Diversified Options Trading

Monthly Trader Alert | May

DavidF — Fri, 07 May 2010 03:50:55 +0000

MONTHLY TRADER ALERT

On 4/26 I sent out an alert saying that the 61.8% retracement level
on the DOW (11,247), could be a good time to go short.

The alert also mentioned a potential high risk position that I was taking
was to short a 3X long ETF.

It also specifically mentioned shorting DRN at $230.

A few days later that ETF had a 4X split, so it would then be worth
$57.50.

Today as the market plunged, DRN got as low as $35.01, which means
you could have made as much as 39% profit in one week if you had
shorted it.

I did cover some of my short positions today, but I don’t think the
selling is over yet.

The market basically did exactly what was said by Dave in the Daily Market Advantage
… it just happened faster than he expected.

The DOW went all the way down to 10,000 before bouncing, and if you
didn’t have any buy/sell orders in place you probably missed it
altogether.

I am looking forward to Dave’s analysis to see what’s going to
happen next.

Members of the Daily Market Advantage receive his insight EVERY
trading day.

If you’re not yet a member you can get more info at:

http://www.diversifiedoptionstrading.com/go/DMA/

In addition to the daily reviews, Dave also posts “mid-day updates”
from time to time, with valuable up-to-the-minute tips.

It’s important to stay alert and be aware of the changing market
conditions, and the best way to do this is to join the Daily Market
Advantage.

http://www.diversifiedoptionstrading.com/go/DMA/

Honestly, I would not trade without it!

Dave F.
Diversified Options Trading

P.S. Remember, everything you learn in the Diversified Options Trading system is used in the Daily Market Advantage.

DISCLAIMER: No personal investing advice is implied or stated in
this communication. The information presented is for educational
purposes only and should not be construed as personal legal or
investment advice.

Monthly Trader Alert | April

DavidF — Mon, 26 Apr 2010 21:00:39 +0000

MONTHLY TRADER ALERT

This is an update from the Daily Market Advantage

Today we ran into the 61.8% retracement level on the DOW (11,247),
and came close to it on the S&P 500 (1227).

If you’ve been waiting for a good time to go short, this might be
it.

I say *might*, because frankly the market has been like a runaway
freight train.

I’m not sure if the momentum is ready to shift yet, but when it
does… it could be fast and furious.

So IF you’ve been waiting to go short, you might consider a small
position now.

But keep a tight stop, because the market could continue its upward
momentum.

If you enjoy the HIGH risk 3X ETF’s like I do, you might want to
take a look at shorting DRN (real estate bull, currently at $230).

Remember, the leveraged ETF’s can kill your margin in a hurry, so
set tight stops and don’t buy or short more than you can afford.

Members of the Daily Market Advantage receive this kind of insight
and much more EVERY trading day.

If you’re not yet a member you can get more info at:

Daily Market Advantage

In addition to the daily reviews, Dave also posts “mid-day updates”
from time to time, with valuable up-to-the-minute tips.

It’s important to stay alert and be aware of the changing market
conditions, and the best way to do this is to join the Daily Market
Advantage:

Daily Market Advantage

Monthly Trader Alert | April 22, 2010

DavidF — Fri, 23 Apr 2010 05:29:57 +0000

The market consolidated again today which, in almost every case (sideways action), means that the market will continue higher.

It’s making it’s way to the 61.8% retracement level on both the DOW (11,247)
and the S&P 500 (1227).

We are waiting now for the best shorting opportunity since October 2007 when
it hits these levels.

A subscriber asked me what will possibly cause the market to go down
at this point.

The answer is never revealed until it happens but I’m guessing that it could be
any one of dozens of reasons:

1. The Health Care Bill backlash that’s building
2. The Tea Party momentum
3. The Greece debacle that’s starting to boil (Greek credit default swaps are hit a historic high this morning)
4. Excessive government debt and lack of bond buyers
5. Goldman Sachs fraud – it’s just the tip of the iceberg
6. And much more…

Trade With Confidence
Daily Market Advantage

What Are The Best Technical Indicators?

DavidF — Sat, 17 Apr 2010 01:40:50 +0000

There are many indicators a trader can use along with great software to scan the many possibilities. Out of all the indicators, what are the best technical indicators?
Well it might surprise you:

Support
Resistance
Trend Line

You are probably thinking to yourself that’s ridiculous or how could that be true. Well if you have the right trading strategy (such as the ones you will find in the Diversified Options Trading website), they could be the only indicators you would ever use. Watch the video below to find out more.

Trading with Iron Condors | Part I

DavidF — Thu, 25 Mar 2010 17:25:18 +0000

We have just posted a video on trading iron condors.

Click here to view the embedded video.

We also posted an article which can be read here.

