the April 2012 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 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.
New Highs in April? - April Newsletter
Welcome to the April newsletter. In March we did see some initial selling that addressed
the concern I raised about the prolonged buying streak. But after that pullback,
we saw the SPX push to new highs.
Will April be the month we see even higher highs? Read on...
Also in this newsletter, I'll be reviewing some of the updates on the site,
trades for the month, talk options
strategies and more.
Please feel free to voice your opinion. If you haven't done so already
(or recently), please consider taking a few minutes to visit the
feedback page and let your voice be heard. I don't require an
email address to submit the feedback so you can do this anonymously.
new at Success With Options
|It's been a pretty quiet month as far as updates go. Last month, I
updated a number of pages. This month there haven't been any changes
other than new trades. Behind the scenes though, I have been making
small progress on the new Vertical Spreads Video. Unfortunately, it's
going slower than expected.
While not a new
feature, I want to continue to promote the fact that all the new
tutorials allow you to make comments if you have a Facebook account. I
encourage you to jump in and participate.
I also continue to look for
new topics to expand the information on the website. Perhaps you have
topics you'd like to see covered. You can let me know using the newsletter
feedback page. By the way... thanks to those who have provided
feedback already. You you have already seen some of your requested topics show
up in the newsletter. Keep them coming!
I entered March with one active trade,
which is now closed. I added a call spread early on in March that is already
closed for a small loss. We exit the month with one active trade. Read on for details of
I mentioned last month that I've been working on the outline for the
next video that will focus on mastering sort vertical spreads. I've finished
planning the first section and will begin recording soon. I'm
very excited about this video and look forward to getting it completed
and made available to everyone.
As to the trades I opened and closed, see the trade tutorial summary
below for additional details.
Trade Tutorial Summary
|I had a few more trades going this month. The one trade
I closed was a winner.
Here's the complete list of trades I was active on this
month in a quick summary.
SPY Iron Condor
This trade turned out better than expected due to an adjustment that
DIA Call Credit Spread
This trade was a bet that the market had found a top. The reason it
only lost $8 was due to an early exit
SPY Pub Credit Spread
Win or lose, I find that I learn something from every trade. I want to
include some key thoughts/lessons learned from the past month's trade
tutorials here. Here are the nuggets from last month's closed trades.
From the SPY
"...The iron condor can do well in a trending market as long as it isn't strongly trending. With the ups and downs of the market there
are chances to close both sides. What helped this trade work out so well is that the sell-off and then bounce happened in the last few weeks
of the option cycle, where most of the option premium is found close to the money. As a result, value drops off quickly as the underlying moves
very far from the short strike."
From the DIA
Call Credit Spread:
"...It's about capital preservation. There's no reason to stay in a trade when you are clearly wrong and this particular trade setup
had obvious indicators to tell me if I was wrong. I'll simply walk away from this trade and look for another good setup."
For more information on all of the trades I've posted as option trading
tutorials, click here
Back to the
table of contents
Options Strategy Focus: Determining Market Outlook
This section of the newsletter will focus more deeply on
the details of some of the options strategies I use in the tutorials. In
past issues, I've talked about how to select a strategy and using
technical analysis to improve timing of entries and exits. An important
part of making a decision about what to trade is market outlook.
For an example of using these techniques to arrive at an outlook, read the 'Options Outlook' article farther down the newsletter.
Market outlook can be described as arriving at a perspective or bias
on the overall direction of the market going into the future. We might arrive at this bias by
simply stepping back and looking at the trend that is established.
However, that is a bit simplistic. A key aspect to the outlook is
timeframe. Are we looking at days, weeks or months? For the rest of this
article, I want to focus on three key points; timeframe, technical
analysis and strategy selection.
When talking about market outlook, it's important to realize that you
can come to a different conclusion depending on the timeframe. You may
have already noticed that you can see an up trend on a 10 day window and
a sideways trend on a 30 day window. We need to realize that when we are
considering most of the options trades discussed on the website, the
timeframe needs to be at least 20-30 days and perhaps a little longer
again, depending on the nature of the trade. Diagonal spread spreads for
example are a longer term trade and would require a longer term outlook.
As you may have observed from many of my trade tutorials and the market
outlook at the end of the newsletter, I use some basic technical
analysis tools for determining my bias. The first is overall trend. With
trend, I'm trying to get an idea of whether the market is moving up,
down, or sideways. Obviously, the market doesn't trade all up or all
down or all sideways. It's made up with up days and down days. The key
is identifying whether we are seeing higher highs and higher lows - an
indicator of an up trend or lower highs and lower lows - an indicator of
a down trend.
