April 26, 2017

The Foundation of Options Trading

The first, and most important, step in options trading is to create a watchlist of highly liquid, optionable stocks or ETFs. This will be the foundation of your all your trading endeavors. The reason you MUST only use highly-liquid stocks or ETFs is so that you can rely on pricing efficiency. The more liquid the option, the tighter the bid/ask spread. This is extremely important because the bid/ask spread impacts the cost of using options. Wide bid/ask spreads eat into the potential profitability of your investment, and contribute to what is known as "slippage." The easiest way to search for what I call "tradeable" options on ETFs or stocks -- Volume. I look for ETFs with an average volume over 1 million shares traded because I want … [Read more...]

The Only Way To Successfully Use Options Over The Long Term

Any time you make a bet with the best of it, where the odds are in your favor, you have earned something on that bet, whether you actually win or lose the bet. By the same token, when you make a bet with the worst of it, where the odds are not in your favor, you have lost something, whether you actually win or lose the bet. -David Sklansky, The Theory of Poker As I always say, investment success comes from process. Let me explain. Back in my early 30s when I was privileged to live in sunny Flagstaff, AZ, I would take the reasonably short drive to Las Vegas so that I could make one the best bets in the gaming world. For those not familiar with the game of craps, the free odds bet placed behind an opening pass line bet carries no … [Read more...]

Trade Alert: 7-3-13

Crowder Options – Trade Alert (open) I have a few important announcements for all of you - current and past subscribers alike…so please read in its entirety. With 44 days left, it’s time to make a few trades for the August expiration cycle. As you all know there really hasn’t been much in the way of trades in 2013. It’s not because of a lack of effort. There are times when the market experiences doldrums, particularly when volatility is hovering around historic lows. I truly want to provide all of you with the best service possible, but as I stated earlier, I am not going to place trades just to place trades. That’s what the other services do. Trades have to make sense. Believe me it costs more for a losing trade than one or two … [Read more...]

Trade Alert – 5/4/13

The May options expiration cycle is coming to a close with only thirteen days left until options expiration. With that being said, now is an ideal time to start looking for June positions to add to the portfolio. Remember, ideally we want to add credit spreads with 20-53 days left until expiration. Here are the trades: IWM Bear Call Spread Simultaneously: Sell to open the IWM Jun13 99 calls (IWM130622C99) Buy to open IWM Jun13 101 calls (IWM130622C101) for $0.33 (Do not accept less than $0.28 credit to enter this trade.  Enter this trade as a vertical call spread to avoid paying double commissions.) Here are the parameters for this trade: The Probability of Success - 82.11% The max return on the trade is the … [Read more...]

Trade Alert (Theta Driver) – SPY Iron Condor (open)

The major market indices continue to push higher and higher. Yesterday in my blog post (read here) I stated my reasons for the continued stand with the bears. Remember, to keep abreast of what I am thinking check the blog on occasion. As for the low premium issues I discussed earlier. The best way to combat low volatility environments…iron condors. Iron condors allow us to keep our premium at a decent level and not compromise our probability of success goals. Simultaneously: Sell to open the SPY May13 162 calls  Buy to open the SPY May13 164 calls  Sell to open the SPY May13 147 puts  Buy to open the SPY May13 145 puts for a credit of $0.37 or better. (Do not accept less than $0.35 credit to enter this trade.  Enter this trade … [Read more...]

High-Probability, Mean-Reversion (Directional) – SPY Puts

The market has rallied without pause since the beginning of the year. Implied volatility, as seen by the VIX, is near historic lows. Moreover the RSI over various time frames has pushed into an extreme overbought state. Basically, the pot odds lean with the bears over the short to intermediate-term. As a result, I will be buying, yes buying a few puts on SPY. Obviously, this is a more aggressive trade, so for those of you that have a more conservative slant this might not be the trade for you. Also, make sure you keep your position-size at a reasonable level. Here is the trade: Buy to open the SPY Jun13 154 puts (SPY130622P154) for $3.59 or less. I will back with a few more trades over the coming days. Stay tuned! Thanks … [Read more...]

Theta Driver Trade Alert – 3/8/13

The market is in a short-term overbought state. DIA has pushed into one of the most overbought states seen in quite some time. As a result I will be placing the following trade: Simultaneously: Sell to open the DIA Apr13 145 calls (DIA130420C145) Buy to open the DIA Apr13 146 calls (DIA130420C146) for $0.37. (Do not accept less than $0.35 credit to enter this trade.  Enter this trade as a vertical call spread or bear call spread to avoid paying double commissions.) Basically as long as DIA stays below 145 through April expiration (42 days), the trade will be a success. That’s right, we can be wrong in our directional leaning and still have a profitable trade….again, the beauty of credit spreads. The trade has over an … [Read more...]

Theta Driver Weekly Report (2-19-13 Insider)

The Week Ahead At the beginning of every trading week I will send out my weekly report. The report will always contain a review of our current positions and occasionally I will add an article or two for the newbie and advanced options traders alike. Also, don't forget to check the insider's page for archived content, including trade alerts, articles, reports and more. I am also working on presenting video once or twice a week. Certainly it will be a valuable addition going forward. Strategy Insights My favorite thing about trading options is the fact that I know my risk-reward and my “probability of success” BEFORE I make each trade. I typically find trades that will give me a 75-85% chance of success - and if I'm even a … [Read more...]

Why I Sell Options To The Speculative Crowd

Trading often appeals to impulsive people, to gamblers, and to those who feel that the world owes them a living. If you trade for excitement, you are liable to take trades with bad odds and accept unnecessary risks. The markets are unforgiving, and emotional trading always results in losses. ---Alexander Elder, Trading for a Living I love Mr. Elder's quote. It embodies the typical retail options trader. Why do you think the most popular options strategy among retail options traders consists of buying out-of-the-money straight calls and puts? There is a reason why out-of-the-money options are so cheap; it's because they are the equivalent of buying a lottery ticket. And gamblers love lottery tickets. Look no further than the hype around … [Read more...]

Theta Driver Trade Alert – 2/6/13

The recent rally in the market has pushed SPY near a very important historical trend line. Typically, when we see a test of strong overhead resistance, a short-term to intermediate-term reprieve follows. I expect to see much of the same this time around.                     The great aspect of the trend line (as seen in the chart above) is that it gives us a defined area to sell bear call spreads. As I always say, no one knows the direction of the market, but if we can create a margin of error with a high-probability strategy we can increase of chances of success. Here is the trade. Simultaneously: Sell to open the SPY Mar13 156 calls … [Read more...]