Options trading strategies

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profitability over 70% of the time

option volumes have jumped almost 500%

However, successful trading of these vehicles requires a skill set that is not intuitively obvious. As opposed to the world of the equity trader where price is the only variable, the value of options respond to the mutual interaction of the primal forces that drive option pricing. The primal forces in no particular order are time to expiration, implied volatility, and price of the underlying. The interplay of these forces defines the yin and yang of option trading.

Key to Options Success #1
Utilizing Multiple Spread Trades such as Butterfly Spreads 

Vertical SpreadsCalendar SpreadsLong Butterfly SpreadsIron Butterfly SpreadsIron Condor Spreads, Credit Spreads and a variety of ratio spreadsA combination of long butterfly spreads, various credit spreads, and a variety of debit spreads are used in combination to produce a constant positive theta portfolio position. Essentially the portfolio is designed to collect daily time decay with a focus on underlying equities or indexes that have implied volatility levels that are above historical averages.

members to profitlow-volatility market, sideways or consolidating conditions, or a high-volatility marketplace.

Key to Options Success #2
Utilizing Time Decay as a Hedge or Profit Engine

 

Warning #1
The financial markets can stay irrational longer than
you can stay solvent.

NO TRADEOptionsTradingSignalswill help keep you disciplined

We regularly remind members to use limit orders when entering and exiting positions and we use a hypothetical 0,000 portfolio so members can view position sizing limits, overall portfolio Delta levels, and Beta-weighted analysis to allow members to use appropriate position sizing based on their own risk capital pool.

Warning #2
You can lose money on options even if you are correct about the direction of the underlying investment if you don’t understand how the options pricing model works.

Have you purchased options naked (long a call/long a put), and watched the stock, ETF or index move in the direction you wanted, only to see the value of your options deteriorate, causing you to lose money? Sure, most novice option traders have . . .

OptionsTradingSignals removes this risk from your trading by providing members with detailed educational material and timely market analysis

member you can be trading the same strategies as the pro’s

OTS Profitable Options Strategies eBook,
PLUS JW Jones’ 45 Minute Options Education Video Course FREE – .00 Value!

Source: http://www.optionstradingsignals.com/




Overview

The markets performed well for 2013, making new highs with very few pull-backs despite slow economic growth (here and abroad) and concerns over the potential impact of tapering.  However, the New Year started on a weak note with mixed economic news and profit taking.  On Friday, what is likely to be Bernanke’s last speech as Fed Chairman, he remarked that the U.S. economic recovery “clearly remains incomplete”.

It is expected the markets will continue their downward movement for the next few days now that year-end results are in and Asset Managers no longer need to push stocks higher (to spruce up portfolio performance).  This will present excellent buying opportunities as we head into earnings season (starts January 8th).

The fourth quarter is shaping up to be moderately strong, with manufacturing gaining upward momentum, housing construction and prices rising (although a possible softening ahead), and consumer confidence and spending on the rise.

With current global economies showing moderate growth, a Congressional budget having passed, and the expectation that debt ceiling negotiations will go smoothly, we expect corporate profits to remain strong (along with balance sheets) leading to continued upward movement in the markets throughout earnings season.  The year 2014 could very well continue the upward movement of 2013 if employment gained more strength.

For the year 2013 the markets were up: Dow 26.5%; S&P500 29.6%; Nasdaq 38.3%.  Clearly a banner year, with economic news mostly positive (especially the consumer sector which showed better-than-expected strength), steady growth in housing, and a vacillating manufacturing sector.

Year-to-date for 2014 the markets are down: Dow -0.6%; S&P500 -0.9%; Nasdaq -1.1%.

The Markets for the past week were: DJIA down -0.1%; S&P500 down -0.5%; Nasdaq COMP down -0.6%.

Commodities (ETFs) for the past week were: Gold (GLD) up 1.85%; Silver (SLV) up 0.78%; Oil (OIH) down -1.36%; Dollar (UUP) up 0.69%; 30-yr Bonds dropped 1 basis points to 3.93%.

The VIX this past week (a measure of market sentiment and volatility) rose to 13.76 due largely to tax selling, light holiday volume, and profit taking after year-end.

 

Economic News

A recap of economic news: The Chicago Purchasing Manager’s Index fell 3.9 points to a level of 59.1 in December, while consensus pointed to a fall to 61. The Dallas Fed Manufacturing Output Index fell from 16.9 to a level of 7.1 in December. The ISM Manufacturing PMI fell slightly by 0.3 points to 57.0 in December, while ISM Prices Paid edged higher to 53.5, beating estimates at 53.0. The ISM New York Index dropped 5.7 points to a level of 63.8 in December. Construction Spending advanced 1.0% in November, coming in higher than the forecasted 0.6% rise. Pending Home Sales decreased 1.6% annually in November, matching last month’s corresponding reading of a 1.6% fall. The S&P/Case-Shiller Home Price Indices grew by 13.6% in October, beating consensus of a 13.0% increase. Consumer Confidence gained 6.1 points to a level of 78.1 in December, coming in higher than the expected rise to 76.0. U.S. Jobless Claims decreased by 2,000 in the week ending December 28th to 339,000. Crude Inventories decreased by 7.0 million barrels last week, while oil prices rose to .94.

 

Top Headlines

In the U.S., why Fed’s QE has ‘no effect’, says University of Chicago economist John Cochrane; don’t cut-off jobless benefits, says Advisor; Tapering, a move toward normalcy, says MIT professor; housing pickup sparks more home seizures; ‘Dr. Doom’ Roubini gets bullish on global economy; Manhattan apartment sales hit high; US consumers a hard sell for traditional retail; manufacturing growth slows, but new orders surge; mum’s the word on Obamacare demographics; high rollers in a buying mood with growing economy and booming stock market; Peter Schiff (CEO of Euro Pacific Capital) tells why Wal-Mart can’t pay /hour wages; 2014 job forecast: quality jobs for the masses; Midwest manufacturing cools in Dec, says survey; US consumer confidence rises, beats forecast; and housing could be facing another bubble, says Shiller (of Case-Shiller Index).

