Effective Ways To Learn Options Trading


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Hey guys I want to thank you for joining me today.

A lot of you had questions and, you know, when I sent out the first email about trading as a business, I had a lot of questions and I had just an absolute ton of responses. Over 582 people have replied and asked for more information about trading as a business.

When I mean trade with confidence, I really mean trade with confidence because once you put these positions on, all you have to do is sit back and monitor them and really just manage them by the numbers. And, I’m going to show you exactly what I mean in this video.

I have set up a test account. Now, this is a live test account using my own real money and this is just one of a number of different accounts that I have. I try to spread out my strategies among different accounts but this one is specifically set up with real money just to demonstrate the positions that I put on and the type of management of the business that I do on a regular basis. So, when you get into all the videos you’ll see exactly how I set up these trades and how I manage them on a daily basis. In fact, I do a review every single day of the trades that I’m in so that you can take a look at those as well.

Plus I show you exactly what I do when I set up the trades and they are all live sessions using real money in this account, in this demo account. This is not the account that I personally trade because what I use is only one or two contracts for these videos because I want to show you the potential that you don’t need a lot of money. If you see me trading 10, 20, 30, or 40 contracts at a time, you’re going to say whoa, I can’t afford that. There’s too much capital. There is quite a bit of capital margin requirements required for trading in those sizes.

But what I want to show you is the fact that in this demo account that I use specifically to show you guys how to trade, there’s only $1,600 of margin required on this account. Today we have a total profit of about $55 which is not a lot but we are just getting started in these positions. And, this is what I mean by managing the numbers.

First of all let me just say that the only actual platform that allows you to do this inexpensively is the thinkorswim platform. If you go to thinkorswim.com, that’s the brokerage account that I use. The reason is that they have a superior trading platform for the type of trades that we’re doing.

Now you may have an e-trade account or you might have a number of different other accounts. There are a lot of brokers out there and I don’t make a cent from recommending thinkorswim. The reason I recommend thinkorswim is that they actually understand the type of trades that I’m doing and they have the analysis tools necessary to monitor and give you a really good and clear picture of where you stand every single day in your position.

So, when you do go in and you review your trades like I said, 15 minutes is actually a long time to review your trades. It’ll probably take you just a few minutes every single day. You can review them in the morning and that’s what I like to do. I like to review my trades in the morning just after the opening bell. But then, you know, at the end of the day you can also do an end of the day review and just kind of see how things are shaping up on your position.

But when I talk about managing numbers, now if you do any type of option trading, there is really what they call The Greeks, The Greeks. That means delta, gamma, theta, vega, and there’s a fifth Greek called rho, which has to do with interest rates. We’re not really interested in that right now. But what I do is simply manage these numbers.

Now I have four positions on in this test account. I’ve only put up $1,600 in margin and what I do is simply take a look at it and I teach this as I go through the course. What I ask you to do is to get comfortable with managing your portfolio because you’re putting on more than one position. Look it’s only $1,600 in margin, but I’m going to show you what the profit potential is. Now, this is just trading one or two contracts.

I’ve got four positions on right now which generally last anywhere from three to four weeks. Okay, with these positions I do this on a monthly basis. Right now it’s April 29 and as you can see up here the time is April 29 and it’s 11:52 in the morning. I’ve already done my review for today which basically is just going over these numbers. All I do is follow these columns all the way down to the overall totals and I take a look at each one of these individual numbers and just make sure that they are all within the parameters that I want them to be in. Just like any business, you want to manage it by the numbers.

So if you were in a traditional business and your sales and conversion ratios were off or some other ratio was off in your business, then you want to drill down into your spreadsheets and you want to drill down into your numbers to find out where the problem is and then, if you need to, you would adjust them as necessary so that you don’t lose money. You adjust your business or maybe you change your business model in some way so you don’t lose money. And that’s exactly what we do. We simply manage these numbers.

We go through each one of the numbers every single day and if you’re not familiar with delta, gamma, theta and vega. I go through and I teach you exactly what those are. I’ll show you how to manage them. And that’s why you just look at one set of numbers every single day and you’re done. I mean that’s it.

You know what, if there is a situation in which we need to make an adjustment, now this is where a lot of traders go wrong. And for you guys who have been trading stocks and options for a long time or you’ve been doing spread trades on options and so forth, you’re going to understand this. When you put a position on, normally when you put it on and if it goes against you, you close it out and you’re done and you’ve either had a profit or a loss. If it went in your favor, then you’ve made a profit; if it’s against you then you’ve got a loss on your hands and you probably just closed it out.

What you may not have realized is how much money you could have made if you understood how to adjust those positions. Because what I teach is not one-dimensional trading. It’s not about one position. It’s about multi-dimensional trading and I’m just going to have you take look at the profit picture that I look at every single day when I manage my positions.  There are two things I want to look at.

