We have made it to the end of another week. Nice work everyone. What a sell off we had intra-day. It was so fast I doubt many people noticed it.

Normally I do not enter too many positions on a Friday, so I haven't done much shopping today. Everything is scaling back a little bit, but that is all part of the plan, right?

I must admit that I like all this movement heading onto next week. I won't try and claim that I am bullish or bearish at the moment, because in my style of trading, it really doesn't matter. What I will admit is that the technical set-up heading into next week is a gem. There will be so many items to choose from next week to trade that I can't wait. I will go out on a limb and claim that next week will the the week of endless opportunities (be optimistic).

I am taking off early and heading down to St. George, Utah. If you haven't heard of it, pay it a visit. Great rock climbing, hiking, GOLFING, etc. The weather is supposed to hit 80's and I have tee times at Coral Canyon. Time to dust off the sticks again.

Anyhow, if you took a beating this week....relax. Take your lumps, and get ready to stick it to the market next week. Next week is the week of the ________ (insert your name here).

BTW- Tonya, feel free to post your system. In fact EVERYONE, feel free to post whatever the hell you want. I only ask that you do not advertise here. Also if you are going to post a trading system, PLEASE make sure you mention your backtesting results, expectancy ratios, or any evidence that you can offer to prove it's profitability. I want to make sure if anyone is going to be using it blindly that they have a feel for how it might have worked in the past.

Tonya, I will be watching for it! Can't wait!

Recommendation: Have a fabulous weekend!

Posted by Option Addict at 11:05 AM | Permalink | Comments

Hmmm....Looks like the market is struggling to hold onto this mornings gains. There are still plenty of nice trades floating around out there.

I am still working on my post on "Futures Part II" I hope to get that out sometime today.

Recommendation: Leave a few comments. Maybe we can start a fire this way?! Today I am a little braindead & spacey so lend me a hand.

Long: BSC (upon confirmation of the inv. head & shoulders), PKX, X (Trade is still paying dividends for all you patient traders!) & TSO

Short: Still short WYNN, hopefully PSA soon.

Posted by Option Addict at 11:44 AM | Permalink | Comments

Posted by Option Addict at 2:17 PM | Permalink | Comments

Do you like the way the averages are trading into the close? We've retraced a little bit of those losses, so things are not looking as bad as they did this morning.

Posted by Option Addict at 1:39 PM | Permalink | Comments

Recommendation: Grab some NoDoz before hitting "play."

Posted by Option Addict at 10:21 AM | Permalink | Comments

This post is in relation to the conversation I had with Mike outside of the blog.

Posted by Option Addict at 4:27 PM | Permalink | Comments

Posted by Option Addict at 11:28 AM | Permalink | Comments

Think it will be another unchanged day today? The Dow spent no time selling off it's profits on this mornings housing data...and is just hanging out. Go figure.

Any good ideas floating out there?

Recommendation: Go long JBX. I had a few breakfast croissants this morning, and it's no wonder they are a tick off of their 52 week high.

Long: GROW

Short: Perhaps NDAQ by the days end

Posted by Option Addict at 8:45 AM | Permalink | Comments

Back by popular demand! The recent intraday volatility has been a huge reason to day trade futures. In fact, this is why more people flock towards day trading e-minis as opposed to index options. Index options have the enormous spreads, time value, and implied volatility. E-minis have none.

Note: Futures trading is not for everyone obviously. In fact most futures traders will tell you that you ought to have a pretty sizable chunk of change in your account, and that you trade very small. You also should attempt to develop a system. If you are a discretionary trader, futures trading will be the end of you.

Here is a description on what futures trading is...

Futures are contractual agreements made between two parties through a regulated futures exchange. The parties agree to buy or sell an asset - livestock, a foreign currency, or some other item - at a certain time in the future at a mutually agreed upon price. Each futures contract specifies the quantity and quality of the item, expiration month, the time of delivery and virtually all the details of the transaction except price, which the two parties negotiate based on current market conditions. Some futures contracts call for the actual, physical delivery of the underlying commodity or financial instrument at contract termination. Others simply call for a cash settlement at contract termination. Generally, however, market participants do not hold their futures contracts until termination but rather offset futures contracts they have bought ("gone long") by a subsequent sale; or, offset futures contracts they have sold ("gone short") by a subsequent purchase.