Sometimes it can help to draw a tend line
connecting the lows on an up trend or the highs on a down trend. This
can serve two purposes. 1) Making it easier to identify the trend and 2)
It can serve as a support or resistance line.
This brings me to the next tool I use. Support and resistance can be
another way to gain a perspective - many times in a shorter time period.
Here's an example. We might see the market in an up-trend such as we are
in currently. Yet, we see some selling taking place. If I saw a sell-off
to some form of support (up trending line, moving average, horizontal
support level, etc), and then bounce, that would give me confidence in a
continuing up trend. If instead I see a failure of the support level, I
might begin to change my bias - at least in the short term. In a similar
way, if I saw an up trend reach a point of overhead resistance, it might
make me begin to expect some short term selling.
How does this affect options trading?
Once I come up with an outlook, which may include multiple timeframes, I
can now choose a strategy that would work with that outlook. As an
example, let's say that in our current up trend we are now approaching a
point of overhead resistance. That might lead me to have a longer term
(30-40 day) bullish bias but a shorter term (10 day) bearish bias. As a
result, I might be inclined to enter a short term bearish position. A
good example of this would be a short call vertical.
obviously packing some rather complex topics into a short newsletter
article. For more detail on any of these topics, I recommend visiting
the following pages.
Back to the table of contents
Answers to Your Questions
I frequently receive email from visitors to the site with questions
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!
This month I received another video related question; this time
related to portfolio management.
Do you have videos for managing options portfolios i.e. something that will show you how to setup and exit portfolios.
Also how to adjust portfolios using the greeks? I see a lot of videos on youtube, but they are kind of hard to see.
A: First of all, thanks for the question. I find despite having a
menu of videos on the website that it isn't always obvious where to find certain
videos that I've created. Let me answer your question directly and then I'll provide a broader
discussion of some of the videos I've made.
To your immediate question, yes I do have a video specifically about
portfolio management. It can be found on YouTube
here. This is a short
video that talks specifically about how to make trade decisions that at the
portfolio level specifically using a combination of analysis of the greeks and
market outlook. I hope you find this video helpful.
On a broader level, there are quite a few videos I've created that are hosted on YouTube and
freely available. To make it easier to locate a specific video you may be
looking for, I provided a
summary page that provides a nice organization of the videos with a summary
Finally, I just want to mention that I have one more extensive video
that provides an introduction to options spreads. You can find more details
about it at this
page. In addition, be watching for more videos specifically on some of
the strategies that I discuss on the website.
Help me ensure we have an interesting question or two to respond to next month. Submit your questions at this page.
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. As
such, it may change if the charts indicate something different.
As I had expected, the market did sell off all the way to the 30 day
MA (and a little bit more) before rocketing to new highs.
Last month I summarized my outlook as follows.
"...The key thing to note here the sheer duration of the move away from the moving average. I went back and checked and there hasn't been a stretch this long in quite a while. While this doesn't mean there has to be a
pullback, I'd say the odds favor it. Remember though, last month I said there was a projection to $1420. I see these two points as the
tension that will pull the SPX back and forth. "
Here's how the month played out.
We did indeed see a pullback and as I expected, the SPX bounced off the
30 day MA. This gave the market the confidence to push to highs that
came very close to the $1420 level I've been suggesting for the last few
months. It turns out that the $1425-1430 level is another area of
overhead support. It wouldn't surprise me to see the market consolidate
in this area before making a move one way or the other.
Which direction will it resolve to? Keep in mind we are in a longer term
(3-4 months) up trend. This means that until indications show otherwise,
I'm going to maintain a cautiously bullish stance long term with a
neutral outlook in the nearer term (10-15 days). If we see a break
through resistance, I think we can expect even more bullishness longer
term. If we see a failure of the support around $1375, I'd say we're in
for some medium term (1 month or so) bearishness.
How does this affect my trades? I currently have a put vertical spread
on. I'm expecting the combination of time passing and a little more
buying to help close this one out. As I said, I expect some
consolidation in the next few weeks. What's a good trade to put on in a
range bound market? Stay tuned for a new trade to show up in the next
week that answers this question.
Remember to stay nimble and alert. Make a point of doing market
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 sales type information.
For those that aren't aware, I recently released the first 'for sale'
video. The title of this first video is appropriately "An Introduction
to Options Spreads". I say it's appropriate because this will be the
first of several videos I'm working on that really are a labor of love.
My goal is to provide a more in-depth and comprehensive coverage of
To that end, this first 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
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.
Expect more videos to be released in the months to come.
more information or to purchase the video.
Back to the
table of contents