The Right and Wrong Way to Approach Options Trading Strategies
January 12, 2012
A while back I had the pleasure to speak with a gentleman from a prominent newsletter service. It was interesting to see just how he traded options and how his newsletter service and others that he was affiliated with used options in their services.
As I suspected – he uses options irresponsibly in his service - as most people do. And I told him so.
His response – “You sound like an idealist.”
An idealist? Why? Because I do not allow marketing efforts to control my options strategies? Because I do not gamble with options by attempting to guess which way an earnings call will go? Because I do not buy out-of-the-money options in hopes that an option will move towards my chosen strike price?
I could go on and on.
I was amazed how little he knew about how to effectively trade options. He actually asked me about how I used statistics to gain an advantage in my trading. This man has been in the industry as an editor for several major newsletter publications for nearly 15 years. 15 YEARS!
And yet, he doesn’t know how to create a trade with a probability of success of your choice – be it 70%, 80% or 90% chance of success.
He stated that using credit spreads does not work for the retail public. It doesn’t sell. It’s too complicated.
I could not believe what I was hearing. This man, who had no clue about the true advantages of credit spreads (like in our Theta Driver Options Strategy).
The general consensus in this business is that the the public is too stupid to place a credit spread. He told me that his marketing department told him not to use credit spreads in their options services.
Why? Because according to him, lots of lottery-ticket gambles are more attractive to readers – and they help create a portfolio of huge winners. He didn’t mention that it also creates lots of big losses. And it might be that it’s easier to sell a newsletter when you can promise lots of chances for big gains.
But that is not my goal as the editor of an options service. I want to educate anyone willing to listen how to effectively trade options like the professionals do. And that does not mean creating more complicated strategies – it means keeping them as simple as possible.
I do not tout outlandish gains. I only try to bring to you the best strategies that I know.
The strategies that floor traders use.
The strategies that create real statistical advantages.
And then I try to incorporate risk-management techniques as well. He actually scoffed at that as well.
If you want an options strategy with a gambling mentality then you certainly have your pick. There are probably dozens of them in your email inbox right now. But I am not a gambler and therefore I do not offer daily trades with no statistical advantages.
I am a realist. I realize there is no holy grail in trading. However, one thing I do know for certain is that I have found several unique and concrete strategies that make a world of sense to me and I trade them to make serious money over the long-term. Furthermore, I realize that the less I trade, the better my strategies will perform over the long run: And the long run is what matters. This is what makes my strategies unique and so far, successful.
If you haven’t already, don’t forget to sign-up for my :
High-Probability, Mean-Reversion Options Strategy : Free 30-day trial
Theta Driver Options Strategy (limited room available): Free 30-day trial
Also, for those of you who live on Facebook. You can access my info there as well. Just click on LIKE.
Why a Short-Term Decline is Highly-Probable
January 10, 2012
We witnessed another upside gap today and in my opinion the bears were handed a gift, at least for the short-term.
Most of the highly- liquid ETFs I follow here at Crowder Options have pushed into a short-term overbought extreme, with several actually reaching a very overbought extreme.
Typically, when we see this type of price action, that is an upside gap into overbought to very overbought territory at strong overhead resistance, a short-term reprieve is to be expected. However, if you recall, I expected to see a reprieve after last Tuesday’s large upside gap, but the gap in the tech-heavy Nasdaq 100 (one of my positions at the moment) has yet to close.
But, now that we have seen the all of the major ETFs, SPY, DIA, IWM and QQQ fail at major resistance levels (as witnessed today) the probability of a short-term downside move has increased. Again, couple a failure at strong overhead resistance with short-term overbought readings in over half of the ETFs I follow and the probability increases even further. And, if aforementioned bearish leanings weren’t enough, the market is entering a period of seasonal bearishness.
IF that wasn’t enough talented sentiment analyst Jason Goepfert of Sentimentrader.com recently stated, ”
Mostly what we’ve looked at over the past couple of weeks has been either market-neutral or positive. We’re starting to see some negatives now. We looked at one of those yesterday, the ratio of speculative Nasdaq volume to NYSE volume. That’s a minor indicator, but it’s at extreme levels.
Another negative is the spike in the OEX Put/Call Ratio. This means that traders have been busy trading put options on the S&P 100 index, the largest companies in the S&P 500. These options are normally traded by more experienced traders. With that put/call ratio high and the Equity Put/Call Ratio low, the spread between the two is at an extreme. This is kind of a poor man’s proxy for smart money (OEX options) versus dumb money (equity options). Such a wide disparity between the two has not been a good sign.”
Combine all of the aforementioned and you can quickly see why I expect to see a short-term decline that closes the 1/3 gap.
