This Is a Rough Time for Many Option Traders
The gist of this blog is you don’t always have to trade. Market volatility has been crazy as of late. The market had its most bearish Christmas Eve ever, and then on the next trading session the Dow closed up over a thousand points. And then the session after that, the market declined yet again. […]
Protecting Profit During Volatility
This year has been quite volatile, possibly the most volatile ever for stock indexes. The first and fourth quarters saw average day ranges that spanned nearly twice the norm. Day ranges have been closer to the length of a historic average week. When the moves are so extraordinary, risk doubles, as does profit potential. An […]
Option Trading Is Always a Trade-Off
Here is just a quick reminder that everything you do has consequences in option trading. In other words, everything is essentially a risk/reward trade-off. Just think about it for a second: If you give up potential profit, you get a better risk/reward and vice versa. Let me go through an example with you below. Suppose […]
Watch Trade Truce’s Impact on Price Action
Last weekend Argentina hosted the G20 summit, which comprised 20 leaders from around the globe. There were three agenda priorities: the future of work, infrastructure for development and a sustainable food future. Trade and tariffs may not have been listed as priorities, but they certainly were. When the commodity markets opened Sunday night there were […]
How to Gauge Trade Patterns
In the first of the two SPY charts below, we see a steady rally in 2017 where the average month range spanned about 8 points. Then in January 2018 the range more than doubled the average bringing on an overbought signal. It was the last thrust higher that ended the nearly nonstop yearlong rally. The […]
How to Select Strikes
Recently I have been reeducating myself with option strategies. It has been over 15 years since I executed an option order at the CBOT. After joining the MTM team, I viewed many of the teaching videos and listened to Dan and John K. talk option strategy with students. Thus, I am eager to use options […]
Consider the Close of the Market
When the market closes, there is never a guarantee of whether it will open higher or lower the next session. If we knew that, trading would be a whole lot easier. But there is something I look for on a constant basis that I have found helps me tremendously. It is to see how the […]
Top Picking and Bottom Fishing All About Timing
Growing up in Chicago had plenty of perks: a beautiful skyline and parks, plus great food, entertainment and sports. But for the harsh winters, it is my kinda town. After college I had the opportunity to work at the futures exchanges, Chicago Board of Trade and Chicago Mercantile Exchange. My first experience on a trading […]
How Contract Size Affects Option Greeks
Understanding the option greeks is pivotal to truly understanding and trading options. As I like to say, the greeks are like the controls on a car. They give you an idea of how the trade should perform based on the underlying, time and volatility. But one thing about the greeks that is often overlooked is […]
Using Bell Curves to Spot Market Trends
Trend and consolidate, run and rest, trend and chop are expressions often used to describe the two things markets do. They move from balance to imbalance and back. Different strategies are employed during a trend cycle vs. a consolidation phase. When a market is trending, there tends to be very little overlap in prices from […]
Dow Jones 30 Quarterly Review
Each day in our futures group coaching class, we examine the major commodity sectors for patterns that frequently precede breakouts or trends. Our goal is to recognize trend potential, which prepares us to enter trends in the early stages. There are several conditions that must be met before a market can be tagged as high […]
Option Contract Size – Full, Half, and Nibble
As I often say in my Group Coaching class, you have three different sizes to choose from as far as contracts go. A trader can select an option contract size based on his understanding. Here is a short blog to shed some light on how I personally choose between them and a few of the […]
Know What You Will Do
I have a saying I like to use in my Group Coaching class, and I repeat it frequently throughout the week. The saying is, “know exactly what you will do no matter what happens.” What this boils down to is having a trade management plan in place before you enter a position. As we have […]
Working on a Trading Weakness
From the Journal of a Stay-At-Home Trader: Struggles on the Journey I’ve been pondering something I wrote a short while ago: “See, the way I look at it, a weakness in this context is something that can be strengthened through study, practice, perseverance and lots of good, old-fashioned hard work. It is similar to one’s muscles […]
Sifting Through the Trading Noise
Special Guest Post At any moment during the trading day, at least five traders with different time horizons are looking at price and volume of any security. There’s the scalper, who wants to be in and out within minutes and is often the first trader on the other side of any transaction. There’s the day trader, who typically has no […]
Overcoming Mental Roadblocks in Trading
From the Journal of a Stay-At-Home Trader: Struggles on the Journey So much of trading is mental. A newer options trader clearly should become familiar with the mechanics of options. But even after one understands those fundamentals, one can still struggle with options trading when there are certain psychological and emotional blocks that must be overcome. Fear – Fear can […]
Trading for Balance
When a market is balanced, it has found fair value. When a market is trending up or down, it is considered imbalanced. Some common terms that describe this contrast are trend vs. trade, run vs. rest, consolidation (horizontal) phase or directional (vertical) move. The ability to recognize when one phase is near an end and […]
Rolling too Soon
Selling premium has so many different risks and nuances it can drive an option trader crazy. But there is a common problem I see among option traders particularly when covered calls and time spreads are involved: They tend to roll the short position too soon. Let me explain a bit more in detail below and […]
Patience During Uncertain Times
From the Journal of a Stay-At-Home Trader: Struggles on the Journey As a short-term swing trader, things have been tough for me lately. Although the overall market has been bullish, I think there is a tenuous edginess to it all. A position in an individual equity can be up one day, significantly down the next […]
Learn Fundamentals Through Technicals
Recently, there have been some massive moves in stock indexes, treasury futures, precious metals and energy. Each sector moved in response to unexpected news. Every week there is a list of upcoming reports as well as estimates of what the data will reveal. Professional traders track consensus estimates so they can react accordingly if the […]
Learning Options not Strategies
From the Journal of a Stay-At-Home Trader: Struggles on the Journey When I was newer to options trading, I studied just about every strategy I could get my hands on. Most people who touted a particular strategy had wonderful win records and promoted dreams like, “Make money easily in your sleep! Wake up every single […]
