Enjoying Life While You Have The Chance!

Hey everyone!  It's Friday and Special Agent Thomas has put his gear away and is looking forward to having a good weekend with the family!

Let's talk about this weeks option trade first. I placed a 167/169 bear call spread on the SPY on Monday.  I lost the trade and gave back some of the gains I've made the last few weeks.  I knew I should have bumped up to the 168 strike but there's no use crying over spilled milk now.  There's always next week right!  One thing I've come to realize is that no one wins every trade.  The market's just a beast!  I even read this week that only 8% of hedge fund managers actually beat the market!  These hedge fund gurus are supposed to be smarter than the rest of us and even they get humbled by the market. Whether you invest or trade its important to stick with your plan and just ride out the bumps in the road.

Now to the good stuff.  When I came home tonight there were a million things I could have occupied myself with.  But I decided I wanted to sacrifice my desires and give my time and energy to my wife and kids.  I played ball and wrestled with the kids and even helped my wife cook dinner.  It wasn't anything big, but this was one of the best evenings I've had in a long time.  So the message here is to take the time to enjoy the important things in life.  We only have so much time and when it's gone.......it's gone forever.

Have a good weekend everyone.  I'll be ready to trade on Monday!  If you're new to options be sure to read the first few blog posts to get up to speed fast.


                                                  

Expanding the Boundries

Hey everyone!  I'll get right to it!  To date, this blog has been all about trading options.  Specifically, Bear Call Credit Spreads.  For the two people that have read each post you should be up to speed on how to execute either monthly or weekly credit spreads.   But today I was thinking (uh oh)!  There are a ton of other things I would like (love) to write about!  Things that may be helpful to my readers.  I suppose I could start a second blog but I'm much to lazy for that.  So, as I continue Options Adventure I plan on sprinkling my posts with random Sean "ness".  I hope I don't lose my two readers!  Anyway, here goes....

Today I went to play basketball after work.  It was still about 90 degrees here in Florida.  The heat was killing me.  I shot jumpers for twenty minutes, ran suicides for ten minutes and then shot free throws.  Everything was cool (sorta) until I got to the free throws.  I was exhausted from the heat and all I wanted to do was hit seven out of ten and go home.  Five of ten.  Six of ten.  Five of ten.  The frustration was building by the time I got to the fourth set.  But I finally got myself together and hit six of seven.  Then I missed the next two.  Thank the Lord I hit the last shot to get my 70% average.

After I shot, I sat down to cool off and started thinking about what just happened. I've been having some "issues" lately and it appeared my free throw escapade was an opportunity to learn a life lesson.  Here's what I learned:

1. When you have mountains to climb in life there will inevitably be problems along the way.  My goal (mountain) was hitting seven out of ten free throws.

2. When dealing with problems you have to control your emotions and stay in control.  During the first three sets of free throws it took every ounce of strength to not curse out my ball and kick it into the woods.  Does anything good ever come out of you blowing your top?  Not in my experience.

3. You have to learn to persevere.  If you give up to early you are going to miss out on a lot of blessings in life.  Keep moving forward! I could have quit after the third set and went home, but I stuck with it.

4. Sometimes you have to learn to adjust from whats always worked for you in the past.  During the first three sets I shot the free throws all the same way.  In the final set I changed my shooting motion a tad and got the results I wanted.

5. Lastly, even when things are going good, expect the unexpected.  In my last set I hit my first six out of seven shots.  I was cruising and had only one more to hit. Then I stumbled and barely reached my 70% goal.    When I hit the first six shots I just knew it was all good.  That last shot was pressure filled!  Not what I expected.

Well that's it.  I can't say basketball can teach you everything you need to know about life but I believe there may be a little wisdom in my experience today.

By the way, I placed a SPY 167/169 Bear Call Spread today that expires on Friday.  Premium was sweet!

