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Success With Options - Monthly Review, Issue #30 -- June 2012 Edition
June 04, 2012
Hello,

Welcome to the June 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 and send it to your options trading friends.

To access previous issues of the newsletter, click here.

Second Down Month! - June Newsletter

Welcome to the June newsletter. May saw the second down month in a row. In fact while April was just a little negative, May was a lot negative. Have we seen the bottom or is there more to come? How has this affected my current trade? Read on...

As usual, I'll be reviewing my trade this month, talking options strategies, answering you questions 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 newsletter 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.

 

In This Issue

1) Trade Tutorial summary

2) Options Strategy Focus

3) Answers to your questions

4) Options Outlook

5) Featured Product
 

Trade Tutorial Summary

I had one trade going this month that closed early with a stop loss trigger. Some of you may have noticed that the number of trade tutorials has decreased quite a lot over the last year or so. This is partly because I've had less time to analyze, set up, and write up the trades.

In addition, since I've added the Facebook comment section to the tutorials, I've seen no comments being submitted. I had hoped this would be a much more interactive area - a place where trade ideas, questions, debates on entry & exit rules and so forth would be conducted. I'm left to wonder if this feature of the website is as valuable to visitors as I had hoped. Use the feedback form to let me know how you feel about this.

In the mean time, I will continue to do trade tutorials but probably not as frequently as before. Here's the trade I was active on this month in a quick summary.

New/ Closed Trade Gain/Loss Comments
Closed SPY Put Credit Spread -$62 This was another losing trade. It's starting to feel like I'm trying to catch a falling knife.

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 Vertical Spread:
"...While I hate losing money on a trade, what I hate more is losing a LOT of money on a trade gone wrong. The lesson here is that it is possible to take adequate precautions, especially when you can identify a clear measure of when your trade has gone wrong."

For more information on all of the trades I've posted as option trading tutorials, click here

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Options Strategy Focus: Options Brokers

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 strategies, entries and exits, trading psychology and more. In this issue, I want to shift focus slightly and talk about options brokers.

While not specifically about a strategy, the selection of an options broker is important in the overall process of successfully trading options. Believe it or not, the choice of an options broker shouldn't be just about who's got the cheapest commission rates. Instead, I have several key attributes I consider important for any serious options broker.

Trading tools
Any broker being considered should have a nice suite of trading tools. Top among tools should be a platform that allows rapid trade analysis, setup and entry. While I'm not interested in lots of trades in and out on a daily basis, when I want to set up a trade, I want to get there without a lot of extra steps. Additionally, a decent charting tool that can display candlestick charts, chart analysis components like moving averages and so fort are really key. You'd be surprised at how many brokers' tools I've looked at where the charting package is practically unusable.

Order Routing
The important thing here is knowing that your broker can rapidly route and fill your order with minimal delays. It's important to be trading in an environment where data feeds are real time (for a minimal price). In addition, another aspect of this is having the ability to route orders at the mid price. Many platforms offer this in some form but make it hard to accomplish.

Commission
Yes, it does matter but notice it's at the bottom of the list of priorities. The thing to keep in mind is that brokers will structure pricing lots of different ways. The key thing to do is find a price structure that matches your trading profile. For example, do you trade small and frequently or larger and infrequently? Do you trade simpler 2 leg orders or more complex multi-leg orders. Some brokerages treat each option as it's own trade/commission.

For more on options brokers and some reviews I've done in the past, visit the Options Brokers page on the website for more information.

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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 didn't receive any questions whatsoever. I didn't even have any in reserve that I was able to use. Of course I could make one up but I'm not sure that would be helpful to anyone.

I'd like to take this opportunity to encourage you to contact me with any questions you may have. I can almost bet that any question you are thinking of someone else is probably thinking about too. So don't be shy, I won't put you on the spot.

Help me ensure we have an interesting question or two to respond to next month. Submit your questions at this page.

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Options Outlook

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 following disclaimer.

 
This 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.
 

We certainly got our answer this month didn't we? Last month we saw minor selling. Last month I summarized my outlook as follows.

"...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. "

Here's how the month played out.



Almost from the start of the month, we saw selling inspired by a number of factors. The result is that we saw that support level outlined last month completely violated. The upshot is that I think we've moved to a more bearish to neutral outlook. HOWEVER, notice that we're currently sitting at a fairly strong level of support (combined with sitting at the 200 day MA).

It's possible we may see a weak bounce from here that I think may be an opportunity to sell bearish trades. It would take clearing the level above $1330 to cause me to be more neutral to mildly bullish.

How does this affect my trades? Obviously the bullish attempts I've made have not worked out well.  I think I will be looking for bearish trades to sell on any bounce from here. I may also look for a neutral trade to put on as well.

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.

More on technical analysis.

Options strategies I use

Be sure to take time to provide feedback on the newsletter.

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Featured Product

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 options spreads.

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 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.

Expect more videos to be released in the months to come.

For more information or to purchase the video.

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