the July 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.
What's next? - July Newsletter
| Happy July 4th! May was a big down month and June was up and down. So what's the outlook
for July? Stay tuned...
Given the market turbulence I didn't do much trading. In fact, I only put
on two trades. It's just as well because this market is pretty wild. Certainly
not for the feint of heart.
I mentioned last month that I'm starting to plan a longer video. This will be one that won't be available
from YouTube but will be hosted elsewhere (to be determined) and will be for
sale for a small fee. I've been asked a number of times about more extensive
videos and mentoring and this effort is in response to those requests. The first
video will be made available on a limited basis with the intent of obtaining
feedback for further videos. Once I fine tune this a little bit more, I'll
probably be rolling out more videos over the remainder of the year. If you have
particular topics you'd like covered, please use the
me page on the website to make a suggestion.
I'm still anxious to receive feedback on the newsletter
content and on ways I can make it more valuable for the readers. Please feel free to voice your opinion. I've received a few responses, but I'd really
like to receive more feedback before considering any more changes.
If you haven't done so already, 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.
new at Success With Options
As I mentioned, I haven't managed to get as many pages added or updated as I'd
have liked. I always seem to underestimate the work I have to do and
overestimate the time I have to do it in. I did manage to get the option
volatility page up although I'm still working on re-organizing the options
basics topic and linking it in properly there. I also updated the
thinkorswim by TD AMERITRADE broker review page with some updated news on their latest Barrons'
ranking as #1 broker. It's in my plans to revise that page completely as well as
update the TD AMERITRADE broker review page as so much has changed lately.
I didn't really do any new videos this month. I'm kind of out of ideas for short
videos. As I mentioned earlier, I am working on ideas for a longer video to be a
part of a longer series eventually. I'm open to ideas on either one of these.
Feel free to
contact me with those.
Watch for a few more updates in July...
|I was not so active with trade tutorials for June. The reason was simply
that it was difficult to determine a market bias and I didn't want to trade
without a clear idea of what I expected the market to do. As a result, I only
put on two trades, one of which closed profitably. Once the market establishes a
clear direction, I'll be a bit more active in trade tutorials.
Here are the trades I put on this month in a quick summary.
||SPY call Calendar
position was the remainder of an adjustment I put on back in early May before
the selling began. I probably should have closed the trade out much sooner when
it was apparent the market was selling off so hard. This is an example of the
price you pay when not following the rules.
example of a trade that started to go well and then the market turned - again.
this trade the last week of the month as an experiment and to illustrate the
concept of a pairs trade. At the time, EWZ was showing weakness but I closed the
trade early when that was no longer the case
||I put this
trade on early in the month. The market began to rally but I mentioned that I
wasn't yet too bullish. As it turned out, the market climate was perfect for
||I put this
trade on a little later in the month when the market was starting to look a bit
more bullish. At this point, EWZ was showing more relative strength. I've since
partially adjusted this position with some calls.
Sometimes I'm my own worst enemy when it comes to trading. Many of the losses
above could have been minimized or prevented simply by following my own trading
In terms of the open trades, time will tell how they work out. The point of
these trade pages is to teach trade analysis, entry and management techniques.
It's nice to get a lot of winners but it's also hard to learn anything from
For more information on all of the trades I've posted as option trading
tutorials, click here
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5 Reasons I Love thinkorswim
|Instead of doing a typical trade tip, I wanted to devote this month to
covering some of the reasons I like the thinkorswim by TD AMERITRADE platform. If you've followed
my option tutorials or any of the videos, you've probably seen the platform
in action. While I have and still do trade on other platforms, thinkorswim is my favorite
and I thought I'd take some time to provide some reasons why.
This is certainly not an exhaustive list; however, these are definitely my top five
features. Over the years as I've used the
platform more and discovered existing features or taken advantage of new
features, I've come to believe there's no other platform or company that
- Trade entry is as easy as 1-2-3-4. From the trade tab, it's literally 4
steps to enter a trade.
