Frequently Asked Questions

[Kim 7,958]

SteadyOptions FAQs

 

What is SteadyOptions?

SteadyOptions is a Premium Options Education service. We offer a combination of a high quality education and actionable trade ideas. My goal is to share my experience and to help you to become a better trader. The trading notifications are based on my real trades that I'm sharing with subscribers in real time. SteadyOptions is not a trade recommendation service and I am not a financial adviser. I see my first mission to educate you about options. Ask questions. Concentrate on your education, not on a short term performance. Please read  Welcome to SteadyOptions post for more details.

How do you recommend to start using the SteadyOptions?
If you are new to options or to those strategies, my first recommendation would be: start with paper trading. Then start with small positions and increase the allocation gradually as you gain more confidence.

How much can I expect to make with your service?
It is important to set realistic expectations, but it's ultimately up to you. I never make any promises or guarantees. You can visit the Performance page to get an idea about our results. 

What is your trading style?
We trade a variety of non-directional defined-risk strategies. I'm a big fan of the "slow and steady" approach. We aim for many singles instead of few homeruns. Our first goal is capital preservation instead of doubling your account. Think about the risk first. If you take care of the risk, the profits will come.

How do I get the trade notifications ?
We will post a topic in the SteadyOptions Trades forum (members only) when I enter, adjust or exit a trade. If you want to get notifications about the trades, you should follow this forum (by clicking "Follow this forum" button on the right upper corner of the forum page). If you follow this forum, you will receive an email when a new topic (trade) is posted. If you want to follow that trade, you will have to follow that specific topic in order to get notifications about the new posts in that topic. To get notifications from any forum, you need to follow that forum and then each topic individually. Read more in here. All open trades are listed under SO Open Trades. I also send the notifications on Twitter, at protected account SteadyOptions. In addition, there is also an option to "follow" a member to get his content, so you can follow all contributors who post trades.

 

When the trade notifications are sent?

All trade notifications are sent during market hours. You don't need to be glued to the computer all day, but you should be able to place trades during the market hours. We provide a full follow up on all trades (open, adjust and close).

Do I have to wait for your trade alert?
No. In the Earnings Trades Discussions forum (members only), I will start a topic to discuss every trade. I provide my entry and exit guidelines and profit targets. I strongly recommend that you follow that forum to see the rationale behind the trades and also to get some heads up before I actually make the trade. I encourage members to set their own profit targets and follow them.

 

Which strategies do you use?
We use a mix of non-directional strategies (members only topic): earnings plays, straddles/strangles, Calendar spreads etc. We always trade defined-risk strategies, never naked options. The focus will be on pre-earnings plays. The strategy is based on my Seeking Alpha articles Exploiting Earnings Associated Rising Volatility and How To Rent Your Options For Free. I encourage you to read those articles before trading any earnings related trades. This strategy is based on aiming for consistent and steady gains with holding period of 2-5 days. We will always close those trades before the earnings announcement to avoid the IV collapse. Please note that you will need a margin account to trade most of those strategies.

Can those strategies be implemented in IRA accounts?
It depends on a broker you are using. Most brokers will allow trading risk defined spreads in IRA accounts, but it's better to ask the broker. Please read more details here.

How many trades do you typically have and how long do you hold them?
We usually have 2-4 earnings plays with holding period of 2-7 days. In addition, we might have 2-3 theta positive trades like Iron Condor, butterfly and/or calendar spread, with holding period of 3-4 weeks. From time to time, we also trade other instruments, like GLD, VIX, VXX, SPY, TLT, UNG etc. to take advantage of special situations.

 

How do you calculate your performance?
We use a model portfolio of $10,000 and allocate $1,000 (10%) per trade (some trades have half allocation or 5%). Since we usually have around 6-8 trades at any given time, this method reflects the growth of the entire account even though we don't have more than 60-80% of the account on risk most of the time. Please remember that posted returns exclude commissions. Please read How We Calculate Returns? for more details.
 

What is the minimum account size to trade those strategies?

I recommend at least $5,000 account to start with, $10,000 is better. I do NOT recommend trading accounts larger than $100,000 due to potential liquidity issues.

 

Are commissions important?

Commissions are important for any strategy, and they are especially critical when trading multi-leg options strategies. If you are paying more than 1.0-1.5% commissions (as percentage of the trade value), it is time to change broker. See more details here.

 

I missed the trade notification and the price is now higher - should I pay it or wait?
I recommend to be patient and let the price "come to you". Most of the time, you should be able to get a similar fill as I do. In fact, in many cases, by being patient members could achieve better fills. As a general guideline, if the stock is still near the price where I entered and the trade price runs and then comes back, I still consider it a valid trade.

