Best option trading 14 2014

Finding the higher volume trading options and tighter spreads have been my primary issues so far. Still, a logical set of steps is a good place to start. RSI of 35 or less within the past 5 trading days. Consider buying calls with 45 to 145 days left until expiration and Open Interest of at least 100 contracts. Your choice whether to use leverage or not. Finding the higher volume trading options and tighter spreads has been my primary issues so far. Of course there is also the whole topic of what to do with this trade: close it, sell some, adjust it, etc.

RSI to drop to 20 or below and then reverse to the upside. So does every trade work out this well? As you can see in Figure 5, only 19 stocks now remain for consideration. Um, is your mother home? There are a virtually unlimited number of ways to play the financial markets. In Figure 8 we see that the Feb 14 call option gained 169.

Figure 1 displays a number of such signals. OK because the purpose here is not for you to rush out and start trading with it, but rather to stimulate your own thinking on the subject. So sometimes the place to start is, well, anywhere, so long as that anywhere has a beginning and an end and a logical progression to it. Have to decide what you can handle. Stocks that have experienced a recent pullback and may now be due for a bounce. If you are interested in a Promo Code for www. That reminds me of a joke. The boy has a beautiful woman on each side, a drink in one hand and a big cigar in his mouth.

Exactly the Wrong Time? This method involves a set of steps designed to generate a bullish option trade based on a logical set of criteria. From here a trader can use whatever bullish option method they prefer to find a potentially profitable trade among these 19 stocks. Stocks that are performing well overall. In Figure 7, we see that MRVL rallied nicely within a few weeks from 13. This report includes some of my recent learnings about popular retirement plans and how you can do better. Would raising rates be a good idea at a time when the market is lower than it was a year ago? Of course, as with all investments, you should only risk what you can afford to lose. After enduring a certain amount of psychic pain, investors remember that that the world will probably continue to move along pretty much as it has in the past, and market fears will subside. SVXY varies inversely with VIX.

The stock was almost just as likely to move in the opposite direction as it had in the previous week. The last time that VIX closed above 20 was on November 13, 2016. Since I am quite certain that it is headed higher, not lower, a drop of this magnitude seems highly unlikely to me. Last week was a bad one for the market. After all, does the Fed want to be the bad guys who are responsible for the worst yearly market in 7 years? The historical mean is over 20, so this is an unprecedented low value. Of course, there are other ways you could make a similar bet that SVXY will head higher as soon as some of the market uncertainty dissipates. Actually, VIX does not have to fall for SVXY to at least remain flat. This message is coming out a day early because the underlying stock we have been trading options on has fallen quite a bit once again, and the put we sold to someone else is in danger of being exercised, so we will trade a day earlier than usual to avoid that possibility.

Not much to worry about, however. Monday, it looks like that bet could triple in value this week. The biggest problem with buying straddles is that you will lose on one of your purchases while you profit on the other. When VIX eventually falls, one thing we know is that SVXY, the ETP that moves in the opposite direction as VIX, will move higher. Friday when VIX once again moved above 20. Note that while the general trend for SVXY is to the upside, every once in a while it takes a big drop. The stock recovers quickly once fears subside. If this pattern could be counted on to continue, it would be a fantastic trading opportunity. Trade, Bullish Options strategies, Calendar Spreads, Calls, Credit Spreads, diagonal spreads, intrinsic value, LEAPS, Monthly Options, Portfolio, Profit, profits, Puts, Risk, Stocks vs. Once again, the historical results did not support the law of cycles pattern. Tags: after hours trading, Calls, DBA, DBB, DBC, DBO, DIA, EEM, EFA, ETF, ETN, ETP, GAZ, IWM, IWN, IWO, IWV, JJC, KBE, KRE, MDY, MLPN, MOO, NDX, OEF, OIL, profits, Puts, QQQ, Risk, SLX, SPY, Stocks vs. With option prices currently so low, maybe it is a time to reverse this method and buy options rather than selling them.

Another good idea dashed by reality. Either choice should result in a higher market and more importantly for option traders, a lower VIX. This assumes, of course, that the current pessimism will continue into the future. The reason is that there is almost always some remaining premium over and above the intrinsic value of the option, and you can almost always do better selling the option rather than exercising your option. In my personal account, I bought weekly calls on this same underlying. So how much do I have to put up to place this trade? Wednesday when the Fed makes its decision concerning interest rates.

