FAQ & Answers

FAQ answers will be updated weekly. If your question is not answered through above FAQ, please post your question in the “Q&A” button at the top of this page or click here.

Coming soon

2.1 FAQ
Question: Debt/Equity Ratio: What is Acceptable?
Answer: D/E at maximum 50%. Debt is good to propel growth, but too high at more than 50% will create too high gearing and burden for company.

2.2 FAQ
Question: When is it useful to use ROI & ROC?
Answer: ROI (Return on Investment) is for buying Stock and selling Put Options where we are prepared to be assigned to buy stock over (investment). ROC (Return on Capital) is generally used for all Options as it is not always paying capital to enter a trade, eg. selling (Sell Put included) options only lock in Buying Power (BP) as capital and not paying upfront capital.

2.3 FAQ
Question: When do we use FA (Fundamental Analysis)?
Answer:FA encompassess the macroeconomics (external environment factors including economy, trade relations, politics, GDP, economic indicators, interest rates, employment data and etc) and microeconomics (the company financial health and strategic outlook, the market capitalization, PE ratio, key ratios and etc.). FA is used when you want to analyse the company’s fundamentals and the stock market status for the purpose of deciding on investment entry/exit. It sis used for medium to long term investments.

 

3.1 FAQ
Question: How to use Divergence?
Answer:Divergence is when the price of an asset is moving in the opposite direction of a technical indicator, such as an oscillator, or is moving contrary to other data. Divergence warns that the current price trend may be weakening, and in some cases may lead to the price changing direction. Divergences are used by traders in an attempt to determine if a trend is getting weaker, which may lead to a trend reversal or continuation.

3.2 FAQ
Question: What is highest possible value for ADX?
Answer:ADX Value
Trend Strength
0-25 Absent or Weak Trend
25-50 Strong Trend
50-75 Very Strong Trend
75-100 Extremely Strong Trend

3.3 FAQ
Question: What is acceptable range(plus/minus) for Open Interest?
Answer:For U.S. market, an option needs to have volume of greater than 300, open interest greater than 100, a last price greater than 0.10. When options have a significant open interest, it means there are a large number of buyers and sellers out there. An active secondary market increases the odds of getting option orders filled at good prices.

3.4 FAQ
Question: What is acceptable range(plus/minus) for Open Interest?
Answer:For U.S. market, an option needs to have volume of greater than 300, open interest greater than 100, a last price greater than 0.10. When options have a significant open interest, it means there are a large number of buyers and sellers out there. An active secondary market increases the odds of getting option orders filled at good prices.

3.5 FAQ
Question: Clarify the difference between IV vs Vega?
Answer: Vega is the Greek that measures an option’s sensitivity to implied volatility. It is the change in the option’s price for a one-point change in implied volatility. … Whereas, Vega is the sensitivity of a particular option to changes in implied volatility.

3.6 FAQ
Question: Clarify the difference between IV vs Vega?
Answer: Vega is the Greek that measures an option’s sensitivity to implied volatility. It is the change in the option’s price for a one-point change in implied volatility. … Whereas, Vega is the sensitivity of a particular option to changes in implied volatility.

3.7 FAQ
Question: How does “consolidation” look like in the graph? (support and resistance)
Answer: Consolidation in technical analysis refers to an asset oscillating between a well-defined pattern of trading levels. Consolidation is generally interpreted as market indecisiveness, which ends when the asset’s price moves above or below the trading pattern.

3.8 FAQ
Question: What is Golden Cross? What is death cross?
Answer: The golden cross occurs when a short-term moving average crosses over a major long-term moving average to the upside and is interpreted by analysts and traders as signaling a definitive upward turn in a market. Basically, the short-term average trends up faster than the long-term average, until they cross. The death cross appears on a chart when a stock’s short-term moving average, usually the 50-day, crosses below its long-term moving average, usually the 200-day. The death cross can be contrasted with a golden cross indicating a bull price movement. You can apply Golden cross or death cross in any timeframe, which depends on either you are looking at long term or short term strategies

3.9 FAQ
Question: Is it possible to write a script to identify the 5 star criteria in TOS ?
Answer: YES, need to learn ThinkScript

4.1 FAQ
Question: What is futures trading?
Answer: A contract on commodities (normally), a contract that is settled on a future date, price agreed today, but delivered on a future date for hedging purposes due to future price fluctuation, runs 24 hrs, Futures of SPX is /ES.

4.2 FAQ
Question: How to do futures trading?
Answer: Investors trade futures on margin, paying as little as 10 percent of the value of a contract to own it and control the right to sell it until it expires. Margins allow for multiplied profits, but also make it possible to risk money you can’t afford to lose. Remember that trading on a margin carries this special risk. CII will share how to trade options on futures in Gold Club

5.1 FAQ
Question: What does it mean to “exercise”
Answer: When you exercise an option, you usually pay a fee to exercise and a second commission to buy or sell the shares at the strike price, forgoing your premium that you have paid. The option contract then terminates.

5.2 FAQ
Question: Options in the US can be exercised at any time, what does this mean?
Answer: An American option is a version of an options contract that allows holders to exercise the option rights at any time before and including the day of expiration.