If you haven’t already, don’t forget to sign-up for my :
High-Probability, Mean-Reversion Options Strategy : Free 30-day trial
Theta Driver Options Strategy (limited room available): Free 30-day trial
Also, for those of you who live on Facebook. You can access my info there as well. Just click on LIKE.
Payroll Probabilities. Ready to Employ Options Strategies?
January 5, 2012
Jason Goepfert of Sentimentrader.com came out tonight with some interesting statistics on how the S&P has performed immediately following the January payroll report.
The S&P has declined 6 of the last 8 years on the day the Nonfarm Payroll report was released in January.
Often, that weakness has continued, which is what we’ve been touching on with regard to questionable seasonality heading into the latter half of the month.
There is optimism the Payroll report will beat expectations due to the big beat from the ADP report on Thursday.
When the Payroll report beat expectations in January, then over the next two days it rose only 1 out of 5 times, averaging a return of -1.1%.
When it missed expectations, then the next two days were up 2 out of 8 times, averaging -0.6%. So damned if you do, damned if you don’t for the short-term.
Over the next 3 weeks, it was similarly negative. The average risk (i.e. maximum decline) was more than four times larger than the average reward, starting from the opening print on the Friday of the Payroll report.
So, if you couple the above statistics with a huge unclosed upside gap from Tuesday and short-term overbought readings you can quickly see how things favor the bears over the next few days.
If we see another gap to the upside I have no problem taking advantage of the overbought situation by placing trades in both strategies. Admittedly, it is my hope that an upside gap occurs because I think this will only fuel more fire to the bearish argument over the next 1-5 days.
If you haven’t already, don’t forget to sign-up for my :
High-Probability, Mean-Reversion Options Strategy : Free 30-day trial
Theta Driver Options Strategy (limited room available): Free 30-day trial
Also, for those of you who live on Facebook. You can access my info there as well. Just click on LIKE.
Will the Gap Close?
January 4, 2012
All of the major indices gapped up on the first day of the trading year and now we are seeing a push into overbought territory coupled with decent overhead resistance. As an options trader this is the types of set-up that I look for and trade without hesitation. Once I make the assumption that the gap will close and the overbought state will move back into neutral territory I then use the appropriate options strategy to take advantage.
I am an options trader. I trade strategies based off probabilities. Nothing new here. I just want to teach people how to trade effectively and profit by using my options high-probability options strategies. For successful investors/traders, its about your strategy, your logic, your process and nothing else.
If you haven’t already, don’t forget to sign-up for my :
High-Probability, Mean-Reversion Options Strategy : Free 30-day trial
Theta Driver Options Strategy (limited room available): Free 30-day trial
Also, for those of you who live on Facebook. You can access my info there as well. Just click on LIKE.
The 2011 Options Strategies Review
January 3, 2012
I just wanted to thank all of you for a wonderful 2011. My theory on how to effectively trade options is finally catching on and the response has been overwhelming. I continue to be amazed by all of the positive feedback. Thank you, thank you, thank you.
Daily Thoughts
Patience, patience, patience.
I have been patiently waiting for one of the ETFs I follow to hit a short-term extreme and after today’s huge rally we are finally beginning to see some short-term extremes enter the market. As a result, I will most likely be placing a trade in the Theta Driver strategy over the next few days and if we see a continuation of this beginning of the year rally we could also see a trade in the High-Probability, Mean-Reversion strategy.
2011 in Review
2011 was a great year for the strategies at CrowderOptions.com. Since I started the having a third-party service audit my performance (for transparency reasons) the High-Probability, Mean-Reversion Strategy is up over 58%. Yes, 58%! Check out the results for yourself here. Join the HP-MR service, try it free for 30 days and if you aren’t pleased with the service then cancel with no questions asked.
As for the Theta Driver strategy, it has also been extremely successful. Through the use of the High-Probability indicators we have been extremely successful using a credit spreads as the strategy of choice. So far the win ratio is 100%. Of course the service is only 5 months old and we have only had 6 trades (roughly one a month), but we are not out to trade heavily or to try and hit home runs. We just want a sound options stragey that makes a consistent 10+% per trade. So far, so good.
As most of my loyal readers already know, I do not market my service. I allow my performance to speak for itself. I refuse to enter the relentless world of never-ending marketing that plagues the industry that I adore so much. My goal is to teach you, the self-directed investor how to effectively trade options the right way. Patience, position-sizing, probability and a long-term approach that incorporate sound, methodical options strategies is what my service is about. I am not going to claim outlandish gains, nor will I spam you with ridiculous marketing emails. As I enter my seventh year of CrowderOptions.com my intention remains the same – to give you the most transparent options newsletter service available that employs a straight-forward approach to trading options.
Theta Driver Options Strategy (limited room available): Free 30-day trial
Also, for those of you who live on Facebook. You can access my info there as well. Just click on LIKE.