In Europe, ECB unlikely to act, but pressure grows; Latvia dismisses ‘dirty money’ claims; UK house prices soar: biggest jump in 4-years; 1930s-style debt defaults likely, says IMF research; Publicis expects World Cup boost in strong 2014; Spain records big drop in jobless numbers; Spain growth seen ‘sluggish at best’ post-bailout; Remy Cointreau CEO resigns after 3-months; US vs Europe: which equities will win in 2014?; Euro zone manufacturing grows while France stumbles on; SocGen biggest task for ECB in 2014; one in 10 young Brits ‘have nothing to live for’; attacks reignite debate on Russia investments; Fiat agrees to buy remaining stake in Chrysler; Deutsche Telekom’s new CEO faces twin tests; Latvia to join Euro zone; Pope’s sharp words make a wealthy donor hesitate; can Europe compete with US tech startups?; Greece to exit bailout plan in 2014, says Prime Minister; AMEC CEO flags barriers to UK fracking; and shots fired at German ambassador’s house in Athens.

In Asia, Indian Prime Minister’s mixed legacy; don’t pounce on Thai shares yet; currency wars to make a comeback?; witnesses say Cambodian police fire on strikers; US put China-made parts in F-35 fighter program; India’s Prime Minister to hand over after election; end of China’s IPO freeze really bad news for stocks?; rescued Australian icebreaker begins journey home; Indonesia surprises with November trade surplus; Wal-Mart recall donkey product in China; ten trends that will shape Asia in 2014: Carnegie; China final HSBC PMI hits three-month low in December; Chinese balloonist lands in midst of isle dispute with Japan; New Zealand dollar could be hottest currency trade of 2014; Singapore’s economy hits a bump in fourth quarter; Japan minister follows Shinzo Abe to war shrine; India cancels AgustaWestland helicopter order; Thai PM returns to Bangkok as protest showdown looms; China’s factory growth slower but resilient; China could raise Iran oil imports; Chinese trade fuels clash with Mexican drug cartel; Nikkei at 25,000?; this Asian market laggard (South Korea) could shine in 2014; and India’s fiscal deficit touches 94% of target.

 

Weekly Review

On Monday, despite weakness in pending home sales, the Dow rose 0.2% to 16,504. Gold dropped to ,196.

On Tuesday, with little news, the Dow ended the year up 0.4% to 16,576 to a new record high.

On Wednesday, the markets were closed for New Years.

On Thursday, despite good news on construction spending and manufacturing, the Dow dropped -0.8% to 16,441.  Oil fell to .50.

On Friday, despite weak motor vehicle sales for December, the Dow rose 0.2% to 16,469.

 

Next Week’s Calendar

The economic calendar for next week is full: on Monday – Factory Orders, ISM Non-Mfg Index; on Tuesday – International Trade, FedSpeak; on Wednesday – ADP Employment Report, EIA Petroleum Status Report, FOMC Minutes; on Thursday – Weekly Jobless Claims, FedSpeak; and Friday –Employment Situation, FedSpeak.

If the Markets move down, stay on the side lines or consider Contra ETFs.  For Option players, selling premium is advised.

To the Charts

The following ETFs (DIA, SPY, QQQ) provide a technical review of the Market (and are also excellent Option trading vehicles).  Represented are the Dow Industrials (DIA), S&P500 (SPY), and Nasdaq 100 (QQQ).

The Charts for each include views for Monthly, Weekly (including Price Channels), and Daily (including monthly Pivot Points) with MACD and Stochastic indicators.  The Pivots are: white for central pivot point; yellow for R1 and S1; magenta for R2 and S2; red for R3 and S3.

The Dow Industrials (DIA) closed down at 164.39.  If the DIA drops, then the next level of support will be at 154.87 (weekly chart); the next level of major resistance is 165.51 (weekly chart).

The monthly chart indicates a bullish posture (up Arrow) with the MACD positive and strengthening, and the Stochastic moving up above the overbought area.

The weekly chart indicates a bullish posture (up Arrow) with the MACD positive and strengthening, and the Stochastic moving up above the overbought area.

The daily chart indicates a bearish posture (down Arrow) with the MACD positive but weakening, and the Stochastic moving down above the overbought area.

 

The S&P500 (SPY) closed down at 182.88.  If the SPY drops, then the next level of support will be at 174.76 (weekly chart); the next level of major resistance is 184.69 (weekly chart).

The monthly chart indicates a bullish posture (up Arrow) with the MACD positive but weakening, and the Stochastic moving up above the overbought area.

The weekly chart indicates a bullish posture (up Arrow) with the MACD positive but weakening, and the Stochastic moving up above the overbought area.

The daily chart indicates a bearish posture (down Arrow) with the MACD positive but weakening, and the Stochastic moving down above the overbought area.

 

The Nasdaq 100 (QQQ) closed down at 86.64.  If the QQQ drops, then the next level of support will be at 81.37 (weekly chart); the next level of major resistance is 87.96 (weekly chart).

The monthly chart indicates a bullish posture (up Arrow) with the MACD positive but weakening, and the Stochastic moving up above the overbought area.

The weekly chart indicates a bullish posture (up Arrow) with the MACD positive but weakening, and the Stochastic moving up above the overbought area.

The daily chart indicates a bearish posture (down Arrow) with the MACD positive but weakening, and the Stochastic moving down above the overbought area.

Source: http://www.optionstradingclub.com/



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