It was the 10th time that it moved over 20 in the last 3 years. You will not have to make a trade at that time, but just wait until the end of the day to see the maintenance requirement disappear. Market volatility continues to be high, and the one thing we know from history is that while volatility spikes are quite common, markets eventually settle down. For those reasons, I bought calls on SVXY on Friday. In fact, since it was created in 2009, VXX has been just about the biggest dog in the entire stock market world. It is important to understand that the risk profile of a calendar spread is identical regardless of whether puts or calls are used. Possible Great Option Trading Idea: As we have discussed recently, option prices are almost ridiculously low.

We tested this pattern on SPY for several years, and sadly, found that it did not hold up. Fear Index, continues to be over 25. You could sell the same spread at any weekly option series for the next 5 weeks and receive approximately the same credit price. You would be betting that the stock manages to move a little higher over the next 4 months. Maybe we could use the pattern and buy weekly either puts or calls, depending on which way the market had moved in the previous week. In either case, no rate increase or a small one, the big change will be that the uncertainty over the timing of the increase will cease to exist. Maybe the pattern would work for our most popular underling, an ETP called SVXY. But it is nice to avoid if possible. The stock is destined to move higher, not lower, as soon as the current turbulent market settles down. To avoid that from happening to you when you are short the option, all you need to do is buy it back before it expires, and no harm will be done.

While this temporary period of high volatility continues to exist, there are some trades to be made that promise extremely high returns in the next few months. When VIX moves higher, SVXY crashes, and vice versa. In making this study, we discovered something interesting, however. However, I feel pretty good about the two investments outlined above, and will be making them today, shortly after you receive this letter. VIX does not rise appreciably between now and when the options expire. Yes, you might lose your entire investment in the losing weeks, but if you doubled it in the winning weeks, and there were many more of them than losing weeks, you would do extremely well. Usually, the owner of any expiring put or call is better off selling their option in the market rather than exercising the option. Usually, you make that trade as part of a spread order when you are selling another option which has a longer life span.

But I believe the likelihood of losing on this investment is extremely low. Owning options is a little more complicated than owning stock. Where else can you make this kind of return for as little risk as this trade entails? VXX inevitably moves lower. It might be a fun week for me. The big challenge would be to find a price pattern that could help you choose which direction to bet on? When VIX falls back below 20, as it has done every single time it rose over 20 for the past 3 years, SVXY will be trading higher than it is today. January 15, both puts will expire worthless and the maintenance requirement disappears. The recent drop is by far the largest one in the history of SVXY.

It takes a fairly big move in the underlying to cover the loss of money on your losing position before you can make a profit on the straddle. When an expiration date of options you have sold to someone else approaches, you need to compare the stock price to the strike price of the option you sold. Of course, a serious terrorist action or other calamity might spook markets as well, and the uncertainty will continue. Because of the persistence of contango, SVXY is destined to move higher even if VIX stays flat. Wednesday, the first time it has done so in a decade. Most of these calendar spreads are in puts, and that seems a little weird because I expect that the stock will usually move higher, and puts are what you buy when you expect the stock will fall. Since VXX is such a dog, I like SVXY which is its inverse. Fed will raise rates in two days as Janet Yellen has indicated they plan to. They have traded many more puts than calls, and put calendar prices have been more expensive. Our goal is to always collect a little cash when we roll over, and that meant this week we could only roll to the 80. When people are generally optimistic about the market, call calendar spreads tend to cost more than put calendar spreads.

One of the best things about option trading is that you can still make gains when your outlook on the underlying stock is not correct. Some time ago, I noticed that the value of some of our portfolios was changing after the market for the underlying stock had closed. The BEST Options To Buy Right Now! Simply sign up to receive our FREE Options Trading Research newsletter and. Free Report includes subscription to Options Trading Research newsletter. Terms of Use and Privacy Policy.