- Select an option month
- Select an option (call or put)
- Right mouse over that option and choose a strategy (buy or sell)
- Confirm and send
That's all there is to it. Of course there are minor adjustments you might
want to make to the buy/sell quantity or to the price but that's pretty much it.
I've never traded another platform where it was so easy to set up a trade. And
with one mouse click, I could jump to the analyze tab and analyze the trade before submitting it.
- I can enter any trade I want - even if it overrides an existing trade. The
frustration I've had with other platforms is that I can't enter a new trade that
overlaps a trade I already have. For example, if I I had a short 100/98 put spread
already in place and I wanted to enter a new 98/96 put spread, I would be
prevented from doing so because the $98 short put I'm trying to sell in the new
trade would wipe out the $98 long put from the original trade. I know when
you're first beginning trading this is perhaps a good thing, but I overlap trades
all the time. Besides, it really helps you begin to see that every trade simply
adds or removes inventory from your portfolio.
- I love the summary page with aggregate option greeks. As I've learned to
manage my trades from the perspective of portfolio greeks, I've come to really
depend on the quick summary I get from the main position statement page. This is
easily customized so I can add or remove items to display only what I want to
- The analysis tab is way cool. I know it can also be way intimidating. There
are still plenty of functions I don't know how to use. However, I've discovered
all kinds of nifty ways to analyze a new trade, analyze an existing trade or
even my entire portfolio when considering adjustments. I demonstrated this to
some extent in
- New features arrive frequently. In the 3 years or so that I've been using
the thinkorswim platform, I've seen dozens of new features arrive. Some I never
take advantage of while others I love the minute they show up. For example, the
latest release included a new feature I've been waiting forever to see. On the
monitor tab, you can now group trades by the way they were executed, which makes
tracking results of individual trades easier. I'm dying to get a chance to
play around with this one. In addition another cool feature from TD AMERITRADE's
Option 360 platform has made it into the thinkorswim platform. That's the
heatmap - a really cool way to view a market like the S&P 500 as a whole. It's
an awesome feature that allows me to look at a market segment to see who's
relatively strong or weak within the overall market. I'll probably be
demonstrating some of these features in a video down the road.
I'm so impressed with the platform and the company that I have no reservations
about showing off the features or bragging about the company. Recently I have
been able to set up an affiliate relationship with thinkorswim through its
parent company, TD AMERITRADE. Through this relationship I'm kept up to date on
the latest features as well as any marketing programs, which I can then pass on
to visitors to the site.
If you are looking for a broker for your options trading, I highly recommend
thinkorswim. By opening up an account and funding it with just $3500, you get
access to all the features I demonstrate in the videos and on the site. In
addition, you can paper trade with almost the exact same platform (there are a
few small differences).
One of the bonuses
thinkorswim is offering as an incentive to open an account is a free high speed internet rebate. That means if you open
an account and fund it with $3500 and make more than 40 options trades in a
month, they'll pay up to $39.95 to cover your internet service. On top of that,
they'll pay up to $100 to reimburse the ACAT fee for transferring funds from
website to see more details on the
thinkorswim broker review or just go directly to the latest
thinkorswim promotion page.
thinkorswim, Division of TD AMERITRADE, Inc. and Success With Options are separate, unaffiliated companies and are not responsible for each other's services and products.
Marketing services disclosure
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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 past month, I didn't receive any new questions directly. However, I did come
across a question on a trading forum that I'm betting many of you may be
Q: I'm trying to find an easy way to
back test a strategy that I'm considering. What is the best way to do that?
A: First of all, kudos for considering back testing before beginning to
trade the strategy live. There are actually a number of different ways to back
test. There are some platforms out there that let you write entry and exit rules
using a programming language or scripting language. The trouble is that many
people don't have that kind of background.
In my opinion, there are at least two ways you can back test using the
- You can use ThinkBack. ThinkBack is a feature that's been available in
the platform for quite a while. With ThinkBack, you can take advantage of
historical closing prices of stocks, ETFs and the options on them. That
means you could select a date for trade entry that's in the past, enter the
trade based on your entry rules and quickly spin forward to the point where
you find your exit triggered based on your rules to find out how the trade
resulted. You can then log that information in a spreadsheet for tracking.
