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.
Before Short Selling-Know These Shocking Facts
Short selling is one of the favorite day trading strategies employed by many day traders. Many companies hate short sellers as they believe that short sellers were responsible in the fall of their stock prices. Nothing can be far from the truth. Short selling is just like anyother market mechanism that provides liquidity and better price discovery. Short selling can never destroy a company if its’ fundamentals are strong. Many stock brokers now let you short stocks with just the click of a mouse. When you sell stocks from your online brokerage account, the message asks you whether you are selling your own shares or short selling. You just need to click once on short selling and the rest is taken care of by the broker. These shares are a loan to you by the broker that you will have to return at a later date!
In some cases, the brokerage firm cannot borrow the shares as so many people have sold the stock short that there are no more shares to borrow. In that case, you will have to find another stock or use another strategy.
Now, shorting is one of the favorite strategies employed by day traders. A day trader may short stock on the mundane reason like its price had been going up for three days and it’s time to come down! Day traders are not fundamental traders. Day traders are simply interested in the daily volatility in the stock. Most even don’t do any financial or fundamental analysis of the companies whose stocks they are trading. Almost all are technicians or what you call technical analysis experts.
You have to be careful about the uptick rule as stock exchanges have rules in place to help maintain an upward bias in the stock market. What this means is that you can only short a stock when the last trade was a move up. In other words, you can’t short a stock that is moving down.
Now you have to be careful when shorting a stock as certain risks are involved. In theory, there is no limit on how high a stock price can go high. So when betting on something going wrong, if you yourself go wrong, the potential loss in case of a stock price going up can be immense.
Know something known as Short Squeeze. Once that happens, almost all short sellers get desperate to dump their stocks and exit but when they try to buy back the stock, they get more hurt as the prices go even higher and higher on rising demand for the stock in the market. Now, don’t get caught in the market with short selling when good news spreads about the stock that you had shorted driving its price up.
As said before, companies, investors and many brokers hate short sellers. They think that short sellers had intentionally driven down the stock prices. So sometimes, they will spread rumors of good news to create a momentary short squeeze. Sometimes, a campaign will be started by the owners of a particular stock instructing their brokers not to loan out their stocks to short sellers. So if you have already shorted that stock, you might get a call from your broker to return that stock immediately. In such a case, you will have to immediately return the stock even if it doesn’t make any sense to you!
Mr. Ahmad Hassam has done Masters from Harvard University. Read this 49 page Quantum Swing Trading FREE Report plus the shocking Profit Button Report that applies no matter what you trade-stocks, forex, futures or options! Turn $200 into $100K in just 3 months with this Penny Stock Trading FREE Report!
