Options Greeks: Earn a Living Trading Options – Video 1 Part 4

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So adjustments are absolutely critical.  It’s very very important for you understand how to do adjustments in your positions and we don’t do just one-dimensional type of positions.  We do multi-dimensional positions so that we profit and it doesn’t matter whether the stocks go up or down.   But adjustments are really the big picture because nobody teaches it.  They teach you how to put on these one types of positions either spreads, calls, puts, or whatever and that’s it.  If they don’t work out you take a loss and if they work out you make a little bit of profit.  But I don’t think that’s a great way to trade.

I did that for years and you know I had 50/50 success.  Some months I made money and some months I didn’t make money.  You have to have some market direction.  If they don’t work out you get killed and if they do work out, you make a little bit of profit and that’s not a business, that’s a gamble.  This is a business; managing our portfolio by the numbers.  We know how much profit we’re going to make every month.

Then I go into closing our positions; our profit and loss.  Let’s take a look at our profit and loss closing positions.  This is absolutely critical because what we want to do is close out the positions at the right time and this is where you want to take a look at this picture again.  You want to analyze your picture because when you get close to expiration that white line moves all the way up here and it’s very close to your expiration full  profit.  You know that if your position is looking really good and it’s in the center, you might want to hold it another day or two just to see how prices go.

In general once you get to the point where you’ve got a substantial profit in these positions, you know you can close them out.  It’s not going to hurt.  You know you can still make a profit and you don’t have to be in a hurry about closing out your positions, which is nice.  You have so much room to move in price on a daily basis that it’s not going to hurt you if you don’t close out your position one day.  Say you got busy with something and you want to close it out but you forgot or you didn’t get the price you wanted or something like that.  You can afford to be patient with these positions. It’s not like day trading where every little tick counts.  In this type of trading, you’re putting on positions and you don’t have to settle for market prices.  In fact, I don’t suggest you settle for market prices.

The nice thing about the thinkorswim platform is it allows you to get in at the mid-prices many times.  It depends on the market, of course, but you can get into the mid-prices and if you can’t get in the mid-prices, then you can move up here little bit by little bit.   The money that you save from trying to get mid-prices really helps pay for all the commissions that you’ll be generating.   Now the commissions are very reasonable on thinkorswim so I don’t even want you to consider that because these positions pay for themselves and make a great profit.  So commissions are really not a major component of your expenses, but they are an expense and that’s the only expense that you have in this type of business.  That’s your overhead.  Your commissions and that’s it.   I think they charge $1.50 for an option trade.  I mean a couple of options are going to cost you $3; one option will cost $1.50 so it’s not a big amount of money but it is overhead that you have to pay.

So closing out the positions is the next videos set that I do and it’s very important that you understand how to close out your positions.  You’re not in any hurry.  You’re not day trading.  You can actually take your time, close out your positions, and make sure you do them in the right way to collect your profits and move onto the next trade.

Then finally we go to the big picture.  I take a look at some technical analysis stuff.  I have a proprietary technical analysis tool that I use to determine how the market will open every single day and it’s been right 95% of the time.  It’s very close to being right almost all of the time.  It’s very interesting because a lot of times the futures will trade before the option stock market open.  I remember recently that the futures on the S&P 500 were down like $9 which is a pretty big down movement before the open and everybody expected the market to open way down for that day.  My proprietary indicator indicated that it was going to be a flat open, in fact it might be a little bit up and it did.  It opened basically down about 5 points and then the Dow Jones Industrial started going up 20-30 points so it’s a very interesting indicator to use.  It’s a proprietary indicator that I came up with and I’m going to give that to you absolutely free as well.

I also talk a lot about the VIX and if you don’t know anything about the VIX don’t worry about it right now, but it’s a very important tool for stock trading and especially for our types of positions.  It’s probably one of the most important tools that you can use to determine future direction of stock market prices, at least in the short term.

So that’s it.  It’s everything that I go over in this course.   Even one trade analysis is going to cover the costs of this easily.  If this is the type of information that you want to learn, then I suggest that you sign up.  To tell you the truth, the type of information that you’re getting, I didn’t get at that $5,000 seminar.

Now it’s all online.  All you have to do is login.  New videos are going to be released every single day until the entire course is available online but I want you guys to start out real slow.  I’m going to give you the introduction videos.  I’m going to go through all the Greeks.  I’m going to go through trade selection strategy, portfolio building, using this TOS platform, portfolio management, using these Greek numbers, managing by the numbers, adjustments, closing positions, and the big picture technical analysis.  I go through everything that you need to start putting on these trades.  Like I’ve said, I’ve been to $3,000 seminars and $5,000 seminars and they don’t teach what I ‘m teaching you.

This is the real deal.  This is how market makers and floor traders who know what they’re doing are doing and based on their trades for making their money through the spreads, they’re actually managing portfolios in this manner.  I can’t say much more than that.  This is the real deal.  You’re going to get real information.

In fact, I have been a market junkie now for about 20 years, maybe even more than that.  I find this absolutely fascinating and I’m slowly replacing my online income from marketing to just trading.  Like I’ve said, it takes me 15 minutes a day and I ‘m done and I go do whatever I want to do.  Go shopping, go to a restaurant, meet some friends, take my wife shopping, and do basically whatever I want to do.  Summer is coming so I’ll probably play a lot more golf.

These positions do not need to be managed on a minute-by-minute basis.  You take a look at the open.  Here’s something that’s very interesting and I’ll give you a little tip.  Generally what happens is there’s a couple of different kind of days in the market.  One are trend days and those days usually start out pretty good and they may continue to grow higher and higher and higher and the market goes up or down and they trend all day.

There’s other types of days in which the prices will fluctuate within a range and the majority of the markets these days tend to fluctuate within a range and don’t trend that well.  That’s why a lot of stock traders and option traders who depend on trends to make their money are having a really tough time right now.  So these types of trades are even more important to learn how to do in the market because this is a consistent way to make money every single month.

That’s it for me today.  I really hope you join me.

I wish you the best.  Trade with confidence.