This also assumes we experience a full loss of money for all of our losing trades, which does not happen every time. In trading, if our probabilities are directly correlated with the credit we receive it is a zero sum game. As contrarians, or mean reversion traders, we can also pinpoint price extremes and trade them accordingly. At tastytrade, we primarily focus on other factors that give us an edge. The reason this theory does not completely correlate with trading is because it only takes price direction into the equation. IV reversion, price reversion, rolling, and managing winners are all ways we can mechanically alter our pot odds and skew them in our favor. To put this into trading context, if we sell a one point wide vertical spread and we receive a credit of 20 cents, the most we can lose is 80 cents. Our main objective is to sell premium when IV is high because price direction is hard to read.

For example, we would risk two to make three, but we would not risk four to make three in a random environment. Thank you for developing this program for the new options investor. It was more of showing his trading sessions and his explanations were all over. This is ok, but there is no mention of the volatility risk. The one thing I did like about these videos is how he shows to look at the overall greeks of your portfolio. Notice that both items have different prices. Bottom line, adjustments are not as not difficult as the trader in these videos makes it seem. There is no mention of this risk in the videos. Advanced level options traders can pass on this course as well.

Study to be a PRO Trader Professional trading education not difficult accessible. Having said that I disagree with the reviewer who claims this course is misleading to beginners. It is not so with calendars. Professional High Probability Strategies course. In addition, the trader says nothing about increasing risk by rolling up the put side. Lastly this course is not for the beginning option student. Information in One Place! In the video where the trader is adjusting the SPY trade, he says his adjustment is break even, and rolling up the put side even gives him a little extra profit.

If however you have purchased material from online option gurus about spreads and Iron condors the material in this course is far more extensive, vast and in depth then any you have come across before. You need a basic knowledge of puts and calls and other basic options terminology. In at least one case, the trader in the video is outright wrong about what he is saying. These videos are ok for explaining a lot of things with Iron Condor and Calendar option strategies. DVD word for word, image for image, from start to finish including the bonus material. Amazon is unaware of this and actually recommends buying them together. For a new trader who were to believe the trader in this video, he may end up finding out the hard way that his adjustments are actually ending up as losses. These videos seem to be pitching calendar spreads a lot.

The instructor covered the topics from the basics to complex trades. DVD just with a different cover, title. This was a very interesting DVD. Altogether, the videos give the impression this option trading is simple with not much risk. Once I learn this material and options trading skills I am confident it will be profitable. If you are fairly well versed with credit spreads, Iron Condors, and Double calendars then you are familiar with the bulk of this material.

If you know the basics you will catch the one possible mistake. There is gold here for anyone in between. So, the benefit of having a new and growing market of speculators is that we have the ability to take the other side of their trade. And this is where the casino analogy really comes into play. They want to take a small investment and make exponential returns. And not difficult within the reach of regular investors. Simply stated, RSI measures how overbought or oversold a stock or ETF is on a daily basis.

In our case, we would use a bear call spread. Once an extreme reading hits I make a trade. So far, my statistical approach to weekly options has worked well. SPY using a simple indicator known as RSI. SPY pushes into an overbought state like the ETF did on the 2 nd of April. If I lower my probability of success I can bring in even more premium, thereby increasing my return.

Take a look at the options chain below. SPY, QQQ, DIA and the like. Take the Apr14 187 strike. It truly depends on how much risk you are willing to take. SPY, I start to take the same steps I use when selling monthly options. As always, I allow trades to come to me and not force a trade just for the sake of making a trade. Unfortunately, but predictable, most traders use them for pure speculation.

So how do I use weekly options? Remember, most of the traders using weeklys are speculators aiming for the fences. Weekly options have become a stalwart among options traders. Your risk will become larger. One thing I have tweaked in terms of my trading is to have several accounts of smaller capital Vs 1 account with all the capital. He asked if I would top up cash to the account to meet the margin requirement. Buffer in percentages means nothing compared to price buffer in stocks lesser than 20 bucks. Every trader and investor needs to practise risk management because there is one trade out there that will wipe you out, regardless if you have total conviction about being right. My lifestyle remains unchanged too.

Trading is indeed a very risky business. My trading rules says I must not carry more than 3 lots NIY, long or short to the next NIY open at 7am. On 27 Jan 14, I received a margin call from the broker. It is because humans failed themselves, not the market and not the method. Not saying it will work for everyone. They just asked if I would. Really sorry to hear of your big loss of money.

