the March 2014 edition of this newsletter!
This is a monthly newsletter packed full of tidbits not found on the
website. This is my attempt to stay connected with those who find value
on the the website and want more.
Since this newsletter is published (nearly) every month, you are always up to
date and empowered to be a better trader. That's because I'll be
sharing lessons I've learned over the prior month, answering questions
from other viewers and providing a spotlight on useful websites
and trading tips. If you find this newsletter valuable, pay it forward
it to your options trading friends.
To access previous issues of the newsletter, click here.
And... We're Back - March Newsletter
|What an interesting month we've seen! As of the last trading day of
February, we've seen a complete recovery of the losses seen in late
January. The question is, will we see even more bullishness in coming
months or is this some sort of double top?
In this month's newsletter, I have answers to your questions, Options
Strategy Focus where we'll examine the Calendar Spread strategy. In addition,
we'll close as usual
with a Market outlook for you. For more details, read on...
I'm always interested in receiving feedback on the newsletter. If you
haven't done so recently, please consider taking a few minutes to visit
feedback page and let your voice be heard. This can be done
anonymously so please consider how you can help make the newsletter
Options Strategy Focus: Calendar Spread Quick Reference
| This section of the newsletter will focus more deeply on the details
of some of the options strategies I use in the tutorials. As I mentioned
in the last few newsletters, I will be taking the next few newsletters to
review some of the
strategies that I use on a regular basis. However,
rather than re-printing the content that's already on the website, I
want to provide a sort of blueprint on the basic concepts as a kind of
quick reference to all the content.
Premium Selling Overview
If you are newer to premium selling strategies, I'd recommend you check
out these references.
I listed these last month but for new subscribers, I want to continue to
list them as they are the foundation for all the trades that I promote
and trade myself.
Calendar Spread Overview
There is a lot of information available in a both web and video formats on the
basics of the Calendar spread. I'd recommend starting here if you
are newer to the strategy. The calendar spread is a little trickier as
calculating target profit can be a lot more challenging. The website and
videos help by demonstrating some of the techniques for calculating
potential profit in the trade.
Calendar Spread Tutorials
This section will provide links to the various tutorials I've put
together that demonstrate the strategy and include both text-based
website content as well as video content. As it turns out, there are
quite a few videos available for those who like learning this way.
Additional Calendar Spread videos
I hope you find this summary valuable in mastering the calendar
spread strategy. Please let me know either by
the newsletter feedback page or the
link what you think or if there are improvements you would like to see.
Here are some additional videos that
provide more advanced coverage of calendar spreads.
Stay tuned for more strategy quick references in future newsletters.
Next month will be the Iron Condor strategy.
Back to the table of contents.
Answers to Your Questions
|I frequently receive email from visitors to the site with
that aren't answered directly from content on the site. Many of these
are great questions and I
think the answers would be valuable to all readers. Each month I'll be
posting one or two questions, so stay tuned!
Last month I received a question from a day trader wanting to transition
to options trading that I think would be good to address here.
Q: I've been demo trading iron condors now for 3 months
on weeklies & monthlies on
SPX, RUT & NDX but what other indexes could I use? If I get in trouble with trade
I roll out to next week & month is this a correct way to adjust a bad trade?
Are there other ways to adjust?
A: Wow, there are quite a few questions in this email. All are
really great questions about trading and managing an iron condor trade.
Let me see if I can tackle them one at a time.
First of all, the iron condor strategy is a great strategy for a number
of reasons. My favorite is because you can collect twice the premium on
a pair of opposing vertical spreads while using the same amount of
margin. For reasons why this is, check out the
Iron Condor video on YouTube.
Now, to your first question, there are a number of indices you can trade
on with this strategy. I suspect when
you say you have traded on SPX,
RUT and so forth, you mean the actual index itself. I have traded on
these but prefer these days to trade the ETFs that represent these
indices. For reasons why, check out the
Index Option page on the website as well as the related
ETF options page.
In terms of trade management, rolling is one of several management
strategies that can be used. I have employed rolling as a strategy.
However, you want to make sure that you're not subscribing to the
'refuse to lose' mentality. Rolling may make sense if you think your
outlook is right but you need more time for the trade to develop
realizing you pay some of your initial credit back for the roll.
There are actually a number of potential
adjustments. I recommend you
have a look at this
Iron Condor management video, which covers most of them. They
basically boil down to 1) exiting the trade 2) buy a calendar in the
direction of the new bias 3) buy back profitable side to remove risk and
re-enter more aggressive position 4) remove some of position in the
direction of risk - take a loss but leave some on still.