How much should I allocate to any given trade?
It is up to you and based on your risk tolerance. I discussed the importance of position sizing here (members only topic). Since most of the trades have a low risk (typical loss is in the 10-15% range), it is possible to allocate 10% per trade and still risk only small percentage of the account.

Why you don't offer auto-trading for SteadyOptions service?
SteadyOptions is an educational resource. I want my members to be in full control of their trading. In addition, SEC considers newsletters that engage in auto-trading to be investment advisers, and I am not licensed to be an investment adviser. So most newsletters that engage in auto-trading are breaking the law and are exposed to lawsuits like this one. You can read more details here.

 

When you issue a trade notification, wouldn't all our orders affect the prices?
It is important to use limit orders and not to chase. However, since spreads are already hedged or partially hedged, they are always easier for the market makers to handle, and they prefer those trades to single orders - there is less urgency for them to 'get flat'. The market makers must trade to make money, and no reasonable order should be difficult to fill. However, I also limit the membership to ensure the best fills for our members.

 

I work full time, will I be able to benefit from the service?
We have a lot of members who work full time. You don't need to be glued to the computer all day long, but you do need to have access to the trading platform during market hours. Usually it is okay to place the trade within few hours after the trade alert. 

 

Please refer to General FAQs for questions relevant to all services. If you have any questions related to services, subscriptions etc. please PM me or use the Contact Us form. For any trade related questions, please post on the relevant forum.

 

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[cwelsh 1,559]

Anchor Trades FAQs

 

What is Anchor Trades?

We would suggest starting with this Introductory post describing the strategy. Then read some of the discussions on the Discussion forum.

 

Why was Anchor Trades spun off from Steady Options?

After much discussion, Kim and I elected to spin Anchor Trades off of Steady Options because the two strategies are so completely fundamentally different in how they are executed and the purpose behind them. Steady Options largely advocates income producing option strategies around earnings events and other non-directional strategies. 

 

Whereas Anchor Trades primary purpose is the preservation of capital through long term hedging, without sacrificing principal. It is a year to year portfolio management style. You will not be making four to ten trades a week, you will not generate steady income, and you will not trade dozens upon dozens of instruments.  However, you will have a strategy under your belt that is designed to preserve your capital in all markets -- bull, bear, and neutral.  As discussed more in the Anchor Trade Strategy Post, I personally believe, and back testing has proven, if you don't lose money in years when the markets go down, and make money in all other markets, over any extended period of time, your performance should obliterate market returns.

 

Because these two strategies vary so much, and target very different purposes and investment strategies, Anchor Trades was separated.

 

How do I use Anchor Trades?

The exact same way you would use Steady Options or the majority of other educational and/or newsletter services.  I would highly suggest reading the introductory threads, asking any questions you may have, and then following the trades for a period of a few months until you are comfortable enough with them prior to doing so in your own account. You may also paper trade them for any length of time you desire.

 

How much can I make using the Anchor Trading strategy?

Over time (a period of several years), you can expect returns well above the market average.  In bull markets, if the strategy performs as anticipated, you should lag slightly behind the S&P 500.  In neutral markets, you likewise should be neutral, or slightly outperform the S&P 500.  However, in bear markets, you should significantly outperform the S&P 500. 

 

For example, in the 2008 bear market, the S&P 500 lost over 38%.  However, had you been using the Anchor strategy, you would have returned over 29% -- outperforming the market by almost 60%.

 

How do you calculate your performance?

I compare performance against the S&P 500 monthly, annually, and over the life of the strategy.  Each month a post will be made comparing the returns of the Anchor Strategy as compared to the S&P 500, as well as an open discussion on the results. Please note that posted results include commissions.

 

What is the minimum account size for this strategy?

Our model portfolio is $100,000. The trade alerts will be posted with regular SPY options.  To implement the strategy, exactly as presented in the weekly trades, the minimum size account recommended is $50,000 (this is a total account size including all components). 

How do new members "catch up" so everyone is in the same position?
There is a detailed guide on the members forum how to start a new portfolio. Your long calls and puts might be slightly different than the official portfolio, but the short puts should be very similar. Then you just follow the adjustments posted on the forum.

 

Can I use this strategy in an IRA?

It depends on your IRA custodian.  Most IRA custodians will not allow short selling of stock or options, regardless if they are covered and/or hedged.  However, there is no express rule against it so some do.  If you want to implement this in an IRA, be sure your custodian permits the selling of puts against long term puts (calendar spreads).

 

What if I want you to handle these trades for me?