Here is a summary on Trading with Iron Condors

Trading with iron condors is a great trading strategy to use when certain market conditions are met.
The stock or index must be in a trading range
Volatility (VIX) should be below 40.
Credit should be greater than $0.50 and shoot for $0.70.
Iron condors make a great trading strategy when added with other condors and option spreads

All of this information and much more is in the Diversified Options Trading System.

The Advantages of Trading Stock Options

DavidF — Tue, 16 Mar 2010 21:22:50 +0000

Stock options are only recently getting the attention which they deserve from traders. The implications made by popular figures that trading options are too risky have been lingering for some time now. This is not something that you should take to heart. While some talk of the disadvantages one must always know that where there are disadvantages there are also advantages. As with any other business it will consist of losses and gains. There are no two ways about it, a loss will always be present but you must have the knowledge to cut your losses fast and let your profits take you home.

Stock options are well capable of leveraging or borrowing money in order to increase profits. A strategy known as stock replacement will allow you to mimic stocks in a cost efficient way. Consider if you are able to purchase 200 shares of $50 stock, a payment of $10 will be maid but at the same time if you were going to buy $20 stock options representing 100 shares each then one would only pay $4 instead of $10. This would allow you to profit $6 to use in your discretion. Of course it won’t be as quick as just stated but the right stock is chosen then your strategy would be a success.

With stock options you can actually be able to spend less money and still make the same profit. With this you can make a higher percentage of profit as with normal stock trading. As compared to traditional stocks these options can offer much more strategic alternatives due to these options being more flexible. Options are the rights to trading a particular stock so you can see how it will allow you to see endless possibilities. Many ways can be used to profit one’s self by exploring different options for that stock.

The use of stock options allows the investor to trade more freely. These trades don’t only depend on the stock movement but also the passage of time and the unpredictable movements in the market. This can be extremely beneficial to the trader as most stocks rarely move significantly. These options offer a trader to do business in every type of market, allowing them to earn more profit. These are some of the many advantages of trading stock options and as you can see it is more than enough a reason to tell that this will benefit you tremendously. It is no surprise that stock options are part of financial circles today with its low costs, access through the internet and with endless benefits.

Related Blogs

Using Option Strategies in Your Trading Portfolio

DavidF — Mon, 15 Mar 2010 22:30:30 +0000

You may be new to option trading but have knowledge of buying puts & calls. Puts & calls are the 2 basic option strategies that rookie traders tend to lean towards. These strategies are very low risk, simple and much easier for a rookie trader to handle. When buying a put you would want the underlying to drop in value and when buying a call you hope that it will rise. No matter what is done the risk taken is limited according to the amount of premium you pay or buy the contract for. If for whatever reason the contract turns worthless you only loose the cost and nothing else.

No matter the level of experience you have we all see this is safe and profitable. It is a potential option which can provide tremendous return without betting a lump sum. At the same time however we all wish at some point to advance and become more of a professional when investing in these options. The numerous options that can be done only make it that much easier to profit. Let us now take a look at some of the options strategies you might want to explore.

Being a seller of an option contract means that you are writing options. This can cause a risk depending on the circumstances but not including covered calls. This is considered as one of many conservative options available to you. With this option it means that writing strategies because your contract is backed up with the ownership of the stock. Perhaps you own 400 shares of Microsoft and you know that Microsoft is not very volatile; this makes it ideal for cover call writing. It is best when writing calls that you write them on the stocks that are not very volatile this is because you are going to be writing out of the money calls to collect an income as a premium. May be they are trading at $24. You may write calls for $35 strikes on the month’s contract and the only risk would be if the stock grows higher than the price before expiration. It is clear to see why it is you must own the stock that you are writing cover calls for and why they should be range bound.

A married put trade is only considered a popular conservative strategy. These puts are very much like covered calls meaning that you already own stocks and will be buying an certain amount of puts that is equal to the exact number of shares owned. You will be long on these puts but by owning the stock it only acts as the hedge which means that you can still make money is the stock drops. Spreads are also various option strategies that you can use. A strategy most popular of the set is known as bull call spread. This is when you are buying calls at a strike price and then selling at a greater price. The underlying security and month of expiration must be the same for this to be called a bull call.

Related Blogs

Non Directional vs Directional Trading

DavidF — Mon, 15 Mar 2010 20:13:25 +0000

We all would like to know if the market price will go up or down but does it really matter?