As you can see, there are a lot of approaches that can be taken. Most
will be based on your new bias as you evaluate the current market
conditions against the trade you have on. If you have correctly sized
the position to sustain maximum loss, you are much more free to stay in
the trade and ride it out. I've found many times the up and down swings
of the market allow me to close both the call side and put side
As it turns out, I currently
have an iron condor trade on where that's
the case. My puts are almost ready to close while my calls are being
overrun. Because I've sized the position for max loss, I can look at
this trade objectively and make decisions according to the market. I may
buy a calendar spread to give me a little more up side head room as I'm
fairly neutral at the moment in my bias (see outlook below).
Help me ensure we have an interesting question or two to respond to
next month. Submit your questions at this
Back to the
table of contents
|In concluding this newsletter, I want to
provide a brief outlook
for what I'm
expecting for the next 20-40 days. Before I do, I need to insert the
is not a recommendation to buy or sell stock, ETFs
or options. It
is simply my opinion of what I expect and how I plan to trade.
expectations may change if the charts indicate something different
during the month.
January was down, February is up... what's coming for March? At
this point, it may be a little hard to tell.
In February's newsletter, I summarized my outlook as follows.
"...The real question now is whether this support level will hold. If you'll pardon a Zen-like statement - it will either hold or it won't.
What I mean of course is that technical analysis isn't as much a predictor of behavior as it is an early warning system of what is happening.
In this case, I believe the strength of the support level coupled with the fact that this area is also where the bottom end of a 6 month up
trending channel can give us a strong indicator of the next medium term move. If support holds, we may be able to see a rally back to $1850 or
higher. If it fails, I wouldn't be surprised to see selling all the way down to $1700.
Here's how the February played out.
The first days of February began as a continuation of late January's
trend. In fact, when it broke support I expected to see the SPX sell
off down to 1700 as predicted based on the high to low of that channel.
As it turned out, selling stopped short of $1725 and then suddenly
reversed direction without really looking back. We've seen a brief pause
in the last few days but many of the indices have been showing all time
highs (SPX, RUT, NDX).
At this point, it's hard to predict what's going to happen. The near term
trend is clearly up. Even the longer term trend seems to have resumed as
the SPX came back into the channel that was established back in mid
2013. At moment, the SPX appears to have broken above resistance. We may
in fact see a little more of a rally before some selling. There
been some confusing signals that may actually just be outliers. However,
it's also possible that the trend is changing to more of a sideways
trend. We may simply trade in a range for a few months as the market
digests some of last year's strong movement.
I did manage to get some bullish trades in as we were near the lows of
the period. I also put on a more neutral iron condor trade a week or so
back as I am somewhat neutral in my bias right now. With the strong push
toward the highs, I am also looking at the possibility of selling
bearish trades as well. However if you choose to do this, use caution
and good money management as you are somewhat fighting a trend.
As always, do your own analysis and whatever trades you enter, use good
money management and have exit strategies in place in case you are wrong
in your analysis.
Remember to stay nimble and alert. Make a point of doing
analysis every day, especially if you have open trades. If you choose
to enter any trades, be sure to do your own analysis and follow your
rules for entry and exit.
on technical analysis.
Options strategies I use
Be sure to take time to
feedback on the newsletter.
Back to the
table of contents
|I'm adding a new section to the newsletter. Feel free
to disregard if you aren't interested in product information.
As I announced earlier, I just released the second for sale'
video last week. The title of this video is "Mastering Short Vertical
Spreads". I now have at total of two videos for sale. Here is a quick
summary of each.
An Introduction to Options Spreads
This video provides a good coverage of the basics of options spreads,
including why they are preferable to other options strategies like
buying options and selling naked positions. What I believe makes this
video valuable is that it combines presentation with interaction. Once
you have the basics down, you will be
well prepared to start digging
deeper into some of the options strategies employed on this website.
For a relatively small cost of $29, you can
own this video, which offers over 40 minutes of material. This package
is very easy to install and use.
more information or to purchase the video.
Short Vertical Spreads
The focus of the video is on one specific strategy, including all
aspects of of the process. This includes:
I'm excited about this project. While a long time coming, it's been a
labor of love. Many know this is my go-to strategy for options trading.
After watching the video, I'm certain you will understand why.
- Understanding the construction and the trade progresses
- Selecting the long & short strikes
- Planning entry & exits
- Managing the trade once entered
- Back testing
- Creating a trading system with the strategy
more information or to purchase this video
Special Discount offer:
If you'd like to own both videos, you can do so for a bulk discount.
Simply add both videos to your shopping cart and then enter the
discount code 'combo10' to receive $10 off your shopping cart
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table of contents