Michael Thomsett

Michael Thomsett

Michael Thomsett is a prolific author and blogger. He has written eight options bookws including the best-selling Getting Started in Options (Wiley, over 250,000 copies sold, 9th ed. released March 4, 2013). He also recently published Options for Risk-Free Portfolios (Palgrave-Macmillan). He operates the educational website ThomsettOptions.com and teaches five classes at the New York Institute of Finance (NYIF). He lives in Nashville and writes and teaches fulltime.

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Trading Close to Expiration – a Strategy with Advantages

Everyone familiar with options trading is aware of the big dilemma: Options close to expiration cost less but expire soon. Options with more time to develop profitably cost more. How do you balance these conflicting attributes? Trading options very close to expiration and containing little or no time value might be the most powerful form [...]

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How to Improve Your Odds with Put Ratio Backspreads

Traders tend to view the Put Ratio Backspread as a bear strategy, because it employs puts. However, it is actually a volatility strategy. So entering the position when implied volatility is high and waiting for the inevitable adjustment is a smart approach, regardless of the direction of price movement. Based on volatility and time decay, [...]

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Black-Scholes – a Critical Examination and Suggestions for Alternative Methods

The big question, of course, is: How can we rely on a formula with a series of variables that are provably inaccurate and based on a flawed assumptions, exponentially inaccurate variables, and outdated models about the nature of options? The pricing model under the Black-Scholes (B-S) formula is premised on several assumptions. Today, in spite [...]

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When Volatility Becomes Unreliable – then What?

Truth be told, volatility analysis is a great idea, but only until the last month before expiration. In that last month, volatility simply doesn’t work reliably enough to be used. Why? Because extrinsic value (IV) is not logical and most or all of time value has evaporated. What can you do at this point? These [...]

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New Options Educational Site Launched

(Editors note: we are happy to pass along info about Michael Thomsett’s new blog site. He is a well known option expert and a friend of the CBOE. Good luck Michael). After years of writing books, articles, blogs, and opinion pieces within the options market, I recently teamed up with a partner, Michael Stoppa, an [...]

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Pitfalls (and Possible Solution) of the Ratio Write

The attraction of the ratio write is the potential for higher premium income. Traders too often convince themselves that exercise is unlikely, and that time decay is “likely” to outpace intrinsic value as the stock goes higher, even if the calls go in the money. Here’s the thinking: You own shares of an underlying security. [...]