In broadest terms, futures are about anticipated future prices of basic commodities and financial instruments, based on current information. Futures are concerned with such questions as what will the price of cattle be next December? What will interest rates be in six months? How much will a euro be worth in May?

Because commodity prices are constantly changing, virtually all businesses face ongoing price risk. Meat processors face risk from fluctuating cattle prices, lenders from changing interest rates, and international businesses from varying currency rates. All these businesses can use futures to help manage their exposure to price risk.

Futures contracts – price agreements – are bought and sold in what is basically a marketplace of opportunity for two symbiotic groups: hedgers, who seek to offset price risk, and speculators, who try to make a profit from favorable price fluctuations. Hedgers are typically businesses and financial institutions who buy and sell futures contracts seeking to “lock in” future prices for commodities that are essential to their business operations. Speculators are a diverse group that includes day traders, financial institutions such as banks and hedge funds, and arbitragers. These groups are brought together at a futures exchange, which provides a venue where their orders may interact on a trading floor or a computer network, and where price agreements can be negotiated.

Traders’ decisions generally aren’t random, but are based on a synthesis of a great deal of data and a variety of different strategies. Some people make trading decisions based on fundamental analysis of the forces of supply and demand in a commodity market (“fundamental analysis”); others trade based on an analysis of market trends and price chart patterns (“technical analysis”).

Because futures prices represent the aggregate of all available information that may affect the market, they are viewed as reflecting a process of “price discovery.” Prices change constantly in response to numerous factors, ranging from weather and wars to political decisions and popular trends. The futures markets assimilate that information and provide a means of determining the price above which buyers will not buy and below which sellers will not sell – the “equilibrium” price – where the supply to be sold and the demand to buy are in balance. The price of futures and the underlying cash markets on which futures are based tend to come together or “converge” by contract expiration. The price of a futures contract at expiration and the cash (“spot”) price of the underlying asset must be the same, because both refer to the same asset are basically equivalent, because both prices refer to the same asset.

Before I move into the segment "Part II" which will discuss contract specifications and ticker symbols, etc...I need to get home and pack. I'm catching a plane to San Jose to go watch the regional finals. Go KU!

Recommendation: I'll be posting tomorrow since I will still be trading tomorrow morning. Catch me then?

Long: Live option addicts!

Posted by Option Addict at 1:32 PM | Permalink | Comments

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Posted by Option Addict at 3:53 PM | Permalink | Comments

The clock is ticking until all hell breaks loose. Obviously the rate stays unchanged, but the verbage that will be used has investors sitting on the edge of their seats. There are a lot of great set ups regardless of the outcome, so have your ammo ready to fire.

There are a lot of good arguments being posted today. I am impressed with each opinion that flies across the blog. Keep up the good work.

I'd like to see how the market plays out, and then come back and try to digest it a little.

PS- The Marketcast will be appearing on Forbes radio today! We are starting to attract a presence!

Recommendation: Hold on tight today!

Long: The market

Short: The market

Posted by Option Addict at 10:50 AM | Permalink | Comments

Posted by Option Addict at 8:56 AM | Permalink | Comments

I am just getting settled in this morning and starting the journey through my watchlists to pick out a few candidates for this week. It's nice to see the market posting some moderate gains, but I have made my stance public....I'm a little more bearish to tell you the truth.

I saw a lot of comments come through about Mastertalk this week. Yes, it is true...the recording was damaged about halfway through the presentation. All that was salvageable was the Q&A. I talked about trading index options, daytrading them (since intraday trends have been amazing), and also discussed why trading spreads on the indices & a few higher priced stocks was a great strategy right now (VIX high, bearish sentiment, etc).

I'll be back this afternoon with a video. Get out there and make a few bucks!

Posted by Option Addict at 10:01 AM | Permalink | Comments

Posted by Option Addict at 9:35 AM | Permalink | Comments

Recommendation: Pump your brakes.

