Blog

2016 marks our firth year as a public service. We had a good year overall. We closed 127 trades in 2016. The model portfolio produced 40.1% compounded gain on the whole account based on 10% allocation. The winning ratio was pretty consistent around 66%. We had three losing months in 2016.

Our readers know that our returns have been tracked by Pro-Trading-Profits, an independent third party website that tracks performance of hundreds investment newsletters. They provided an excellent explanation how to analyze and compare performance of different trading systems. 

AutoZone Inc (NYSE:AZO) has earnings due out tomorrow, 9-19-2017 before the market opens and we can look at a slightly advanced option trade that starts two calendar days after AZO earnings (9-21-2017) and lasts for the 19 calendar days to follow, that has been a winner for the last 3 years. 

A lot of options traders consider 90% probability strategies a Holy Grail of trading. After all, if you can win 90% of the time, you should be able to grow your account very quickly, right? Well, not only this is not true, but in fact, winning ratio alone tells you NOTHING about your chances to be profitable. 

For Facebook Inc, irrespective of whether the earnings move was up or down, if we waited one-day, and then sold an one-week at out of the money iron condor (using weekly options), the results were quite strong. This trade opens two calendar after earnings to try to let the stock find equilibrium after the earnings announcement. 

The iPath S&P 500 VIX Short Term Futures TM ETN (NYSEARCA:VXX) is referred to as "the VXX.". The obligation of the VXX is to match the performance of the S&P 500 VIX Short-Term Futures Index Total Return and that is a strategy index which maintains positions in the front two-month Volatility Index (VIX) futures contracts. 

One of my basic tenets in teaching people how to trade options is that rules and guidelines should not be written in stone and that there are valid reasons for accepting or rejecting some of them. When I offer a rationale or explanation or suggest course of action, it is because I have found that this specific suggestion has worked best for me.

Iron Condors have gained a lot of popularity among professional money managers and retail investors. It is a market neutral strategy that allows you to profit when the underlying price moves sideways. Iron Condors usually have a limited risk and a high probability of success.

How would a trader like you decide to do early exercise? Say you bought calls when they were trading in the 1.0 -> 2.5 range, now underlying has risen so that calls trade bid-ask at 4.0 / 4.8 and there is strong possibility of it going higher. Also assume in another case that they trade in the 6.0 to 7.0 range.

Large-cap, blue-chip companies are not exactly the hottest commodities on the current market. But one of them has been rewarding income investors for decades and will likely continue to do so. I’m talking about Procter & Gamble Co (NYSE:PG), a multinational consumer goods company headquartered in Cincinnati, Ohio.

It’s no secret that selling far out of the money options, as opposed to buying them, is a trading strategy with a high probability of success. Low-delta options have a proclivity to expire worthless. The dramatic downward moves required to make low-delta options profitable don’t happen all of the time.

One of the requirements when developing a trading method is that traders have to fully describe how to start and settle trades. However, when they are forced to describe how to adjust and manage the size of their positions, few traders have a concrete answer.

There are some psychological dangers in the market that you should know about. It is important that you know how to deal with your emotions and what steps you must take to achieve your investment goals. Therefore, you must equip yourself with the right tools to be able to implement your operations in a profitable way in the long run.

'Volatility skew' is one of those topics that many traders ignore.  It's not something that was understood in the early days (1973 +), when options began trading on an exchange. According to Wikipedia: "equity options traded in American markets did not show a volatility smile before the crash of 1987, but began showing one afterward."

I've had three emails in the past month on people being assigned on positions and receiving margin calls, and generally not knowing what happened. I advise everyone to completely research and become familiar with the exercise/assignment aspect of option trading. If you don't you can find your entire account blown out over a weekend.