The one limitation with this approach is that the charts are still based on
the current point in time so to get an accurate picture, you'd have to zoom
in and adjust the chart to make the right edge reflect the individual days.
Another limitation with this approach is you can't set up limit and stop
orders to close the trade automatically. The nice thing though is the data
goes back quite a ways in time. You can use this feature on either the live
platform or the paper money platform.
- You could also use OnDemand, which is a cool new feature of the platform
that allows you to turn your entire platform into a time machine. What I
mean is you can pick a point in history (currently only as far back as
12/6/09) at any time of the day and begin re-playing the data. This gives
you a live feel to the trading. When you go into OnDemand mode, it affects nearly every feature of
the platform as it will adjust the charts, analysis tab and everything. To
keep from confusing yourself with your real trades, they disable real
trading and you enter a kind of virtual environment much like paper money.
Not everything is quite hooked up to this yet. ToS charts are available but
Prophet charts aren't. While you can't go back in in time before Dec, 2009,
the overall feature set is nice because you can trade tick by tick intra-day
just as if you were there. So, you can re-live the 'flash crash' of May 25
and see how you'd handle it. The advantage of this approach is that you can
set up closing orders (limit & stops) and test them.
There are probably other ways to do this and lots of variations on that
theme. If you know of some other ways to do back testing feel free to
contact me and I'll post them in next month's newsletter.
more about the Thinkorswim platform, you can visit my
broker review page.
If you just can't wait to get your hands on these features, you can just go
to the website and
If you would like to submit a question, comment or feedback
on the website, please
visit this page.
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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.
In the June newsletter, I summarized my outlook as follows.
"It's difficult to say at the moment which way the SPX will go. I'd say if a new
high is formed above $1100, then the recent low may be the bottom of the
sell-off but I wouldn't expect a raging rally because of it. If the recent lows
are broken, I'd expect the SPX to sell off further - maybe even to $1000."
Talk about a fake out! It's times like these that make it difficult to trade
and why money management is so important. After rallying up to just over $1125,
the SPX suddenly reversed and has had 10 down days out of 11 since the reversal.
I also threw this little tidbit in just because of the where the SPX was in
relation to the fibonaccci retracement lines I drew in.
"As the chart shows, we came close to hitting the 38.2% retracement
level. ...I mention that because it wouldn't surprise me to see this level tested before a bottom is in place".
And... look where we ended up.
Last month I added the fibonacci retracement lines to the chart measuring from the
low in March of 2009 to the recent high in May. Not surprisingly, the SPX did
come down and touch the 38.6% level on Thursday. I say 'not surprisingly' because on one
hand, it's typical for the next level of support to be tested once a prior level
has been broken. However, the higher high formed in mid June did cause me to
start being more bullish so I was surprised to see the prior low broken after
such a breakout.
What's next? I'm not exactly sure. Right now, I'm a bit bearish. I believe the
next few days will reveal more. If the $1000 level is broken, then expect more
selling. If we start to see more buying, watch for overhead resistance because
it may just be another opportunity to sell into the short term rally. Right now,
I'm watching $1050 to be broken as resistance before I switch to a more
cautiously neutral stance.
Last month, I mentioned that there's
nothing wrong with sitting on the sidelines waiting for a trend to be
established. If you are uncertain, it's better to sit on your hands than throw
money down on a trade with a high risk of losing it. I still recommend paper trading
in the mean time. Think of it as a no
cost way of trying out your market assumptions.
I'd also look for some possible bearish, bullish and neutral potentials to
trade. It's always good to be ready when the market establishes a direction. For
now, I'm going to treat any rallies as an opportunity to sell call spreads or
maybe buy a put calendar spread. A break above the $1050 level might cause me to
sell some more neutral trades like iron condors.
Stay alert and nimble. Make sure you are doing market analysis more than once a
month. In this climate, every few days would be a good timeframe to re-evaluate.
More on technical analysis.
Options strategies I use
Be sure to take time to provide
feedback on the newsletter.
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