Blog

The MTM Take

Trade Talk and Tweets: the New Fundamentals

Fundamental data are also known as event risk. Professional traders keep a close eye on the economic calendar for events or reports that could alter a trend or start a new one. A treasury trader might hedge a long position by buying 10-year note puts or selling calls just before employment or

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How to Save Time Analyzing Markets

Since leaving the trading floor at the Chicago Board of Trade I’ve been tethered to my desktop computer. My office is my workshop, and all the tools I need are there. Since the futures markets virtually never close except on Saturday, the leash to my tools is short and therefore constrictive. My

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Option Traders Need a Plan

When I became a retail option trader, I was told by many that I needed to write and follow a plan. Although many of you know this as well, you may have either not written or finished your plan. As I always like to say, if you were opening a restaurant, would

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How to Catch Directional Moves

One of my chores is to write a weekly piece that enlightens traders. At times my interpretations are spot on, almost prophetic. And sometimes I am clueless. My 30 years of experience in the futures markets has taught me to accept, almost embrace, being wrong. Traders must embrace risk. No one likes

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A Bullish Trade Setup to Consider

The market remains predominantly bullish, and there are several potential bullish trades we have considered in our Group Coaching class. One setup I continue to love is the 2-bar bullish break from a bullish base. A bullish base is created when a stock moves considerably higher usually over a short period of

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What Makes a Well-Rounded Trader?

I was fortunate to spend most of my career at the Chicago Board of Trade as a broker in the 30-year bond pit. The ’80s and ’90s were the heyday for interest trading pits. Most days were filled with big swings and lots of volume. The pits were packed and often became

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How Do Option Collars Work?

The market has been on some run since the holidays. After investors were worried that stocks would continue to sink into 2019, many stocks have recovered quite nicely. If you are a smart investor and know what an option collar is, the threat of another decline is not as scary. If you

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How to Avoid Technical Overload

My search for the ideal trading tool ended about 30 years ago after attending the Market Logic School conducted by Pete Steidlmayer, the creator of Market Profile. These days I do not think it is necessary to use Market Profile. But applying the logic behind the tool allowed me to create charting

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Is Option Trading a Good Idea?

I have often been asked whether option trading is a good idea. The answer is fairly simple, I believe. I tell those who ask it depends on two things: you and what you hope to accomplish. I will elaborate a little on each point, but there are certain things option trading can

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Think Like a Pro Trader

Spend time with a broker or pit trader from the era when all trades were executed at an exchange and you will learn about the auction process and the information it provides. Pits were created to facilitate trade. To an untrained eye a trading pit looks like a mess of mad, aggressive

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A Reminder to Review Your Trades

I have mentioned this before and will continue to mention it as much as I can: Please record your trades and review them often. Simply put, there is no better way to see what you are doing wrong and doing right. To me, it has always been an eye-opening experience to go

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How to Read Open and Close Clues

Monitoring the time of day when extremes (high and low) are made can be helpful when timing entry and exit of a position. Liquidity is king. Large orders from professional traders are likely to be executed when volume is at a peak. The first hour of trade is frequently the highest volume

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Traders Often Need to Be Reminded

Well over a year ago, I wrote about several of my favorite sayings that of course apply to trading. Well this is a short blog to remind everyone how important this one particular saying is to me and most likely to you. With the volatile market we have encountered over the past

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How to Catch a Trend Early

Timing an entry price is a critical component for successful trading. To identify the optimal time to get long or short involves a setup or pattern that typically precedes an above average vertical move or trend. To quantify the odds for a breakout, refer to the combination of time at price and

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Don’t Forget About Positive Theta

Here is something to think about next time you are bullish and are considering a bull call spread as one of your options as an option trader. Many times, moving the spread in-the-money (ITM) makes sense from a positive theta perspective. Let’s take a look at a recent trade idea we covered

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Be Your Own Market Speedometer

One goal for most traders is to catch a trend early and ride it to the end. To accomplish this requires incredible timing on both entry and exit. Good traders recognize when a market has moved too far too fast and is therefore likely to stall out or even reverse direction. Markets

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Using Spreads to Offset Volatility Risk

When options traders purchase call options, they knows they will have limited risk (the most that can be lost is the amount paid for the option) and at the same time unlimited profit potential. One of the reasons traders love options so much is that they are usually far cheaper to buy

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Key Economic Sector and ETF Watchlist

Most days in futures class we review direction indicators for the major sectors of the economy. These sectors often correlate either directly or indirectly. For example, a rise in interest rates may affect currencies, which might have an impact on stocks or precious metals and energy. A small move in one of

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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

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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

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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

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