Long: AXE, PCAR (small positions) perhaps MICC...

Short: I don't want to talk about it ;) & SHLD depending on the close.

Posted by Option Addict at 3:12 PM | Permalink | Comments

Honestly, I cannot think of a better time of the year. I love College Basketball above all other sports. This tournament will be fantastic this year. Anyone placing any bets? Who's your dark horse?

Posted by Option Addict at 2:01 PM | Permalink | Comments

Folks... FYI I completed a video to be posted over two hours ago, and I am still waiting for it to come back from Revver. In the interim, you can view it at YouTube, albeit a worthless quality version.

http://www.youtube.com/watch?v=kN_W4sQK94A

Recommendation: Wait for the better version, which obviously makes it in after the close.

Long: Day.

Short: Time and GOOG since they own YouTube.

PS- I think I might discuss trading Index Options on Mastertalk today. I am getting nervous that everyone is looking at short term trades on these and not considering the costs, spreads, volatility and trading ranges. I will try to think something up without sounding too pessimistic.

Posted by Option Addict at 1:55 PM | Permalink | Comments

For those who follow the Marketcast last nights recording was finally uploaded to the website. We have had server problems and I think we have nailed down a solution. Sorry for the inconvenience.

Posted by Option Addict at 9:50 AM | Permalink | Comments

Here is a copy of the e-mail that triggered todays topic....

Hey Jeff - I just got caught up with the last weeks worth of blog postings... I have an idea to bounce off of you: It might be a good idea to remind fellow bloggers that just because you (and several others on the blog) trade a certain style, doesn't mean that it will fit with everyone's personal style. I have met a lot of people through investools and almost everyone I talk to says they are a short term trader and they pretty much all know of you, your style and your blog (you are so popular!)... however, after talking in greater detail with some of these folks, it is often the case that their personalities and style don't really mesh with the way you do things... They see a potential setup on your blog and just go full steam a head and buy it without taking ownership and responsibility. Then when it fails cause they don't know what they are doing they are ready to throw in the towel...

Although I am rather new to investools (started in November) I have hit it pretty hard... The education was straight forward, it made sense and I got through all the PHD stuff in about a 3 weeks. I am very impatient and determined to make trading work, but when I first started, I did terrible! I understood everything you did and the concepts behind it all, I could read the charts and had a decent grip on getting in and out at the right time... However, it turned out that I was more impatient than I thought... I couldn't wait several days or a week... I needed to see things faster.... Then I got into playing index options and daily price movements. Since I started with this strategy I not only recovered all of my losses from my initial mess ups, I am up 40% on my original account balance... and I was able to do this in a month and a half.... I have customized my system and am continuously tweaking it and am confident that it is only a matter of time (target is the end of the year) before I will be trading for a living...

The point to this short novel is that although someone may be determined and they work really hard, it doesn't guarantee that your system will be ideal for them.... In my case I was able to learn a great deal from you, your blog, etc and develop my own game plan based on the type of person I am... I know a lot of people who just go to your blog to get trades.. and those are the people that I talk to who are thinking about giving up now... I know you mention this type of thing a lot in your blog but it might be worth mentioning again to drive the point home and to give out some "tough love"... There are no guarantees and if people don't take responsibility and ownership to what they are doing they should expect to fail... Of course that applies to everything in life, but especially trading!

Sorry for the lengthy email... After my 40% gain this morning and reading your blog, I felt the need to write you... :)

Thanks again for everything you do - too bad we missed each other when I was out there a couple of weeks ago... maybe I will catch you next time.

Justin

Recommendation: He is absolutley right. Remember folks, this blog is an insight to how I trade and what I see. My trading style is not for the faint of heart, nor is it a place that guarantees results. While I have done pretty well, these ideas I share don't always resonate within the hearts of all my readers. I see this as a place to learn a few things, catch a few ideas, and have an ear that listens to questions or comments of what others are experiencing out of the market.

Long: Justin's trading system....as long as I can show up for your trades and not have to do any work yet get your exact same results!