Non Directional Trading

Non directional trading has shown to be useful in the financial markets due to the profits these trades can make in a flat market. Due to their ease use and less risk, these non directional trading strategies or neutral strategies are now becoming more and more popular. It does not matter whether the financial tools goes either up or down for profit to be made via non directional trading but rather the volatility of the prices which would determine your profit. This is what is known as neutral strategy. Here are some examples of non directional strategies. The condor strategy is an example to non directional trading strategies. This will involve selling out of the buy calls and the money calls at a much higher strike price and simultaneously buying puts at a low strike price while traders will sell out of money puts. Another example would be the straddle strategy. This strategy holds and takes both put and call positions at the same expiration.
Position will only become money making if the underlying financial instrument has a change in value, whether it be high or low and also will involve the short and long straddles. Some other examples include the strangle strategy and also risk reversals. To sum up, non directional means that the method of trading does not require the trader to have a permanent side in a trading market. The only direction the trader should follow is that which is winning and succeeding. The main element in mastering non directional trading schemes is to identify the direction the market is taking and where you should place the investments.

Directional Trading

Directional trading makes up the majority of traders in the financial market today. They are those who try to predict the direction the market is going to turn. They are also cause for much headache for others. To master or to be average in directional trading a massive amount of time needs to be spent on training and practicing, also there is the need to be behind the computer watching over each and every transfer. A directional trader needs to keep up to date with all news concerning the market, new news is so important to a directional trader. Of course from this little overview you can tell that it takes a lot of patience and dedication to fully succeed as a directional trader. This level of trading and constant access to the market will also affect your broker fees making them more expensive. As a directional trader you must also be on the go, meaning that at odd times you will have to be checking the market to see what is moving where and take necessary action. You must also be very quick when deciding what decision to make hence the reason why they must remember all strategies possible.

Related Blogs

Trading Iron Condor Options

DavidF — Mon, 15 Mar 2010 05:06:03 +0000

Iron condor options are meant to find the best between reward and volatility. When in a fixed range you profit the most, however those that are most boring with low betas are more than likely to remain fixed and also will be the lowest in volatility and in turn produce the least reward. The spread is divided into 4 legs, 2 money puts and 2 money calls, all which will expire at the same time. The strike prices of calls are also the exact same as with the difference between the puts. As you may have understood you will be selling both a call and put spread.
When selling a call it means that you both buy and sell a call that has a lower strike price. Due to the low strike price the premium received from the sale will be much higher than the amount spent on buying the call. This basically will mean that you will start with a surplus of cash. By the underlying security remaining lower than both they will be worthless by the time they expire which will leave you with the original cash profit. If however it may go higher than the strike price you will be at a loss when the price falls between the 2 strike prices. Be this as it may, the loss that was taken will be the difference between them due to the market price going above the highest strike price, and this call will grow in value while the call sold will not.
When you are selling a put spread this will mean that you both buy and sell a put option as a much higher strike price. This will cause you to have a surplus of cash after the profit made from selling the put at a higher strike price that what was paid for the lower strike price put. By the underlying security remaining above the both of the strikes then they will be worthless after expiring and you will be left with the initial cash being your profit. If however it may go higher than the strike price you will be at a loss when the price falls between the 2 strike prices. Be this as it may, the loss that was taken will be the difference between them due to the market price going above the highest strike price, and this put will grow in value while the put sold will not.
Both the put and call are hedges which will prevent any large amount of loss your position in case the security goes down or up. Now it is important that you don’t get greedy as some have and you don’t spend that money. With this type of spread you are selling both a put and call spread which are out of money. This way maximum profit is made from the security which would not go up to that lower strike price of the calls nor would is fall to the high striker price of the put.

Related Blogs

Options as a Strategic Investment

DavidF — Sat, 13 Mar 2010 06:25:48 +0000

In the ever changing market of today we all want to be able to ensure that our investments will perform very well no matter the scenario in the market. This can sometimes be a very difficult task when trading futures or stocks. For this we have the solution of options trading which is the financial instrument which will provide an investor or trader with limited risk, profit and flexibility that is needed to fully take advantage of any investment that may come your way. No matter if the market is bearish, bullish, choppy or even quiet option trading will increase the opportunity to make a substantial profit.

From since the CBOE first opened and allowed trading we have since then much evolved to broad and active markets. The standardization of expiration dates and strike prices has cleared the a way for maximum growth to follow.

Options today are now considered to be dieing assets. The depreciation rates are much faster than cars and shows that these stock options will soon to be worthless. To the disbelief of option players high risks does not always come with a high return. With this option they are only fooling themselves into believing the more that they put out there to lose the more in return they will receive. This is the total opposite of a smart option trader. To really have success in this business one has to be very careful with the decisions he or she is making. It a market at first glance seems to not be worth it may be a perfect stock option if proper analyze is done resulting in a gain and not a loss. If you were to buy stock which would be risky then it should not come as a surprise that it would be even more risky to sell. There can always be the possibility that you lose more money than what you put in, no trader would want to have this option hanging over his head.