New to option trading?

Not sure what the difference is between a butterfly, a condor, or a mouse?

(Hint: there is no strategy called “mouse”)

In this video I open up one of my personal trading accounts to show you 4 trades that are all of a different strategy. We have a naked put in oil futures options, a butterfly in Berkshire Hathaway, an iron condor in LVS, and a straddle in LVS. All four trades are doing well.

Watch the video to see how they look on the risk graphs as well as how they are made up and work.

In the optiongenius portfolio we do not do naked puts or straddles, but we do a lot of iron condors and some butterflies. In times of low volatility with the VIX below 30 these non directional strategies work wonderfully. In high volatility markets, they can work as well but with adjustments and a [...]

In this video, I show you a tool that I use to sometimes help me find trades.
This free website can literally give you hundreds of trading ideas no matter what kind of trader you are.

Here is a pretty good video of a segment done by Jim Cramer in which he talks about what to invest in inside your retirement accounts.

Now it is possible to sell options inside your IRA and many people do. I do not recommend it for the most part. Why?

Because it is still more riskly than just owning a bunch of boring dividend paying stocks. If you are an OptionGenius member you can see how I invest my own funds and the allocation. But in my retirement accounts, I am mainly invested in stocks. I do sell covered calls and sometimes some puts, and the occasional credit spread/condor/ or butterfly. But those are the exception.

I use my normal trading accounts for the bulk of my option selling trades.  Several reasons.

1. I like to take the gains out to live on and enjoy. Can’t take your profits out of an IRA and [...]

There is a lot of volatility in the markets these last couple weeks. The DOW is up 100 points then down 124 the next. Then up again, then down. But overall the short term trend has been down.

But there is a sector that is doing well.

Fast Food. Well not exactly fast food, but whatever they call the sector that is lower than the sit down meal with the waiter.

Take a look at CMG – Chipotle.  And PNRA – Panera Bread.  and MCD – McDonalds.

All doing well, all at 52 week and all time highs.

Why? Well run businesses with pricing power. But also because they are growing by building more stores, mostly overseas.

All 3 of these are in my retirement accounts and will stay there for years to come.

Credit spreads are a very simple trade.

You sell one option, buy another for protection and hope that your sold option is not in the money on expiration day.

In other words you sell the 100 put and hope the stock stays above 100. Or sell the 150 Call and hope the stock stays below 150.

And since credit spreads have such a high probability of profit, most traders make money with them most of the time. But when they lose….. ouch. Credit spreads are not very forgiving when you lose.

I learned this firsthand. I had been trading credit spreads in Apple, FXI, and Google. Doing well for several months in a row. But then there was a drop, and all the gains I had made, plus a lot more was wiped out.

It takes a while to recover mentally from a loss like that. I was reminded of this event when a member emailed [...]

It’s been a couple days since I asked the question, “What will LVS do?”

From what I can tell, LVS hit the resistance, and fell back into the channel.

Why? Well fundamentalists will tell you it is because LVS missed on earnings. Actually their earnings were pretty good but below analysts expectations so the stock took a beating.

Was that it? Or was it a technical move – LVS hitting its head on the ceiling of its trading range?

Who knows? But it was fun to play. Congrats to all those that got it right.

As for my trade, it is still doing ok. I don’t get into trouble until LVS goes below 145. Even then, I am happy because I will get to buy the stock at that price, which is the lower end of the range. I want to keep LVS long term and trade around it, so i plan to sell the [...]

Successful Habits of a Trader
 
1) Follow the Rule of 3: I will not enter a trade unless I have 3 reasons from my list of indicators for doing so.
2) We keep our losses small
3) We adjust targets and stops at the end of the day
4) We try to keep our commissions low
5) We dont trade first thing at the open, we wait a while and trade later in the day.
6) We know the general market trend and trade accordingly
7) We write down our trades.
We never average down a losing position
9) We never overtrade
10) We give 10% of our profits to charity. Per the words of John D. Rockefeller:

Work for all you get
Give away the first 10%
Invest the next 10%
Live on the rest
Account for every penny

Thanks to member George A. for sending these to me. He notes that these habits are taken from Chapter 4 of a book he [...]

Good news!

OptionGenius.com has just reached an autotrade agreement with the broker OptionsXpress. We are already autotrading with eoption.com but adding a second broker to the mix gives members more options (Pun intended). Many of you probably already have accounts at OptionsXpress.

I’ve written about autotrading before but in case you don’t know what it is, autotrading is where a broker executes trades for you in your account on your behalf. So if I send out a new trade or a trade alert and you are on vacation, or at work, or driving the kids to school, etc you don’t need to worry about missing the trade. The broker will take care of it for you.

OptionsXpress is a very friendly option broker and has recently bought Optionetics so they are very strong in the educational component as well.

I hope this will be a long and happy relationship for all involved.

For more info [...]

By strict definition, this term basically means the transfer of a person’s rights to another person or business.  In terms of stock options, it refers to a notice given to an option writer that states the option (that was sold to a buyer) has officially been exercised.  Exercised as in executed, not exorcised, which would have an entirely different meaning.  Whenever a seller has been assigned then he or she is obligated to finish the requirements as stated in the option.  For instance, if the option was a call then the writer/seller of the option would have to sell the security at the agreed upon price.

 When the holder of an option wants to exercise the option he/she notifies his/her broker. The broker will notify the Options Clearing Corporation (OCC) of the event.  After this, OCC fulfills the rest of the contract and then selects a firm that happened to be [...]

Published: Wednesday, 31 Mar 2010 | 10:09 AM ET

By: Jeff Cox
CNBC.com
Investors should acclimate themselves to years of lower-than-normal returns in both stocks and bonds, Pimco’s Bill Gross told CNBC.

As part of the firm’s forecast of a “new normal” in the slow-growth economy, Gross, co-CIO at the largest bond management firm in the world, said returns probably will be half of the normal 8 percent or so annualized profits to which investors have become accustomed.

“We should expect less as opposed to more—new normal as opposed to old normal,” he said in an interview. “We should expect that the private economy is delevering on a global basis. That means consumption and household income growth will be less than it has in prior years.

 “And that means ultimately in terms of risk assets, whether it’s stocks or high-yield bonds or even bonds themselves that those types of returns will reflect a slower rate of [...]