Short: Options? Or do I want to be a buyer after all this?

Posted by Option Addict at 4:44 PM | Permalink | Comments

A thought entered my mind today. Since it was one of only two, I figured I ought to write about it.

This blog is a watering hole for various option traders from all walks of the earth. We all have one thing in common and that is that we trade options. As I read what is spoken here we all have different experiences with success, failure, profits, losses, etc. It makes me realize that even though we may trade the same underlying stocks sometimes, that the outcome is a totally different experience depending on your set of entry and exit rules. I have talked about the topic of entry and especially exits more times than I can remember, but today I want to talk about the underlying strategy. Are you certain you want to be an option buyer?

You are all here learning to trade options, but is this where you really wanted to be? Why is it as traders you wanted to trade options? Leverage? Why not futures or currencies? Was it the correlation to stocks? Do you feel you know the market better than the economy or macro economics? Why trade options?

I have gone full circle in my career. Stocks, options, currencies, futures, and back to options. I like to trade options because they are multi dimensional. There are various ways to profit. For those who don't understand the various dimensions, I hope you realize that whether you profit or not goes beyond the stock price going up or down. You can have a stock move in favor but lose on the option. If you didn't realize this, read my archives, or drive slow.

Since there has been an underlying tone about success, failure, quitting, working harder, etc I want to do my part to talk everyone through the reality of being an option buyer. Most importantly I want everyone to realize that just because I have found success in the way that I trade, this does not mean that it is a strategy that will work well for everyone. I am not trying to navigate you away from your approach, I only want to insure that you understand the odds, nuances, and details of this type of strategy.

First off, did you know the odds of success as an option buyer are totally against you? Imagine an option contract for just a moment. Who has the higher probability of success? The buyer or the seller? Since options are a time/expiration based product, they decay in value. Based on this factor, you have a higher probability of success being a seller. A comment surfaced recently about the success of our student base, and for anyone that has attended a trading room or talk product and filled out the annoying poll, you can see that we actively track our students success. What the results say is that our students are finding more profits trading spreads vs. directional trading.

Not only do options melt, but you pay a premium for melting time. This premium fluctuates and not everyone understands fully how to make it work for you. With changes in time and fluctuating premium, this puts more pressure on the price of the stock to move in your favor. With a typical individuals irrational thought process and timing inefficiencies, this becomes a very low probability of being right. This is why many option traders will tell you that options are meant to be sold. They do have a point. However, how many books have you read about market wizards, or any traders for that matter that made it to the top trading spreads? I can recall a lot of stories about blow ups, but this was for lack of risk management. Are you trying to make it to the top? Or do you just want to supplement your income?

Most of you know I am not a spread trader, but in truth I do not dismiss it altogether. In fact, I will do my part to discuss this strategy a little more openly through the blog. The biggest debate among options traders is which side of the trade you are on and I want to make sure everyone can say with conviction that they are on the right side of the trade.

In the end if this influences a strategy change, or at least a sense of urgency to explore and make sure that the type of activity you are soliciting is what you are good at, or fits well with your style, personality and investment objectives than I can say this was worth it. Matter of fact I just opened another e-mail addressing the same point. This post is timely in my opinion and do a little soul searching to make sure you are doing the right thing with you financial future.

Let me hear your thoughts. Also let's hear it for CME.

Recommendation: "life comes down to a few moments....this is one of them." Bud Fox; Wall Street

Long: Community

Short: CME

Posted by Option Addict at 10:59 AM | Permalink | Comments

Recommendation: Take trades that mesh with your analysis. Welcome an idea but make it your own. The greatest trader of all time (Jesse Livermore) said it best..."let me warn you that the fruits of your success will be in direct ratio to the honesty and sincerity of your own effort in keeping your own records, doing your own thinking, and reaching your own conclusions."

Posted by Option Addict at 9:24 AM | Permalink | Comments

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Posted by Option Addict at 2:09 PM | Permalink | Comments

This low unemployment report that came out this morning was a best case scenario for the market. I think if we can hold the days gains and close towards the highs of the day, then the market is likely to continue higher. Go figure.


