and what you can still do about it.
- The covered call is a sale with a ceilingYou keep the shares' downside and hand over their upside above the strike. Where the premium helps, and where it can't.
- Rolling is a close and an open, not a rescueThe buy-back is a realized loss no matter what the net credit says. How to judge a roll, and how to write it down.
Volatility
- Implied volatility is the option's price, spoken as a percentageHow to turn the number into an expected move in dollars, and why a fat premium is the market telling you something.
- The VIX is a price, not a moodIt's built from S&P 500 option quotes. What the calculation is doing, and how to read a level like 20.
- Selling when the VIX is high: the rule and the fine printPremium is richer when volatility is high because the moves are bigger. Why the rule works on average and fails in clusters.
- Times to leave the premium on the tableEarnings, stocks you don't want, collateral you don't have, and other cases where the answer is no.
Strategy and the Greeks
- The wheel, stated plainlyPuts until you're assigned, calls until you're called away. Where the loop breaks, and what the premium total leaves out.
- Delta: what the option does when the stock moves a dollarA hedge ratio that people read as a probability. Where that reading holds up and where it gets you hurt.
- Time decay, and the gamma that comes with itWhy options are worth less every day, why the decay speeds up, and why the seller's tailwind isn't free.
- The last day of a contract, hour by hourThe close, the exercise cutoff, after-hours moves, and the weekend between assignment and your next trade.
- Credit spreads: buying a floor with part of the premiumAdding a long option caps the loss at a known number. What the cap costs, and what it doesn't fix.
Costs, sizing and the account
- The spread is the commission nobody itemizesYou sell near the bid and buy back near the ask. How to measure the cost as a share of the premium, and how to pay less of it.
- Sizing: the decision that decides whether you're still hereA win rate is not a shield. Sizing by notional, the arithmetic of losing streaks, and why correlated names are one position.
- Options approval levels, and what each one unlocksWhy the broker gates strategies, what the application is actually asking, and how to get to the tier you need.
- Puts on margin: same promise, smaller depositThe obligation doesn't shrink when the collateral does. What margin changes about the worst case and about sizing.
- Options and the tax return: the three ways a trade endsExpiry, closing, and assignment are taxed differently. Wash sales, index options, and why SPX and SPY aren't twins.
Housekeeping
- A trade log that tells the truthThe fields worth keeping, the ones that flatter you, and the monthly questions a log should be able to answer.
- Corporate actions rewrite the contractSplits, special dividends, mergers, and spin-offs change what a contract delivers. How to read the adjustment before you trade it.