The one thing I want to look at is these numbers. These numbers are incredibly significant and they tell me a lot. These numbers alone I can manage the entire portfolio. I can manage my business, my investment business, and these teach me everything that I need to know about my positions and that’s what I teach you. Manage by the numbers. If they do get out of line, then I teach exactly what you need to do in order to get them back on track and get into a profitable position.

But let’s go to the analyze tab for just a second because I want to show you what the potential is. Okay, I mean this may not be very impressive to you. We’ve got an open profit of $62 in our overall positions and we’ve got a profit today of about $40. But our margin is only $1,600 so this is a relatively low cost number of positions that we’ve got.

We’ve got four positions. We’ve got a position on the diamonds, the EEM which is an ETF, options on the IWM, and options on the SPY, which is the S&P 500. The IWM is the Russell 2000. The EEM and the diamonds is the Dow Jones Industrial ETF.

Now, let’s take a look at this which is what it looks like in numerical form; we manage by the numbers and now let’s go over to the analyze tab for a second. On the analyze tab what we do is we have a picture. We have a picture of our profitable position and what we want to do is we simply want to take a look at and manage this portfolio. Just take a look down here. We are managing a portfolio based on all of our positions as an aggregate position and here’s where it gets really really interesting.

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How To Trade In Options – How To Trade Options Video 43 part 6


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We’ll see if it completely engulfs this red bar here. If it does, it might be a very good sign that it’s going to continue higher. It’s called an engulfing pattern in the candlestick charts. I’m not so sure it’s going to go that high, so I’m getting out.

We made a little bit more profit. We’re up to $402 now. About $250 of that was in the last 40 minutes. That’s all I do every day. I take a look at the extremes of the market. I take a look at these bars. These four bars set me up. If I see a couple in a row, I might look to go on the long side. If I see three of these, I might continue to go on the long side, here.

I’m just going to be monitoring them to see if the trend has changed, and we do start to trend a little bit higher in the market. I have to reload my gun. We’ll see if this market trades higher. It looks like it wants to try. If it goes above this little tail here, we might have a chance for a pretty good rally up at 55, and I’m going to be riding it all the way.

So far, I have a nice profit of $402 for the day. Just take a look at these profits for the day. You can see that on the DXD, which is the ETF for the short side of the Dow Industrials, I made more money than I did on the DDM. That was the long side of the market, so far. That’s usually how it goes.

I could have held my last 100 shares a little longer, but it never hurts to take a profit. That really jumped. We may have an opportunity to trade for the long side. It looks like there is a trade. This market is going to turn around and start trading higher.

I don’t know if it’s going to last or not. Let’s take a look at the DXD. We’re probably getting some extreme readings here. We’re way down here. Let’s see if this holds. The market internals look pretty good – actually, kind of bad. When you think about the market itself, we are in a bear market for today. I’m just talking about the day.

There are 2799 stocks declining. There are only 38 advancing. That’s pretty bad. You have these rallies every once in a while, but I would take the extreme other side of the market and say, “You know what? You had a nice rally here, but if you take a look at the day, you’re in bad shape.” That is how bad this day is.

You can have a little rally, but it may not last. That’s why I would take this side. Let’s just hang in here for a couple of minutes, and see what actually happens. We are trading a little bit higher. Not a lot, but a little bit.

I got it at $69.09. It’s not too bad of a trade. Just a little extra profit here. $69.13. I have a red arrow. My volume is starting to decline on my internal indicators. The advancers are starting to go back down again. I may have caught something here, but I’m not going to hang around for it.

The internals do not look good at all. I would like to catch these extremes. Actually, I probably pulled the trigger on that trade subconsciously. I didn’t actually mean to pull the trigger on it, but as long as I did, I’ll take the profit off it.

We’re up there. We’re going higher. I’ll take my profits. I didn’t really mean to get into that trade, but I’ll take it. Now we’re up to $480. It gives me a little $50 profit or so.

That’s how we do extreme trading. It’s pretty interactive. We’re constantly monitoring the internal situation of the market, at all times. If I can come out with $1500 a day, that’s my goal. When you do this, when you take a look at these internal sensors here – I consider this my control panel. When I have a green light, I’ll go long. When I have a red light, I’ll go short.

Measuring the number of advancing-declining issues, and the volume that’s going into these issues, is a very nice way to trade. Generally, what happens is that you’ll get the signal on these indicators, before the price starts to move on you. You have a little bit of an advance warning.

Now, it looks like we’re turning around. We went negative, and now we’re turning back around again. The trend continues, where we’re going higher, and the number of issues continues to increase, when we’re going higher – then I’ll start trading more confidently from the long side. I traded very confidently from the down-side, which gave me a good amount of profit for the day so far. I’m constantly monitoring these.

You can tell that, when you see a lot of red bars, that means that the market is just going to decline. When you start to see a grouping of green bars like this, the market will probably continue higher.

That is extreme trading. Hope you guys enjoyed it. Go out there and trade with confidence.

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