I know this correction in the market has probably caused some losses, created fear, and caused traders to throw in the towel, give up, and call it quits. Just to let you know, you are not alone. Throughout my career I can't count the amount of times this has crossed my mind. I can't count how many days, weeks, months, that I have taken breaks, or stepped away from trading to gather my thoughts and really ponder if trading was for me, and if I would really be able to make it work.


Let me use an example... I relate becoming a successful trader to an individual working towards a CFA designation. Let's say you start with 100 people. Only 40% of them pass level one. Out of the 60% that fail, a lot of them drop out and do not continue. The 40 people that passed, 50% of them pass level two (20 people). Out of these 20 people that have made it all the way to the final exam, 67% of them (13 people) walk away with the designation.


Think about your progression as a trader and how far you have come, yet how far you need to continue. How bad do you want to be in the top of your class? I wanted it more than I have wanted most things, and I had to bust my ass to get it. It took me about 5 years doing it the hard way...and the way I see it is that each of you have it so much easier than I did. You are lucky. There were not companies out there that wanted to teach me how to do it. There were only books. There weren't many successful people sharing how they were trading, or discussing what was working, or any support groups willing to help me out when I felt lost or overwhelmed. George Lucas said it best...




Do you really want to be a trader? Are you convinced that you can be part of the few that make it? I believe you can. It is very challenging career we are chasing, but it will eventually be one of the most rewarding accomplishments once you get to where you want to be.

This is what prompted my comment last night. I know that times like this people curl up and disappear and I don't want this to happen to you. This is why I want people to continue to post comments or feeling on the blog so I can see what it is that people need to get past these day to day hurdles. For the most part, plenty of people are here for the trades rather than to learn how to trade. There is nothing wrong with that as long as you are taking my "ideas" and turning them into your actions. But for the people who want to learn the "why" behind all of this, I wanted a little feedback on features, technology, or just plain ideas on what you would find helpful. Please continue to keep them rolling in. I have plans for this site and your feedback and ideas have gotten us this far. Let's keep it going.


In closing...keep your head up. Think about this not from a day in and day out perspective. But keep in mind that it could take months or years to be where you want to be. When you start thinking like this, you'll see how important things like position sizing and diversification are to a trader, and that these gains/losses are very inconsequential to what you will go through for the rest of your careers.


Hang in there.


Recommendation: Don't stop believin!

Long: ----
I already tipped my hand, tip yours!
Short:----

Posted by Option Addict at 9:47 AM | Permalink | Comments

As you may or may not have noticed, there has been a flurry of charts, and a lack of video. My computer is having a bad week. Time for an upgrade. In the meantime I have a few more things that popped up on my radar. Wanna see?

Posted by Option Addict at 11:35 AM | Permalink | Comments

Recommendation: Always think before you speak. And "Yes" these are bearish trades I am taking down.

Posted by Option Addict at 2:08 PM | Permalink | Comments

So I must admit, I like the way the market is trading right now. I am trying not to let my mind wander here, but I like the way things are holding up today. I am going to add on a few more stocks to the weekly watchlist. Here they come...

All breakouts. Some I am waiting for volume, one (VMC) waiting for price & volume to confirm. We'll see how the day closes before I get myself carried away.
PS- If you are unable to click on these charts, here are the symbols in order... VMC, MRO, DWSN & DE

Recommendation: Trade defensively

Long: MLM thank goodness.

Short: ADBE when/if it breaks

Posted by Option Addict at 12:11 PM | Permalink | Comments

Recommendation: Proceed with caution

Posted by Option Addict at 11:17 AM | Permalink | Comments

Recommendation: If it doesn't work in 5 minutes or so... just wait longer :) This hosting site takes for ever to approve content and post.

Posted by Option Addict at 1:57 PM | Permalink | Comments

PS- Thank you to everyone for the nice comments you have left recently. There were so many I wouldn't be able to fit in individual responses, but I appreciate all your support and comments. Thank you.

Posted by Option Addict at 11:28 AM | Permalink | Comments