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The Market Taker Take: Option Trading Blog

These Work-From-Home Stocks Will Continue to Climb Even After COVID

One of the big stock market stories of 2020 was the domination of so-called Work-From-Home Stocks. While some companies lost massive share value last year, these work-from-home stocks skyrocketed. But what happens after COVID? Can some of these stocks continue to climb? I think they can. To understand why, let’s take a

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Trading Options and Cash-Secured Puts Over Earnings

With the next round of quarterly earnings just about to start, it is a good time to take a look at trading options and in particular cash-secured puts. Option prices (implied volatility levels) tend to increase around an expected earnings report. This could be potentially good (if traded correctly) for premium sellers

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Technical Analysis to Endure Unprecedented Times

Technical analysis is playing a bigger role than usual due to the effects of the pandemic and subsequent stimulus packages. Guidance and earnings estimates have been difficult to quantify making them unreliable. Yet of the Dow Jones 30 companies, 28 have beaten earnings estimates in Q3. Only American Express (AXP) did no,t

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Wall Street Bull

Bull Call Spreads and Bull Put Spreads Explained

Option traders often ask me is there a way that you can take advantage of this bullish investing scenario while limiting risk? Certainly, there are a few option strategies that can accomplish this goal. One that may be an option (no pun intended) is a debit call spread, which is sometimes referred

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Charting patterns

Learn to Identify Charting Patterns

There are numerous books and journals written on charting techniques and seemingly countless patterns. There is terminology that describes popular patterns using bar or candlestick charts. Some of the most well-known charting patterns include flags and pennants, trendlines, head and shoulders, gaps, island reversals, and ascending/descending triangles. Some of the basic patterns

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A Detailed Credit Spread Guide for Option Traders

What does an option trader do if he or she thinks that an underlying won’t most likely go higher but doesn’t feel confident that it will drop much or vice versa? Without using options, it is hard to profit from that scenario. Using options, a credit spread in particular, you absolutely can.

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Start Each Trading Day With a Plan

Professionals in all walks of life are engaged day and night. My leisure passion is golf. I study the game and hone my craft through practice. I did the same as a baseball player during my college years. Through sports I learned hard work and diligence pay off. My dream to be

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If You Want to Succeed, Get Motivated

On the surface, it seems silly to think one is not motivated to make money option trading. But if you look deeper, lack of motivation is what holds back many traders. Having the proper attitude can go a long way in life including in your potential success as an option trader. So

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Use VIX to Adapt in Extraordinary Times

There is a toxic cocktail that traders are forced to swallow. The pandemic, election, lockdowns, and divided House and Senate comprise a nasty drink. The current trading environment is extraordinary and challenging on normally reliable strategies. As traders we must adapt. When volatility is at lofty levels, regulating risk and profit targets

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Put Your Profit Taking Orders in Immediately

The market has been a volatile beast and there are no signs of that slowing down especially with the election on the horizon. This post will not only be an eye-opener to some but will also remind others of something they should already be doing: Set up a profit taking order as

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Having Anxiety About Your Long Stock?

If the market has not been volatile enough for you recently, add in quarterly earnings and you have even more potential volatility into the mix. If you own stock, you would love your stock to gap higher after the release. Unfortunately, that is not always the case. The way 2020 has progressed

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Use Daily Candles to Spot Changing Trends

To recognize change in trend we must understand “responsive activity.” As a market moves lower, we need to identify when buyers respond to the cheap prices. Conversely, as prices move higher, we have to note when sellers consider prices too rich. Daily candlesticks are a useful tool to determine when momentum has

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Before You Enter That Trade…

I have a bunch of different sayings when it some to options trading, but this one might be my absolute favorite: “Know exactly what you will do no matter what happens.” What this really means is that I want traders to have a trade management plan in place before they enter a

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The Essential Elements of Trade Analysis

Acronyms and mnemonic devices are learning techniques that aid in information retention. I use them to recall patterns in charts and when teaching a logical approach to trading. The acronym I use most often when creating trade strategy is VERTEX. Each letter in this acronym is an element I research for every

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Option Bid-Ask Spreads Can Hurt You

I have always wondered why there has to be a spread between what you can buy an option for and what you can sell it for. The simple answer is someone needs to make money and that someone is usually the market maker. All kidding aside, many option traders do not even

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Your Trading Plan of Attack

When scanning for trades I do it with purpose. When searching for directional or vertical trades, there are conditions that must be met. And the first one is that the market has come into a long-term support/resistance zone. Markets frequently reverse when revisiting previous extremes. When a market reaches such an area,

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What Triggered Today’s Stock Tumble?

Stocks had been trending steadily for a couple of weeks, but today they took a tumble, seemingly out of the blue. In the Wednesday MTM Daily Edge session, we prepared for a possible reversal or consolidation phase to begin. A day before the sharp decline there were subtle changes that are common

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Trade With the Trend

If you have traded for any serious amount of time, you have probably heard the saying “the trend is your friend.” I start my Group Coaching class each and every session by reminding traders to consider the trend. To me it is an important reminder to look for opportunities when it comes

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How to Compete With Pro Traders

I have three sons who grew up in a unique era. Little league and soccer were their first social gatherings. Around that time electronic games were just taking hold. Baseball, football, soccer, hockey, water polo, lacrosse, boy scouts and music were options for youngsters, and my kids tried them all. They embraced

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How to Plan Your Option Trading Day

Just recently in MTM’s daily group coaching class, I shared a PowerPoint about how I go through my option trading day. It was not extremely detailed because of lack of time, but I would like to share some of the finer points with you here today. Prep Work Consider taking into account

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bollinger bands

What You Should Know About Bollinger Bands

I have researched and tested many technical tools and indicators. My goal has always been to find the ideal combination of instruments without overloading my charts. When traders use too many tools, they often get conflicting signals making it difficult to execute trades confidently. I began testing new disciplines years ago and

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