The "haves" and the have "N.O.T.S." (Novice Options Traders)

Here is an example of a Peak Investing newsletter. I do not have this advisory, but I have been watching them for 6 months:

Welcome to all the new sign-ups for our PeakInvesting newsletter.

Trading Update:
Last Friday, we closed out our WK B Weekly credit spread trade with another win. That made two wins for the first two weeks of April. That comes on top of four wins for the month of March without a loss. Next week is monthly options expiration and we'll be recommending our April POI trade.



The Option Trader's Diary:

We continue to make improvements at our website PeakInvesting.com to help our traders learn and profit from the available tools for our credit spread strategies. The recent addition of the Trader's Diary guides members step-by-step though an actual trade. Below is last week's diary. The trade was successful by the way, making a nearly risk free 6% in just 3 days.

Thursday, April 13, 2006
6:50 AM PDT: With six hours to go before expiration and the market selling off, I have an excellent chance of keeping my 0.30 credit.

7:20 AM PDT: Just want to point out some of the recent improvements made to the Option Volatility Analysis pages. The exact time of expiration is now used in the probability calculations. Also, the graph and table of probabilities show only the option strike prices that are currently being traded.

12:32 PM PDT: With the market coming to a close and the OEX well below 590, it's almost a sure thing that I will keep my 0.30 credit and make 6% in just three days.

Tuesday, April 11, 2006
6:50 AM PDT: Deciding on which option spread to trade just got a whole lot easier. You will notice that at the bottom of the Weekly SPX Option Volatility Analysis page, each of the option spreads are listed in a table with their potential percent gain and probability of success. Currently, the 1315/1330 bearish call spread is still the only viable trade with an 85% probability of making 2.7% profit.

6:55 AM PDT: I decided to place a limit order at 0.50 for the 1315/1330 bearish call spread. My current open position is:
Buy To Open .JXBDF SPX APR WK B 1330 Call Credit 0.50
Sell To Open .JXBDC SPX APR WK B 1315 Call Credit 0.50

Note, the 1315/1330 bearish call spread is no longer displayed on the Weekly SPX Option Volatility Analysis page because the 1330 bid price went to zero.

11:05 AM PDT: The market sold off and my order never got filled. I decided to cancel that order and place a trade for the 590/595 OEX bearish call spread. This goes against my rule of only trading the SPX, but there is nothing available with a high enough probability. The Weekly OEX Option Volatility Analysis page shows an 82% probability of making 6% profit. Note, the actual probability of success is higher because the market closes a day earlier. My current open order is:
Buy To Open .RZBDS OEX APR WK B 595 Call Credit 0.30
Sell To Open .RZBDR OEX APR WK B 590 Call Credit 0.30

1:00 PM PDT: At the end of the day my order was filled for the full 0.30 credit.

Monday, April 10, 2006
6:52 AM PDT: Not much movement in the general market this morning. I plan to stay on the sidelines today unless a high probability trade presents itself. Currently, the 1315/1330 bearish call spread has a 86% probability of success.
The PeakInvesting site includes our successful POI strategy, covered call writing, S&P 500 Forecasting and our proprietary Options Volatility Analysis. And now with Auto-Trading, its the best options site on the web. Sign-up now for your Free Trial and receive both our Weekly and monthly POI credit spread recommendations.



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Important Notice:
This newsletter is for educational purposes only and is neither a solicitation nor an offer to buy or sell options. Trading options has potential rewards, but also potential risks. You must be aware of the risks and be willing to accept them in order to invest in options. Do not trade with money you cannot afford to lose. Please read the risk disclosure documents posted at the following website
 
Quote from ElectricSavant:

Does everybody trade options the same way?
More...

It's not that everyone trades options the same way, but there are situations that make certain strategies more favorable. I would look for these first, assuming that the advisory knows what they are talking about.

As a simple example, if you were to open a long call position in an equity with high IV. If you plan on staying in the position for a few weeks, you might be puting yourself at an immediate disadvantage, because you will lose money on both an adverse move AND a drop in IV. In many cases you could even lose money in spite of the underlying making a positive move because the IV drop hurt you more than the underlying price increase helped you.

So, I was suggesting that the strong points of a strategy are a good place to start when trying to determine how the trade was selected.
 
in reflection...options are much harder to trade than equities because there is the decay to consider...there is no buy and hold and time is in fact the enemy. or at can be the salvation...according to what you are trading...like a straddle for example...

Michael B.
 
Quote from ElectricSavant:

in reflection...options are much harder to trade than equities because there is the decay to consider...there is no buy and hold and time is in fact the enemy. or at can be the salvation...according to what you are trading...like a straddle for example...

Michael B.
More...

I prefer to think that options are more "interesting" to trade:p and I definitely belong in the N.O.T.S. club, as I have only been studying/trading options for less than a year. I did do CC's for several years and became reasonably good and understood intuitively what was happening...just did'nt grasp the theoretical.

Its not just time or Theta...but IV's and Vega and gamma! A very wise Michael C said when you put an option position on you need to understand ALL the things that can go wrong and have aplan for what you will do. The problem for us N.O.T.S is we do not have the experience in KNOWING what can/will go wrong so its very difficult to have a plan for all the contingencies.

What has worked best for me to to sink my teeth into a strategy for a period of several months to experience the events and develope strategies for managing the risk. Currently working on the calendars...I'm really learning soooo much. After six months I'll review and be able to have a better understanding of the nuance's of Calendars. It takes time and many different types of markets to gain the experience that really gives you any kind of edge in options trading.

Some types of strategies you can combine with what you know such as selling straddles on stocks you owne. Since I was already doing CC's selling the straddle was a fairly easy transition, the important lesson was sell only short term (30d) to limit the risks. Another example is what I'm doing with WM. I've sold the call but also did a call calendar on it figuring I can Have the stock taken but then I'll still have a call call and if the stock goes down I'll just resell both the call's on the stock and the shorts on the cal..kinda neat. IC's came fairly easy to me but struggling with a real understanding of B-fly's. very interesting and constantly challenging:D
 
Quote from ElectricSavant:

As I have mentioned I have been with OptionSmart for two years and I am very thankful to them for allowing me to profit enough to purchase my small Condo with.

Michael B. [/B]
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I don't see how is that possible with your account size and their trading style.

besides, if OS is so rewarding, why experiment and change???


:D
 
A 10k Downpayment...excuse me....look in the first tab for details.

I find that diversification is prudent, as nothing works forever...but the only thing that changes is money managment (allocations) so far...

Also more frequent trading may speed up the compounding, as long as the allocations make sense. Questionable results get allocated less money to trade.

Michael B.




Quote from WD40:

I don't see how is that possible with your account size and their trading style.

besides, if OS is so rewarding, why experiment and change???


:D
More...
 
adding advisories only increase subscription costs and not commish, thanks to ThinkorSwim. But the goal is to get to 1 buck a contract with no minimums or cancellation fees.

also understanding a little bit more about options would be nice :)

I believe two different methodolgies can hedge each other while maximizing profits in each cycle. But what do I know....(to me it seems that a cycle is the length of the option hold and to capture the correct timing in the MARKETS cycle would be key)

Michael B.
 
This am this alert was broadcast. Now that it is filled here it is:

NEW ENTRY PRICE

Day Limit Order
Open Credit Put Spread
Buy to Open QQQQL QQQQ May 38 Put (AT)
Sell to Open QQQQO QQQQ May 41 Put

Credit 0.30


Here is the TOS platform, with fills exactly as alerted:
 

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