The margin proved too much to handle and the broker intervened. Along the journey the market will test you. My whole account was blew up too. How will you know your limits without an occasional failure? What happened to the promise? You will have to be lucky always. If I survived this trade, I will do it again in the future. Yes, Trading is glorified because we do not have enough traders to admit their losses. There are a good many articles about trading and investing, about properties and insurance and entrepreneurship.

We can be disciplined for a long time but it takes just a moment of carelessness to get punished real bad. However, I am confident you will bounce back. That is why I continue to write about them. My friends were shock when I told them about the loss of money. Your capacity for occasional blunders is inseparable from your capacity to reach your goals. On hindisght, USD 10k would be sufficient.

He can drive safely for 5 years but the moment he has a slip in safety, he may just get into an accident. It takes guts to admit a mistake and move on from here. At that point in time, price is moving against my position so no one can tell exactly how much to top up. NIY at 15150 this morning at around 6am. Well you are right, it is easier said then done. Share this with people you care about. Do you think not having a regular income could have somehow affected your psychology? And if you keep rolling you will run out of margin and the broker will ask you to top up or force close your position. The lesson definitely has more impact to people close to me. And this apply to our everyday lives too. Hi newbie, you cannot keep rolling.

It was difficult to cut loss of money because the paper loss of money was big. Just sharing my own journey. We can break our rules and hope that we are lucky enough not to be caught. FAILURES, when they happen, are just Part of your GROWTH. Jon I am picking pennies in front of the steamroller. How did all these happen?

Jon is the biggest Taleb fan I know. One of them admitted he was breaking his trading rules too. If I am wrong, will I be financially ok? One day I will still blow up. Somehow got impatient to earn more to make up for the lost income, resulting in the outsized position? If I could bet some money, I will surely bet you will bounce back. Take a look at nflx for the past 2 years. The second safeguard to risk management is cutting losses. Dec 2013 when selling NG premium. Since humans cannot be trusted all the time, we should minimise our involvement to execute risk management procedures.

Keep your eyes on the risks! What protects the trader is his understanding that the market can be very volatile and we have to stay agile and be ready change direction. However, it does not mean you will not blow up your capital if you long or short shares. And if I do, I hope he will pick me up from there. In the end, only a few can be successful in trading. This is how vulnerable our exposure to risk is. It is the person who is trading it that is risky. Unless you have very deep pockets, your margins could run so high that you go insolvent. Selling premium is still a better way of generating income but do remember not to use up all your margin.

The saving grace was that I did not have all my money in this account. Eg I find it easier to lose 1K against a 10K account Vs 10K against a 100K account. We know it is hard because we are all emotional. How did I end up with 43 lots in 15 minutes when I am supposed to sell and hold just 3 lots? It all started when Alvin blew up his options trading account. Building on my good results, I was eager to find more opportunities. NG incident, as remember him talking during a seminar in Dec 2013. You just need to be careless and unlucky once to be punished. Happy to hear that you are doing well and managing the risks properly.

Yes, I firmly believe that most method are good but the problem lies with the trader. We hope they do not skip any of it just because they feel moody that day. Regardless, the brokers are always safeguarding themselves, in case the clients could not pay up since selling naked options is said to have unlimited downside. Simple things like stop loss of money? That is why our airline pilots follow a set of procedures to check and fly the aircraft, no matter how experienced they are. Trading is about discipline as much as the method and one need time to master over oneself and allow me to take the time to expand my comfort zone before increasing my trading capital. In case you do not get the point, it is very difficult to be consistent with our behaviour because we have emotions.

Hi Alvin, thanks for your kind sharing. And sure they did. Nikkei 225 options mainly. However, I have a question here, can someone guide me about how the options trading works? Hope this year you are able to get it through. This is confusing since most brokers will insist you pay margin on any short option positions nowadays. They can no longer rewind time, but you can learn from their experience and hopefully start with a better footing.

