American Option Styles vs European Option Styles

An option style refers to whether the option contract can be exercised before the expiration date or not. European options cannot be exercised before the expiration date of the option contract. American options can be exercised by the option holder (the option buyer)...

Volatility and Standard Deviation

Simply stated, we can define volatility as a 1 standard deviation (StdDev) price change over the course of one trading year. The value is normally expressed as a percentage of the security price. If a stock trades at $100 with a...

Value-at-risk (VaR)

VaR is an estimate of an amount of money. It is based on probabilities, so cannot be relied on with certainty, but is rather a level of confidence which is selected by the user in advance. VaR measures the volatility of a company’s assets, and so the greater the...

The odds against you

Why do most traders lose and wash out of the markets? Emotional and thoughtless trading are two reasons, but there is another. Markets are actually set up so that most traders must lose money. The trading industry kills traders with commissions and slippage. Most...

Just business, nothing personal

Treating your trading as a business means accepting the fact that it is just business and you should not take it personally. When you lose money on a trade, it is not a personal attack on your character or a conspiracy by the underlying security to ruin you. Losses...