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How to use Options and Hedging

How to use Options and Hedging
Todd "Bubba" Horwitz on Liberty Talk FM - Image Rotator Photo

BY: Todd Horwitz, Host & Senior Contributing Analyst
PUBLISHED: November 13, 2015

Potential for Unlimited Gains if you use Options the Right Way.

Today on The Bubba Show, Todd introduces his program for students how to use options and hedging. He tells the students what puts and calls are. How they are affected by market conditions. He comments that he will show them the phases of the market and how that will affect their trading and how this will help them to learn how to protect their portfolios from adverse price movements. 

Bubba teaches the phases of the market. He notes that all liquid markets have phases that they constantly go thru. The birth of any market is the congestion or consolidation phase, where buyers and sellers constantly change hands. Next is the breakout to the trend, when the strong hands overcome the weak hands and price moves in a direction. Finally is the blowoff in which the strong hands and the weak hands change position, and the market makes the classic V pattern and goes the other way.

Bubba talks about how the market is very efficient. It prices in much of the information that the public believes that they have the handle on. This is a mistake that should be avoided. Bubba stresses that all of that information is in the charts and that you need to block out all of the media disinformation and follow the chart patterns. Use support and resistance to trigger your trades.

Bubba talks about the advantage of using options in your portfolio. First he sites leverage that options give you. He also notes that if you are overleveraged that it can lead to disaster and talks about Lehman Bros. and Bear Sterns. Using options in the correct way will give your limited dollar risk and the potential for unlimited gains. Bubba comments on why financial literacy is so important to investors.  You can’t compete if you don’t understand how the market works.


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Todd Horwitz began his career in the financial industry as an option market maker at the Chicago Board of Options Exchange in 1982 and was one of the founding traders in the SPX pit. He is an active member of the am currently a member of the Chicago Board of Trade.