If you are an accredited investor or qualified client, I would suggests investing in the Anchor Fund, a hedge fund I manage.  There are certain advantages to having invested in a large fund that implements this strategy over trading in a private, smaller, account.  For one, selling far out of the money covered calls can be utilized to extract one to two extra percentage points of gain per year.  You can also own a greater diversification of equities, further isolating individual security risk.

 

If you are a qualified client or accredited investor, and would like to discuss an investment in the Anchor Fund, please feel free to contact me at your convenience. 

 

I work full time, can I benefit from this service?

YES!  This strategy is specifically oriented around low management and time commitment.  As there is a long term hedge in place, if the market absolutely tanks one week -- well that's a good thing.  There is only one required trade per week (rolling of the short puts). 

 

There will be other adjustments made (rolling the longs to lock in gains, adjusting the weekly shorts to extra more premium, etc.), but none of these trades are mandatory, they just help to increase performance.

 

How do commissions impact this trading strategy?

As in any trade, the cost of commissions has to be considered.  However, the total cost of commissions for running the Anchor strategy for a year should run well less than one percent (1%) of the portfolio value.  Most members use either TDAmeritrade's Think or Swim platform ("TOS") or Interactive Brokers (IB), but by all means choose the broker you feel best suits your trading style and needs -- there are dozens out there. 

 

There is a specific post on commissions that details how to account for the cost of commissions annually in preparing the strategy for your personal use.

 

How can I contact you?

The best way to contact me directly is a PM through this website. You may also post in the relevant forum or email me directly at cwelsh@lorintinecapital.com.

 

Can I share this information with my family and friends?

Please note that all of this information is copyrighted and may not be shared, as stated in your membership agreement. 

 

That said, if you have a family member or friend that is interested in the Anchor Fund, or the strategy through this site, feel free to invite them to join.  If they are more interested in the Anchor Fund itself, just direct me to them, and I will get them all the materials they need.

[Kim 7,958]

General FAQs

 

How is this forum organized?
The forum is organized as a set of sub-forums and topics. In order to get notifications when a new topic is posted in a specific sub-forum, you will need to follow that sub-forum. If you are interested to be notified about new posts in a specific topic, you will need to follow that topic. Please click here for some technical tips about the forum. Click here for a full rundown on using our forums.

 

I am a potential subscriber, why I get an error message when trying to open some of the links?
The FAQs section is open for members and non-members in order to give potential subscribers an idea how the service works. However, more detailed description and discussions are open to members only.

 

When do you send your trade notifications?

All trade notifications are sent during market hours. To get notifications from any forum, you need to follow that forum and then each topic individually. 

Can your strategies be implemented in IRA accounts?
It depends on a broker you are using. Most brokers will allow trading risk defined spreads in IRA accounts, but it's better to ask the broker. Please read more details here.
 

How do I cancel my subscription?
I hope you won't. But if you insist, just login to your PayPal account and cancel the PayPal profile. All subscriptions are recurring so you need to cancel before your next renewal date. You will have access till the end of your term (no refunds for the unused portion of the term). I hope to hear some feedback why it didn't work for you. Read more here for PayPal related issues.

 

Please refer to our Cancellation Policy for full details.

 

How can I contact you or ask questions?
The best way is to post on the relevant forum. If you are not a subscriber, you can create a forum account and post on this forum which is open to everyone. Or you can contact the contributors via PM (Private Message).

 

[Kim 7,958]

Simple Spreads FAQs

 

What is Simple Spreads ?
Simple Spreads is just that – much simpler trades, that take less management, less time to enter, and with performance that is easier to understand. Please read the Welcome to Simple Spreads topic for more details.

How much money do I need for Simple Spreads?
The model portfolio is based on a $25k account. We typically would have around 40-50% of the account allocated with the rest in cash. If you want to trade with less, you'll either need to trade less contracts, skip some of the trades or keep less money in cash, which will increase the risk of the overall portfolio.

How many trades will the strategy have?
Simple Spreads targets around 4-6 trades per month. It targets trades with a large margin of safety.

How new members should start a new portfolio when the model portfolio already has open trades?
Typically we recommend waiting for new trades - unless some of the existing trades were opened for just few days and the prices are still similar.

What strategy does it use?
The main strategy is a leveraged covered call (our version of diagonal spreads).

Can those strategies be implemented in IRA accounts?
It depends on a broker you are using. Most brokers will allow trading risk defined spreads in IRA accounts, but it's better to ask the broker.

How time sensitive the strategy is?
The entry price depends mostly on the stock price. If the stock price moves lower after our entry, you should be able to get a better price. That said, the strategy is theta positive, so the price will be drifting higher every day, all other factors equal.