the September 2015 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.
Volatile September? - September Newsletter
|Holy cow! What a change from last month. We've seen quite a change in
the market as a number of factors, including the financial issues in
China have played out. What's up for September?
In this edition we'll tackle that question, explore an interesting
trading strategy for this market and revisit an older question that was
submitted by a reader.
Finally, 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: These Volatile Times
| This section of the newsletter will focus more deeply on the details
of some of the options strategies I use in the tutorials. With a month
like we've just seen, I feel compelled to go back re-visit
on how to trade in a volatile market.
The first thing to acknowledge is that something big has happened. We
are often caught off guard when we see the kinds of behavior we've seen
over the last few weeks. If you're in trades that have gone against you,
you might find yourself a bit paralyzed as you watch in morbid
fascination while your trade goes completely wrong in just a few days.
Take a moment to step back and simply absorb what is happening. If you
are following good money management rules, you will find some of your
trades will be threatened and could indeed lose money. However, in the
scheme of things, shouldn't have a big impact on your portfolio. I often
take this opportunity to step back and look at my year. I note that
there are several months where I have one or two losing trades, but the
overall trend of my trades is profitable - in other words my portfolio
is growing month
Now that you've gotten over the shock of what's happened, now what? We
were bullish to neutral but that's clearly changed. You may find
yourself conflicted with two different fears at this point when
considering a new trade. The first is fear of additional loss - the fear
that if you put a trade on, it may be wrong and you'll lose more. The
second is the fear of missing an opportunity.
Neither of these fears should be the driving factor behind your decision
to trade or not to trade. It's important to be clear headed about your
decision. If you feel you can't do that, it may be best to simple step
away and do nothing. While you are deciding what to do, consider these
The most important thing to focus on is that nothing stays the same
forever. If the current market climate is a bit more turbulent than you
feel comfortable with, take a break. Opportunities will come at a future
- Higher volatility means better premiums for strategies such as
vertical spreads and iron condors. This means that regardless if you
remain bullish or have become bearish, you can either get a higher
premium for a position you might typically take or you may be able to
take a more conservative position for roughly the same premium.
- Markets tend to behave in irrational ways and can sometimes be over
sensitive to news. Take the time to assess the fundamentals of the
market & economy in general. What are the factors that are driving the
behavior in the market. Are these systemic issues or short-term issues.
- Consider that in the case of our current situation, the market has
been in a long term up trend since late 2011. It's healthy for the
market to go through periods of 'reset'.
If you feel like putting your toe in the water, take small positions.
all your trades in one day. You can spread your risk out by
entering a position, waiting a day or two and entering another trade and
so forth. Remember, you want to make your trades in a clear headed way.
Take some time to get perspective on the trend in the long term and in
the short term. Take the time to put those technical analysis skills to
For more information on the technical analysis, check out the
Technical Analysis page on the website.
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!
This month, I received a suggestion rather than a question. Thanks to
Terry Bingham for this new approach to setting up a spread.
I just finished reading your August news letter and I felt compelled to
drop you a line. I've been a fan of your site and appreciate all the time you spend
keeping it up and running.
In your videos of the Ameritrade TOS platform I’ve noticed that when you
are selecting your
strikes on the trade tab, option chain that you like
to use the (RIGHT CLICK - SELL – VERTICAL – DEEP AND WIDE) method of
My personal preference is to hold down the Ctrl. Key and then click on
the individual bid and ask prices of the option chain at the exact
spread spacing that I want. This also works for strategies like Iron
Condors and Calendars because you can use the scroll wheel to move
around the option chain while you are still holding the Ctrl Key.
I'm not sure if I'm telling you something you are already aware of, but
if not you might find this method quicker and easier to setup your
A: Thanks Terry for this great suggestion. It does seem to work more
efficiently, though I may have to work to train myself to use that
approach as opposed to the one I've been used to using for the last
years. I'm not sure when this feature showed up in the product
but it's a great addition.
For those of you who have never given this approach a try, I encourage
you to at least try it. Old habit may be hard to change but you might
just find yourself preferring this approach.
Help me ensure we have an interesting question or two to respond to
next month. Submit your questions at this
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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.
expectations may change if the charts indicate something different
during the month.
Wow! How about this last month? The last few weeks have certainly given
us a lot to talk
about, right? We shouldn't be too surprised though as
I've been hinting something might change. You can't just keep going up
In the August newsletter, I summarized my outlook as follows:
"...At the very least, this should provoke a degree of caution. As we remain within the range I've outlined above, there are really only a few possible outcomes.
You might be saying, "Thanks, Captain Obvious, but I could have come to those conclusions." However, part of doing the analysis is to first identify what you expect might happen or could happen. Once that's done, you might decide to determine what are the more likely outcomes AND prepare for
the case when the other possibilities might occur.
- We continue for a while in this range, which is about 75 S&P points wide
- We eventually push out over the top of the range for a resumption of the up
- We see the range support fail, which could indicate moving into a bearish
Here's how August played out.
Last month I noted that we'd moved into a sideways trend, but the most
concerning part of that is that the SPX had broken down through the
up-trending channel. News of a number of market factors , including the
financial crisis in China, caused traders to decide enough was enough.
Selling accelerated as fears mounted. So far, we've seen the lows down
to $1875, which amounts to roughly a 10% selloff.
So, what next? More of the same? Since this is written after 4 days of
September trading, we know there has been a bit of selling from the
initial bounce. Will this mean another leg down? It's honestly too hard
to tell. We know that the current low is around $1875 but
there is a
more recent intermediate low around $1925 set on Sept1. If we see that
level hold and the SPX head above the high just around $2000, then I'd
say we might be cautiously bullish again. If $1925 fails to hold, a lot
of things could happen. We could see $1875 tested again.
these points because I consider them lines in the sand so to speak. We
can't really know what WILL happen but we can observe what MIGHT happen
based on those lines being crossed or not.
For now, I'm remaining cautious and taking very small positions as I
wait for the market to reveal it's next moves. I've got both bullish and
bearish trades I'm considering depending on how I see the next week play
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. It's a good practice to be prepared with
in either direction but not to act without confirmation.
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 product information.
One of the more recent additions to the portfolio of services and
products is the Live Web sessions. These sessions are recorded and and
available for a very reasonable price of $12 per session. I've created a
Newsletter Special. If you add all 4 sessions to
your shopping cart, you can get 4 sessions for the price of 3 by using
the discount code: WebEx4Pack
Some time back, I released the second for sale
video. The title of this
video is "Mastering Short Vertical
Spreads". I now have a total of two strategy training 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. 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 how 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