Different strokes for different folks. My case reminded him of the consequences. Yes, I have the rules, but I broke them. The explosion and meltdown of the reactors caused panic and widespread fear, the Nikkei was sold limit down, spam margining kicked in for options position with the increase in volatility, many long positions were cut at ridiculous prices at best available bids. From what I read in this post, the trade would have been profitable if the position size did not increase. All forms of trading are risky.

But that is what a sore loser will say. Finance Bloggers share their mistakes and lessons learnt through their investing experience. You have also chose to bet against the trend. But this is similar to scalpers, swing traders and trend followers. Apart from that, withdrawing my profit regularly keeps the trading capital consistent so that I can apply my rules more consistently and to hone in my trading. Your TURN WILL COME. Today we were unlucky, but remember we only have to be lucky once. Risk management applies to local businesses too. Please check your email for the ebook!

He said he was powerless to grant the request and the margin team will have to close the positions. They closed all my contracts which wiped out my entire capital. Asian market trading hours and the options pricings were erratic with wide spreads. Believe the financial industry can treat their customers better. So what is the difference between selling options or any other strategies? But because my position was too big, I did not have enough margin to buffer the rise in price. Humans cannot be trusted? Even specialist can be caught off guard when there is event that happen unexpectedly, just like the earthquake in Japan, resulting in a Tsunami that destroyed the nuclear reactors in Fukushima. Our emotions can bend risk management rules which can be very costly.

Who said stocks are not risky? Instead of rolling trades like what Dave suggests, I prefer to cut the loss of money fast. It could possibly help them. The price went up and the margin got bigger. The magnitude of the loss of money and the swiftness in which it happened shocked and humbled all of us. ES, but now doing vertical spreads and not naked which Dave taught us. The trade busted because of margin calls. The other key thing I do is that I withdraw money from my accounts whenever it reaches a certain profit target. Look back at it Too long. It is not just naked options is risky.

Writing options is a very risky business, you are lucky to have separate account for this trade and only busted that account. Jon questioned my overconfidence in jumping off in time and I admit I stand a chance to blow up, without a doubt. Shake off your blunders. In this way, we can overcome our past mistakes faster and soar to greater heights! One99 shop too fast and ran into cashflow problems which eventually led to bankruptcy. And I am sure this lesson will be your turning point to success. Those who follow your blog will know that you have interviewed several experienced traders and read much related literature on trading. Jon that all forms of trading and investing are all about risk management. The paper loss of money was big because the positions were big.

It serves as a reminder that market is erratic and deserves our utmost respect. Greed got the better of me and I overrode the rule. Joz Koz, thanks for your honest and wonderful sharing. NG options to expire worthless and making a profit, despite the price going against my position. Nonetheless, it will take some time to make the money back. Thanks for sharing your story with us Alvin. Always protect the position by buying a further strike price to limit the loss of money just in case.

Yours is really a very scary story and it is really important to keep both ego and greed in check at all times. The broker can keep calling again if the amount is insufficient subsequently. Hi FW, you are right that margins took me out of the method. Bending rules when stakes are high is a killer. This lesson will stay with me forever and bring me a long way. If you trade or invest for next 10 years, you need to be consistently keeping to your rules for a good 10 years. Wants to change the world. When I saw the heading of the post, I thought you copied and pasted the article from somewhere and that someone else blew up. Only on hindsight we know what the Black Swan is. But when I really think back, I do take shortcuts sometimes and I bend the rules a little, believing everything will be fine. Bending most rules were inconsequential.

This means your option position is going to be marked to market daily. Has it been smooth, of course not. So even guru can make a wrong move. Not many traders are like you to have the intellectual honesty to own up to their own mistake, blame themselves and even share the investment lesson to the public. This is why blowups happen time to time. In order to cover your initial loss of money, you often need to double the number of contracts. Often we hear how much people can make from trading and we want it too. Victor Niederhoffer bet big in Thai stocks and went bust during Asian Financial Crisis. As I was making good profits, I became greedy and put on too much options than my capital could take.

If your loss of money is one contract, you need to sell two more contracts further OTM. Just a matter of how soon. It seems like you are a new reader and that is why you have yet to get exposed to the activities that I engage in. We can be lucky to escape punishment sometimes, but one day it will get us. Factor Portfolio that taps on the Value, Size, Profitability and Momentum Factors.