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The Market Taker Take: Option Trading Blog

The 60-Minute Rule of Trading

Stock indexes continue to break barriers in response to positive economic data. The historic rise has also come with headwinds such as impeachment, coronavirus and conflict with Iran. The question on many traders’ minds is, what will prompt the next big downturn? The markets are sensitive to the spreading of the virus.

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Reducing Risk as an Option Trader

There is no sure thing as an option trader when it comes to profits, no matter how much the odds may be on your side. All trading is speculative, but as traders we do our best to improve the odds. But what if there isn’t a setup that matches our criteria for

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Coronavirus: How to Protect Your Trades

Stock indexes took a big hit this week following news that the coronavirus was spreading around the globe and that the death toll was rising. The initial reaction incited a decline over the next two days that spanned about 75% of an average month range. When a market moves that far in

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Implied Volatility Skews During Earnings

If you don’t trade options over earnings announcements, you may not have noticed what happens to implied volatility (IV) levels. Usually an expected volatility event like earnings increases the price of options. In other words, when implied volatility increases, so do option prices. That can give an option trader an edge, but

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Helpful Hints for Using Moving Averages

When trading futures I tend to be more short-term oriented than when trading stocks. I often enter trades that are intended to be speculative, meaning I will be out of the position within 24 hours or even by the end of the trading session. Generally, stock market traders and investors plan to

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Using Technical Analysis to Gain Edge

I work with traders all the time on how to decide what strategy to consider. To me, it all starts from the chart and the key is to look at different time periods. Technical analysis can give all traders an edge. By doing this properly, you can put the odds on your

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Know the Numbers Before You Trade

Every new year I update a spreadsheet that consists of recent average ranges and benchmark ranges for many stocks, ETFs and commodities. Most charting platforms have the ATR indicator (average true range) to make the task of updating easy. One reason for comparing historic and current data is to identify trend potential.

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Why Expiration and Strike Prices Are Important

When it comes to options trading, traders have many strategies from which to choose. One could say there are plenty of options on your options. This can be particularly true for vertical spreads. Just to start with, there are vertical debit and vertical credit spreads. Generally vertical debit spreads are used when

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A Prepared Trader Is a Profitable One

This week was historic for more than a few reasons. The United States-Mexico-Canada Agreement was accepted by all three countries and should be passed in early January. Phase 1 of a trade agreement with China was signed. The pact included some resolution to theft of intellectual property. There will be large purchases

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Traders Deserve a Break

This is my usual blog that I write every soften where I implore you to take some time off from trading. The market will be there when you get back. No matter what you do or did for a living, everyone needs some time off to energize themselves. Trading is no different.

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How to Enhance Trade Entry

I learned long ago that keeping a trade journal not only helped me recognize patterns that suited my personality, but it also taught me how to avoid repeating mistakes. The journal, through diligence and repetition, permitted me to develop a short-term entry strategy to enhance the timing for catching longer-term trends. One

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My Favorite Option Things

Every year Oprah releases a list of her favorite things ahead of the holidays. According to her magazine, she has selected 79 perfect presents and one bonus selection for 2019. I also have a list, but it is not seasonal. It is a few phrases I like to use that I think

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Fed’s Stance Sparks Fundamental Shift

Over the past week we saw a subtle fundamental shift, but sometimes that is all it takes to get a trend rolling. It started with the Fed hinting at a more neutral stance. A fourth interest rate cut had been widely expected in the December FOMC meeting. That may not happen now

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Is Option Trading Easy?

Let’s answer that question right now before we go any further…no! It takes a lot of work and patience to be a profitable option trader. Getting started by putting some cash into a trading account is easy. But that is where the easy part ends. Not only do you have to learn

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How Will Brexit Affect Markets?

I was writing my daily commodity market updates early Thursday morning and just as I was ready to hit send, stock indexes and interest rates rose abruptly. The euro and pound rallied while the dollar dipped. Gold fell as well. These immediate reactions were reversed later in the day when it appeared

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Positive Theta Should Be Your Friend

This market has been particularly volatile over the past several months. I am sure most of you have noticed that. Finding directional or even neutral trades that last for more than a session or two has been extremely difficult. But what if there was a way to help offset some of your

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To Find Money Flows, ‘Follow the Sun’

A week ago, we finished the first of 2 MTM Mastermind sessions. On the last day we had a visit from a very good friend and colleague, CNBC’s Rick Santelli. He and I worked together in the ’90s where we compared notes often. We each had our own personal style and technical

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Trading an Iron Condor During Earnings

We are getting closer to another round of quarterly earnings, so this may not be the best time to talk about a relatively neutral strategy. But I think it is always a good idea to learn more about different option strategies. An iron condor is a market-neutral strategy that combines two credit

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How to Trade ‘in the Zone’

It was the mid-1980s and I was in my mid-twenties when I stepped on the CBOT trading floor as an employee. I was terrified, intimidated and eager. I got a jacket with team colors, a badge for access to the pits, and a warning to keep my mouth shut and do what

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Learning the Option Greeks

As summer comes to a close here in Chicago, I have spent more than the usual amount of time over the past few weeks reviewing the option greeks in our Group Coaching class. It is always important to know about the greeks when trading options, but many traders neglect to properly educate

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Smart Traders Check Commodity Chains

In previous blogs I introduced a checklist of technical tests that I utilize before making a trade or writing my daily newsletters. A consistent approach is important to professional traders. Many investors are purely technical traders, some follow fundamentals, while others employ a combination of both schools of analysis. Fundamental data are

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