the May 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
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.
Two Months Flat - May Newsletter
|What an interesting month! There were lots of ups and downs this month
but at the end of the day, we didn't end much differently than when we
started. What excitement is in store for May?
In this month's newsletter, I have answers to your questions, Options
Strategy Focus where we'll examine the Diagonal 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:
Diagonal 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.
Diagonal Spread Overview
There is a lot of information available in a both web and video formats
on the basics of the Diagonal Spread. Interesting thing about the diagonal
spread is that it's really just a combination of a calendar spread and a
vertical spread. Once you master those two strategies, the diagonal
spread strategy is only a little more complex. I'd recommend starting here if you are newer to the
Diagonal Spread Tutorials
I hope you find this summary valuable in mastering the diagonal spread strategy. Please let me know either
feedback page or the Contact Me
link what you think or if there are improvements you would like to see.
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
several videos available for those who like learning this way.
Next month we'll be returning to more general options trading topics.
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
Q: I'm wondering if you knew where I could find a list of top ETF
options by volume? I can only find equity top average volume on the CBOE
A: This is a great question, especially if you are looking for new
underlying instruments to trade options strategies on. Let me give you a
brief overview here but this intrigued me enough that I will create a
short video to host on YouTube.
I've only found this feature available on the thinkorswim platform.
There may be others
that offer this kind of search but I haven't found
it. So I want to quickly go over how I do this. In order to set up this
kind of search filter you must have an active thinkorswim account. While
you can do some filtered searches on the paper trading platform,
specifying options filters isn't supported unless you are on the real
To begin, you need to go to the 'scan' tab on the platform. Most likely
stock hacker will be the default and initial view but if not,
select it. You may want to issue a reset to clear any existing searches.
The reset button can be found on the top right area of the stock
To begin, locate the pull-down menu labeled Scan in. Expand this
pull-down and look for the Public item and from there the All
ETFs item and select it. Next locate the pull-down menu labeled
Intersect with. Expand this pull-down and
look for the Categories
item and All Optionable and select it. You're half way there.
Clear any existing filters using the red X on the far right side. There
will likely be 3 of them if you performed the reset recommended at the
beginning. Now, add an option filter by clicking that Add Option
Filter button. Use the pull-down menu in the second field of the
filter to select Volume as the filter type (that's option
volume). In the min field (next field over), enter a value such as 500.
This will eliminate ETFs having options daily volume of less than 500
You've now completed the setup. Hit the Scan button to see the
results. What you'll see are all the ETFs that have options with options
daily volume greater than or equal to 500 contracts. From here, you'll
likely want to do two things. The first is add the items to a watch list
and the second is
save the search.
Save the search by locating the Scan Query menu (top right next
to a button that looks like a flame). Select that menu and from there
Save scan query. Give the query a name and now you can call it up
any time you want using that same menu (next item down is Load scan
Finally, you'll want to save the results of the scan into a watch list
perhaps. You can do this one of two ways. First, you can add them
individually by locating the blue ball next to each ETF symbol.
Right-mouse click and locate the Add to watchlist item about
midway down the rather lengthy menu. The second way is to save the
entire set of results to a watchlist. To do this, locate the small
button with a disk symbol on it on the far right side right above the
list of results (next to the text displaying the number of results).
Click this button and give the name of a new
list to create from the
That's it. Now, you may find it easier to follow this with a video so
I've created a short YouTube video to demonstrate all the steps but
saving the search (I forgot to include that). You can find this video
here on on the links on the website.
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.
Looks like another sideways month. Will May be more of the same?
In April's newsletter, I summarized my outlook as follows.
"...We're not seeing the signs of rampant bullishness that we saw last
year. While the market could still resolve itself in either direction,
the indications are still mostly bullish for now. Notice that we are
sitting at the bottom end of the channel and also at horizontal
support. Until I see those levels breeched, I'm going to remain
cautiously bullish. If we see any kind of significant bounce, it's
likely we'll see new highs up over the $1900 level over the month.
We're heading into earnings season so that may also cause some big
swings up or down.
Here's how the April played out.
You can see the SPX tried a couple of times
to breach the $1900 level
and failed. We're knocking on the door of $1900 again. Notice, however
that with the churn we experienced last month that we ended almost where
we started the month. If you had any iron condor trades going, you
probably did fairly well. I know I did. Interestingly we had breaches of
overhead resistance and the $1850 support, which appear to just be fake
With another month of sideways movement, the market's likely winding up
for something. For the moment, earnings haven't been impressive enough
to bring out the buyers and multiple factors seem to be putting a damper
on additional bullishness. It's hard to say at the moment what's going
to happen except I'd encourage you to consider some of these additional
factors. The VIX (SPX volatility index) is at the lower end of it's
range, which could signal potential near term selling. The Russell 2000
and Nasdaq 100 indices are both
relatively weak compared to the Dow and
the SPX. That makes me a little worried that something is brewing.
For now, my plan is to let the market indicate a direction and follow.
Be sure to keep trades short term as things could change quickly. In the
mean time, I'll be looking at some bearish trades as well as some
bullish trades to have ready. With low volatility and a possibility of
selling, what's a good options strategy? Any thoughts? Stay tuned, maybe
I'll do a trade tutorial on it here shortly if the market cooperates.
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 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
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
Back to the
table of contents