Let’s begin with a basic fact: There are many methods for adjusting a position so that risk is reduced. Some are inexpensive, others cost more than most traders are willing to spend. Some are effective most of the time, but the protection offered is minimal. Others are so effective (alas, that happens rarely) that the gains an be spectacular. [Think of owning an extra put or two before the market opens down 20% one fine day]
Steady Condors has just finished another profitable month of trading with gains of 7.7% on margin, and 6.2% per unit for April expiration. This makes the year to date return 17% on a whole account. Of particular importance is that this month’s gains bring Steady Condors back to new equity highs after a somewhat lengthy (yet statistically expected) drawdown over the last year. Those who had the discipline and patience to stay the course have been rewarded.
Many people believe in the above methods, indicators. I am skeptical about the usability of them. I'll tell you why ... Fibonacci, Gann, Elliott - all of them bring the laws of nature into the trading. These are formulas and laws that can be found in nature and form certain patterns.
Karen the "SuperTrader" has generated a lot of curiosity in the trading community. She has been interviewed on TastyTrade twice. The title of the last interview was "OPTION TRADER makes $105MM PROFIT in the NDX, SPX and RUT. Is she real? Does she really generate all those outstanding profits? Do you think Karen is a fraud? This article aims to clarify some facts about Karen SuperTrader and her trading results.
We closed today our Steady Condors March trades for an average gain of 7.5% before commissions, or 5.8% return on the whole account after commissions. We don't promise you some absurd numbers like 10%/month or 5%/week, but we are proud to report performance in the most honest and transparent way possible. I will explain later how our performance reporting is different from other newsletters, but let me start by quoting Jesse Blom's post on the forum.
The OptionAlpha is a highly respected publication managed by highly dedicated and extremely knowledgeable editor, Kirk Du Plessis. I had the privilege to be interviewed by Kirk recently for his highly successful podcast. The Podcast was created and dedicated to options trader, stock market investor or trading wannabe.
Options Trading is a business. As in any business, there are costs. One of the major costs is commissions that we pay to our broker (other costs are slippage, market data etc.) While commissions is a cost of doing business, we have to do everything we can to minimize that cost. This is especially true if you are an active trader.
Our long term followers know that buying premium into earnings is one of our favorite strategies. I wrote about the strategy in my Seeking Alpha article Exploiting Earnings Associated Rising Volatility. IV (Implied Volatility) usually increases sharply a few days before earnings, and the increase should compensate for the negative theta. We have been using this strategy in our SteadyOptions model portfolio with great success.
We discussed in the previous article that the risk graph of the stock market involves unlimited risk. That means despite using super good stop levels, there might be days when the market skips your limit order. Or, your market order could be executed at a price you did not expect. Consequently, a precise risk management cannot be achieved. Those who trade on the Forex market may groan now because this is not strictly true for them.
Option is the contract or deal, that lets a person to sell (put) or buy (call), a certain asset before or on the specific date. There are about 72 options trading strategies. There three most commonly used options strategies: bullish, bearish and neutral or non-directional. The following infographic describes few basic options strategies.
2014 marks our third year as a public service. We had a fantastic year. We closed 150 trades in 2014 which produced 146.6% ROI, based on fixed $1,000 allocation per trade (non-compounded) and 6 trades open. The winning ratio was pretty consistent around 63%. We had only one losing month in 2014. Check out the Performance page to see the full results.