Market Sets Record
December 20, 2011
What a day!
According to Jason Goepfert, Tuesday was “the best day in 30 years.”
“The buying stampede resulted in just under 98% of all volume being transacted in stocks that were positive on the day.”
The highest ever.
Historically, after large Up Volume days the market consolidates and I would expect that this time would be no different.
All of the ETFs I follow have pushed back into neutral territory and several of the major market benchmarks are very close to a overbought state. With that being said, I intend to add a credit spread in the Theta Driver strategy tomorrow and depending on the price action tomorrow I might just add a position in the High-Probability, Mean-Reversion strategy.
Subscribers stay tuned!!!
Theta Driver Options Strategy (limited room available): Free 30-day trial
Also, for those of you who live on Facebook. You can access my info there as well. Just click on LIKE.
Oversold States in the Major Benchmarks
December 20, 2011
Random Thoughts
I have taken another much needed hiatus to concentrate on a few additions to the website. The members page is still int he works although progressing much slower than I originally anticipated. It will be worth the wait.
Until then, we still have two of the most successful options strategies on the internet. The High-Probability, Mean-Reversion strategy is up over 58% since its inception and the Theta Driver Strategy just reaped two more winners. The portfolio has had an average winner of over 13% per trade.
As the year pushes to an end I will begin to start ramping up my posts and my intention is to ramp up my posts on a daily basis in 2012.
Oversold Again
The Nasdaq (QQQ) and S&P 500 (SPY) among many other ETFs that I follow have pushed into a short-term oversold state. As a result, if the market pushes lower at the open I will add a few trades to both of our portfolios.
Sorry to keep this so short tonight, but I am bombarded with trade set-ups and trade-related work, so stay tuned for the next post.
Major Indices Remain in a Short-term Overbought State
December 7, 2011
Random Thoughts
Three of the top five most short-term overbought ETFs that I follow are major market ETFs. DIA, SPY and IWM (in that order) are currently “very overbought” on a short-term basis. The RSI (2) of SPY and DIA are roughly 96 and above and IWM is not far behind at 92.
As I write this the futures are higher and if we open at these levels we will see another test of the recent overhead resistance that has plagued the bulls since last Wednesday’s historical surge.
As I stated yesterday with DIA and SPY in short-term extreme overbought states coming off huge gaps to the upside and battling with strong overhead resistance the probability for a short-term reprieve is high.
However, as we all know, stranger things have happened during the seasonally bullish month of December. Add the historical bullishness of December triple witching and one can quickly see how the market could push significantly higher before a significant decline occurs. As contrarians, we have all witnessed the power and irrationality of short-term trends (the most recent observance was in the month of October) so as always pay close attention to the position size of your trades whether you are bullish or bearish.
Remember, position size IS the key to long-term success as a trader.
Theta Driver Options Strategy (limited room available): Free 30-day trial
Also, for those of you who live on Facebook. You can access my info there as well. Just click on LIKE.
Bullish – Bearish – Bullish – Bearish
December 6, 2011
On the Tuesday before Thanksgiving I turned into a short-term bull. The High-Probability, Mean-Reversion Indicator had pushed into a short-term oversold state with readings not seen in months and as a result, I bought a few, two-month out calls. I recently sold my calls after the huge advance last Wednesday in the HPMR strategy and now I find myself back in the bearish camp.
Over the past several days the market has struggled with what seems to be an area of strong overhead resistance. The struggle follows the huge gap from last Wednesday. Couple the aforementioned with the short-term overbought extremes in the market and I expect to see another short-term pullback over the next few trading sessions. It is my hope that the market allows me (by opening higher to flat) to enter into a few short-term positions tomorrow in both of the options strategies I follow. Subscribers stay tuned!
Theta Driver Options Strategy (limited room available): Free 30-day trial
Also, for those of you who live on Facebook. You can access my info there as well. Just click on LIKE.
ETFs Back in a Short-term Neutral State
November 29, 2011
All of the ETFs I follow are back in a short-term neutral state. The two day rally has pushed all of the ETFs I follow back into a neutral state from the extreme oversold readings reached late last week. So, in terms of an edge, there really isn’t one based on the high-probability, mean-reversion indicator I follow for my two options strategies.
However, the market is currently entering one of the strongest seasonal periods of the year and a Santa Claus rally look imminent. As a result, I am short-term bullish on the market.
I will be back later with more details, but I wanted to get out my indicators sooner than later.
As always, please feel free to contact me with any questions or comments that you might have.
Kindest,
Andy
I will be back later this weekend with more options related info. Stay tuned!
Theta Driver Options Strategy (limited room available): Free 30-day trial
Also, for those of you who live on Facebook. You can access my info there as well. Just click on LIKE.
