Wednesday, November 20, 2013
Added more TBT call contracts
TBT retraced about 5 days after my recent purchase of its 2014 Jun$73 call, then it started to resume up trend from yesterday. I liked its orderly pullback and the current upward candle today. So I doubled my long contracts by adding June$74c on TBT at a mid price of $7.70.
I'm considering raising my stop loss point to somewhere below the upper line of the recent downtrending channel if case the trade works against me.
I also prefer to wait a couple of more weeks before I consider selling calls to convert this trade to diagonal spread, unless the price and volume action change significantly from current trend.
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Saturday, November 16, 2013
Skeptical about super trader Karen's strategy and performance?
Since I posted about Super trader Karen's option selling strategy, I have received a couple of anonymous comments questioning about her strategy and trading performance. Other on-line trading forums have a lot more critics of the trading performance of Karen, the super trader. So I'd like to share my 2 cents as well. Please note I'm not affiliated with Tom or Karen. They don't know me at all, at this time of my writing.
I was educated by Investools (same stock/option education company that Karen attended) and by TOS (founded by Tom) in option trading. I happened to attend a few seminars presented by Tom, the interviewer of the Karen. Thus, I believe Tom is a successful and honest businessman. So it's hard for me to believe he would lie about his client (Karen) in TOS. In my humble opinion, there is no dispute among option traders that selling option premium is the most consistent way to profit on stock option trades. Karen's option selling strategy appears to be sound and logical for me. [Update: I'd like to stress that the system and the rules disclosed in the interviews should be far more important than the phenomenal profits for traders who are process-focused.]
A lot of people know solid option trading strategies as they are taught by many education experts but only very few limited numbers of them actually make money for living using these strategies. I think Karen is one of the successful option traders who made millions of dollars. Her trading performance in the time frame discussed in the interview video was exceptional, as Tom stated in the interview repeatedly. It's so exceptional that Tom and other option education experts could not achieve. It also means all other traders are not likely to achieve unless they become really exceptional too. Exceptional also suggests the excellent performance may not last forever. Since Karen's strategy involves probability, I believe it's possible to calculate the expected rate of return in estimation. Anyone who can keep the rate of return should be considered as a successful trader of this strategy. This should be the target many of us trying to reach.
To make a good judgement about this option strategy and its potential performance, traders must understand its principles first. Many of the critics online do not provide enough substances in their comments. But I still like any critics about the strategy itself and its published rules. Otherwise, I suggest to put accusations in other on-line forums.
I was educated by Investools (same stock/option education company that Karen attended) and by TOS (founded by Tom) in option trading. I happened to attend a few seminars presented by Tom, the interviewer of the Karen. Thus, I believe Tom is a successful and honest businessman. So it's hard for me to believe he would lie about his client (Karen) in TOS. In my humble opinion, there is no dispute among option traders that selling option premium is the most consistent way to profit on stock option trades. Karen's option selling strategy appears to be sound and logical for me. [Update: I'd like to stress that the system and the rules disclosed in the interviews should be far more important than the phenomenal profits for traders who are process-focused.]
A lot of people know solid option trading strategies as they are taught by many education experts but only very few limited numbers of them actually make money for living using these strategies. I think Karen is one of the successful option traders who made millions of dollars. Her trading performance in the time frame discussed in the interview video was exceptional, as Tom stated in the interview repeatedly. It's so exceptional that Tom and other option education experts could not achieve. It also means all other traders are not likely to achieve unless they become really exceptional too. Exceptional also suggests the excellent performance may not last forever. Since Karen's strategy involves probability, I believe it's possible to calculate the expected rate of return in estimation. Anyone who can keep the rate of return should be considered as a successful trader of this strategy. This should be the target many of us trying to reach.
To make a good judgement about this option strategy and its potential performance, traders must understand its principles first. Many of the critics online do not provide enough substances in their comments. But I still like any critics about the strategy itself and its published rules. Otherwise, I suggest to put accusations in other on-line forums.
Friday, November 15, 2013
Sold Dec$37.5p on FXI
FXI gapped up and broke up the 2 month down trending channel today with high volume. Since I'm bullish on China over long term, I looked for a way to play this ETF. My rules require me to see a 6 week retrace from overbought zone for the MS line in order to enter an uptrend trade. But FXI MS is dropping for about 4 weeks only. Thus I used the naked put strategy as it requires FXI to move sideways or up. FXI also has a high cor-relationship with SPX. So I felt it's saver with the naked put as US market has been running up without a rest for quite some time. I plan to keep FXI if the put has to be exercised later. My cost will be 37.5-0.68 = $36.82. TOS indicated a 18% annual return rate.
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Friday, November 8, 2013
TBT: Profit from higher interest rates
Interest rate sensitive ETF's reacted on Government job numbers strongly today. TBT jumped above the recent 2 month long down trending channel with strong volume. My naked put Dec$70p sold about 10 days ago reached most of its profit with current Delta 0.09 in a surprising period of short time. So I bought them back for $0.25 each to nail down the profits and initiated some June$73c contracts for a longer term trade at the cost of $8.5 each. My stop loss will be around the recent low of $71. If TBT pulls back without heavy volume, I'll look for an opportunity to double my contracts. I'm impressed by the large pullback yesterday and the huge breakout today. The trade is consistent with my long term view of the interest rate rise. I'll change it to diagonal call spread later when I see TBT become far extended in price.
Another major beneficiary of the rising interest rate is the regional banks ETF KRE which also made an impressive breakout with huge volume today. I'll continue to investigate the possibility of playing with this ETF in the future. The real estate ETF's IYR got hammered again as a result.
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Labels:
diagonal spread,
Exit,
IYR,
Long Term,
Profit and Loss,
Selling put
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