August 20, 2017

More Downside To Come?

Today was a banner day for the High-Probability, Mean-Reversion Options Strategy. The IWM puts that I purchased near the close yesterday closed the day up 27.9% and if we continue to move to the downside tomorrow, which looks highly likely we could see even greater gains. My thought is that we will close the gap in IWM, DIA and SPY that occurred last Friday. This would take the major market ETFs to $69.73, $115.77 and $122.10, respectively. If we happen to close the aforementioned gaps then the next move could take the major market benchmarks down to close the gap from 10/10. A move like this over the next few weeks would lead to extraordinary gains in the strategy. A move to close the gap from last Friday could lead to us to a … [Read more...]

Options Offer Tremendous Opportunities

I am always amazed how large the opportunity to "make it big" factors into the great magnetism of the market. The belief that anyone, from any background can be successful and make tons of money has quite the allure. But, in all of this euphoria people neglect to think about all of those that failed before them. And believe me the failure rate is high. Yet, investors/traders continue to choose the most difficult of investments to trade - stocks. Stock-only traders are at a complete disadvantage because they have no way to trade the randomness of the market. They have a 50/50 chance of success for each and every trade. Bottom line - stock investors/traders are truly at a disadvantage. Again, stock investors only have two ways to make a … [Read more...]

Capital Preservation is Key

Money management, capital preservation, stop-losses, and position-sizing are (in my opinion) the keys to options trading success. Trying to be a hero when a position moves uncomfortably away from you can (and often) leads to disaster. All traders at some point have experienced this at some point. Almost every trading text out there decribes, in great detail, the authors great epiphany after a disastrous, account depleting journey in trading. These one or two failing experiences seem to create that “ahhhh” moment where, as a trader, you ”get it”.  The reason I mention this is that so many times in a market like we have experienced over the past week traders that are long, continue to be long, in the face of a sharply declining market. Why? … [Read more...]

Extreme Overbought Territory

I stated in the last trade alert today (subscribers only) that as a high probability, mean-reversion trader I thrive on situations where the std. deviation has pushed to extremes. Well, almost every ETF I follow has moved into a short-term extreme after today's rally. The tech-heavy QQQQ's have pushed to 99.9 on the RSi (2). As you can probably guess, a short-term reading this extreme does not occur often. Admittedly, my current position is nearing the max pain area, so I could potentially close out the position (most likely the prior two trades with lower deltas) for a loss if the indice keeps pushing violently high. When exiting a trade I typically look for a  fade of the current direction to a critical area of support/resistance and … [Read more...]