Consistent Returns With Option Trading
I had an intriguing conversation today with an option trader who has been searching for the secret to making consistent returns in option trading for many years. He made many familiar points.
Something that stood out was when he said “Non-directional option trading doesn’t mean we can make money in any direction. It means that we make money if the underlying doesn’t move in any direction. In other words, it’s still a directional trade, sideways.” I couldn’t agree more, and it’s been advertised that it’s easy to make money with options because we can make money on any direction. In some respects this is true, but in others it’s not.
Those of you trading the strategy that most courses and books teach know exactly what I’m talking about. The Iron Condor is just as directional as most option trades, only that its direction is sideways. So if you’re trading that strategy in 2009, you probably aren’t making anything. It’s just as hard for some to predict a sideways move as it is an up or down.
Over the years, I’ve received many calls from traders loosing massive chunks of their accounts from trading condors and credit spreads. Sadly, it’s always the same complaint; “It was going so well for several months, then all the sudden I lost nearly my whole account in one day.” I’ve heard this time and time again, and it’s about time something was done about it!
Therefore, I decided I wouldn’t teach traditional Condors and Credit Spreads. Using them will end you up a few days from expiration, with the RUT is right at your short strike, because you traded the way most people traded these strategies. Soon you’ll be telling your sob story to your friends and trying to hide your financial travesty from your wife! This is no laughing matter. It can happen to anyone, including you. Is the stress really worth sticking to traditional methods?
In response to this problem San Jose Options Mentoring has reinvented Iron Condors and Credit Spreads. The less you have to adjust your condor, the better off you will be in most cases and we have a different technique which gives the underlying much more flexibility, lowering our stress level and keeping us out away from a disastrous scenario.
So you know we have a safer way to trade Condors, but we’ve also developed great techniques to lock-in our profits on them. Normally option traders exit their trades when they make a profit, but we can lock-in our profits and stay in the trade.
To conclude, even if we have a condor move against us, we have developed a technique that earns us a free bonus trade! We may experience a rough month now and again, but now we get an outstanding, free trade out of it where while other traders will take the loss and struggle on.
Win or lose, San Jose Options is the best way to trade Iron Condors along with many other strategies.
Film Predictions For 2010
There will be a number of additions to film franchises this year. The second Sex and the City movie will be released in May, with the four friends taking a vacation together to Abu Dhabi. Eclipse, the next film in the Twilight Saga will be out at the end of June, and Bella will be torn between her love for vampire Edward and werewolf friend Jacob. In children’s films, there will be Shrek Forever After in May and Toy Story 3 in June. Forever After will see the ogre Shrek trying to away from his cosy family life and being transported to an alternate reality in which he never met his wife, Princess Fiona. Meanwhile, in the third Toy Story, Woody, Buzz and their friends are about to be put into storage as their owner Andy sets off for college.
Unfortunately for the toys, they are accidentally picked up with the garbage and end up being sent to a day care center. The Last Airbender film will be released at the beginning of July. It is based on the cartoon series in which hero Aang discovers that he is the Avatar, the only one who can manipulate the elements used by all four nations in his world: Air, Earth, Fire and Water. In November, the seventh Harry Potter film will be out in theaters. This is the first of two parts focusing on the final book in the seven part series, the Deathly Hallows, and it is the beginning of Harry, Ron and Hermione’s last adventure as they set out to find a way to destroy Voldemort forever.
2010 will also be a big year for film remakes and spin offs, with a distinctly 80s theme. The A-Team and The Karate Kid will both be released in June. The video game spin off, Prince of Persia: the Sands of Time, will be out in May.
The Girl Who Played With Fire, the second movie adaptation from the book series by writer Stieg Larsson will be released in July. The third and final installment, The Girl Who Kicked the Hornet’s Nest is set to be released in October.
There are plenty of big films expected out in 2010, although it remains to be seen whether some of the remakes and sequels will be able to live up to their predecessors. The new Harry Potter movie is expected to be one of the most spectacular in the series, with fans waiting to see how some of the many exciting scenes from the book are brought to life on screen. There is also great anticipation for the second Sex and the City movie, although as with Harry Potter, this is a franchise that depends upon its loyal fanbase who are likely to want to see it whatever the critics think.
Futures: Soft Markets and Lots of Leveraging Power
Stocks are temporary loans, for all intents and purposes. You acquire a certain amount, based upon your wherewithal, and then you take possession of a certain amount of certificates entitling you to the value of your investment. When the market value of these stocks increases, you can sell your stocks for the market value, entitling you to the difference. Hence, when yours stocks “go up” you make a profit. But, when your stocks lose value, you quite clearly lose value as well.
Hard stocks, however, lead to hard losses. You may prefer the softer margins of the futures market. To begin this volatile career as a futurist, you need only pony up to the margins set by each commodity on the market. So, for instance, you like that the margin (think of margins as ante in a poker game) for wheat — or let’s say sugar. The initial investment margin for a commodity, therefore, may be $5,000 or so.
Once you have invested the initial margin amount you may begin to wheel and deal using smaller increments known as e-minis. Now, it may help you to think of this margin in term of your own home. Imagine putting down 20% of your home’s value in order to steer its potential open market value. Heady stuff, indeed. But be wary and stay focused or you will suffer the fate of many a day trader in the 1990s.
Now, thanks in part to the Online Trading Academy, let’s indulge in a borrowed example. Let us presume that a given e-mini trading price is valued at $980. The market value is computed by taking the dollar value per e-mini point ($50) and multiplying it by the last trading price. Thus, $980 multiplied by $50 equals $49,000. Now, say the initial margin value, as set by the Chicago Mercantile Exchange, is $5,625. This means for $5,625 you can determine a futures contract worth $49,000. This represents a 9:1 leverage ratio.
This tremendous leveraging power, however, comes at the cost of liquid capital. Replenishing undervalued or depleted e-minis means having instant access to cash. Your Roth IRA or trust fund will do you no good. If the market moves against your futures, you will be responsible for meeting your margins should they fall below market value. Failure to do so will handicap your ability to trade as quickly and lucratively as you might like.