5.3 FAQ
Question: For Buy-Put, if I don’t hold any stocks, what am I selling?
Answer: When a trader buys a put option they are buying the right to sell the underlying asset at a price stated in the option. There is no obligation for the trader to purchase the stock, commodity, or other assets the put secures. Therefore, you are buying into a contract, that doesn’t require you to deliver anything, as long as you don’t leave it to expire ITM.

6.1 FAQ
Question: What are the 4 basic options strategies?
Answer:

(1) Buy call – right to buy stock at strike price, pay premium

(2) Sell call – obligation to sell stock at strike price, receive premium

(3) Buy put – right to sell stock at strike price, pay premium


(4) Sell put – obligation to buy stock at strike price, receive premium

Refer to CII Guidebook

6.2 FAQ
Question: What are the 3 main applications taught in CII?
Answer:

(1) RBS (Rolling Boat Strategy) – Bull call and Sell call

(2) FIS (Funded Income Strategy (also called as wheel strategy) – Sell Put and Sell Call

(3) MTVS (Multiple Tight Vertical Spread) – Bull put and Bear call

6.3 FAQ
Question: What is RBS & FIS?
Answer:

> RBS stands for Rolling Boat Strategy (also known as Long Call Strategy)
> FIS stands for Funded Income Strategy (also known as Wheel Strategy)
> These RBS and FIS are the strategy term set by CII. Please refer to SOP 2 for more details.

6.4 FAQ
Question: Why naked sell call can be dangerous
Answer: Because you have to buy at any price to cover (Unlimited Loss). Sell call @ 100, Mkt 150, loss $50 (50×100=$5000 loss)

Answer: 7.1 FAQ
Question: How is buy put protective?
Answer: Traders buy a put option to magnify the profit from a stock’s decline. For a small upfront cost, a trader can profit from stock prices below the strike price until the option expires. By buying a put, you usually expect the stock price to fall before the option expires, and if you have stocks, you have the rights to sell away at the strike price even when the market price drops

7.2 FAQ
Question: There can be a situation if the price is high but still it may not be profitable to exercise the Buy Call option
Answer: When you exercise a buy call option, you are buying the stock at strike price and forgoing your premium, therefore your breakeven. The market price has to go higher than the break even strike price to start making profits.

Eg. Strike price is $50, Premium Paid $5.00, your breakeven strike price is $55

Coming Soon

Coming Soon

10.1 FAQ
Question: What does “AM” mean?
Answer: Special contract with US time morning 8am expiry. AM means morning settlement, next day at start of market open, instead of at market close. Every option contract has a specific expiration date, and time. The time of expiration can be either in the morning (am) or in the afternoon (pm). Options that expire at the close of the market are considered pm and options that expire the morning of the last trading day are am. Avoid “AM” trades.

10.2 FAQ
Question: When I see icons (eg. earnings or dividends), how do I view the details of the icon?
Answer: Just hover cursor over icon and pause there, do not click, … details will pop up

10.3 FAQ
Question: What is Spark Chart?
Answer: Its the small chart icon on watchlist of mobile devices to illustrate a price movement feel.

10.4 FAQ
Question: How to link chart setting on PC to mobile devices?

Answer: Mobile devices are separate lite platform and will require separate setups. Please redo there and is quite intuitive. Refer to TOS video on Chart Setting (Corehub). Once setup and linked with colored pin, when you click on any SYM, all charts on any devices in your account will be synchronised.

10.5 FAQ
Question: How to set Alert on PC or mobile devices to alert on entry, exit or action?
Answer: See TOS video on Setting Price Alert. There are several ways to do that. You can right-click to Create Alert from your left panel WATCHLIST, TRADE tab, or CHART tab

10.6 FAQ
Question: How to see and use Standard Deviation on TOS?

Answer: CHART tab: EDIT STUDIES to add in PROBABILITY OF EXPIRING CONE or (2) ANALYSE > RISK PROFILE: At Price Slice row, look to the far right click 3-bars to select Set Slices for 1 sigma base. 1 Standard Deviation means 68% chance of price movement is expected to be within the price range indicated.

10.7 FAQ
Question: How to put stop loss in TOS?
Answer: For positions already opened: (1) You can Create Alert to set an alert reminder for mental stop loss. and or (2) calculate a target profit / max loss then right-click on opened position to set a GTC (Good-Till-Closed) closing order and leave in your Working Order till close is triggered.

For positions yet to be opened, before clicking CONFIRM, you set the STOP LIMIT.

10.8 FAQ
Question: How to exit trade of opened position on TOS?
Answer: Activity & Positions > Position Statement: Highlight trade, right-click to Create Closing Order >MONITOR > Activity & Positions > Position Statement: Highlight trade, right-click to Create Closing Order.

10.9 FAQ
Question: What does SPREAD on Option Chain mean?
Answer: Spread has 2 meanings in Options. (1) BID-ASK SPREAD: It is the difference between the sellers’ BID vs buyers’ ASK prices. When volatility is high, the option price in bid-ask spread is high. (2) STRIKE SPREAD: In verticals, it is the difference between the buy and sell legs’ strike prices. The higher the spread, the higher the max loss.

10.10 FAQ
Question: How option prices (Bid or Ask) calculated?
Answer: The bid ask option prices are calculated based on standard but complex Black-Scholes formula. And is derived from a combination of INTRINSIC value (difference between the market and strike prices) and the EXTRINSIC value (theta time value, vega volatility value and to a very small extent the rho interest rate.

Coming Soon