                                            

Weeklies Update

Wazzup people!  If anyone has been following my blog you'd know that I've adjusted my strategy to trading weekly credit spreads instead of monthly spreads.  So far things have worked out really well.  On Monday I placed a SPY 165/167 bear call spread and earned $11 per contract.  The SPY closed today under 163 so I was good to go.  It appears even when you calculate commissions weeklies can be more profitable than monthlies.  Plus if a weekly trade were to go bad there are more options to roll the trade out.

In the mean time I've tried a couple other services that provide trading signals but I just don't think they're for me.  If anyone uses a service that's made them some money let me know.  I'm willing to check out just about anything.

I hope you had a good holiday.  Fireworks in Jax, FL were pretty cool!  Later!


                                            
                                                                         My City!

Writer's Block!

Happy Friday and welcome back to Options Adventure!  This is actually the first time I have no idea what I want to talk about!  I was going to talk about some other types of option/stock orders but I'm really not feeling it, so I'm just gonna wing it!

First off, I have to give congratulations to the Miami Heat.  I'm a die hard Laker fan (shout out to the Mamba) but you have to give Lebron and those boys credit.  They beat a quality team in the Spurs and to my surprise showed great sportsmanship after the game.  Just check out the moment Lebron and Duncan had after the game.  And that shot by Ray Allen at the end of regulation in game six was just sick!

Next, it always amazes me how the entire financial world gets their panties all tied in knots whenever the Federal Reserve Chairman speaks.  The Chairman uses a negative word during his remarks and the entire markets tanks.  That my friend is what I call "gangsta"!  It really makes me wonder if the whole market is just a sham and controlled by the big institutional banks and other super rich powers that be.  Hmm....

Lastly, I can touch on my two trades this week.  I successfully closed out a SPY 168.50/170.50 Bear Call Spread (weekly).  I have Mr. Fed Chairman to thank for the SPY never getting close to 168 this week.  Unfortunately, I lost on a straight 159.50 SPY call that expired today.  I was expecting the SPY to bounce back after yesterdays drop, but I was definitely on the wrong side of that trade.  I still may experiment with some calls and puts in the future but the foundation will always be high probability Bear Call spreads on more than likely only the SPY.

Well, that's it for now.  Hopefully next week I'll have a little more inspiration.

When does football season start again?!  


                                              

What Types of Orders Are You Using?

Hey everyone and welcome back to Options Adventure!  It's been a couple weeks since I posted but not to fear.....I'm back.  I wanted to do a quick post today about the different types of option orders you'll come across when you trade.  With credit spreads the two basic types of orders are:

1. Sell To Open (the short strike)
2. Buy To Open (the long strike)

With these two orders we create our Bear Call Spread.  If for some reason you wanted to close out your spread the two basic orders to accomplish that are:

1. Sell to Close (the long strike)
2. Buy To Close (the short strike)

These are the basics.  But let me ask you a question.  When you go shopping don't you always try to get the best price for whatever you're buying?  Of course you do! Well, in "options world" things are no different.  When I sell an option I want to get the best price I can so I can make the most money I can.  The best way to do this is by placing "Limit Orders".  Lets say the Bid/Ask price for an at the money SPY call was 0.5 and 0.7.  I can always sell an option at the "Market Price".  This is normally going to be the worst price I can get into the trade with.  In our example, the Market Price would be 0.5.  So for every option I sold, I would get $50.  But let's say I want to try to get a better price!  No market maker is going to sell you a option at the most expensive price of 0.7, but you may be able to make a deal if you offer to sell the call at 0.6.  This price sits in the middle of the Bid/Ask spread.

How do you do this?  I'm glad you asked!  Instead of placing a Market Order, you need to place a Limit Order of lets say....0.6.  This order basically says I want to sell the call, but I will not accept anything lower than 0.6 per contract.  If my Limit Order gets filled than I'll have earned $60 per contract instead of $50.  That's a big difference!  You want to get as much money as you can for taking on the risk of the trade.  Sometimes you're Limit Order will fill quickly.  Sometimes it takes a few minutes.  Sometimes it never fills at all.  Worse case scenario, you can always change your Limit Order back to a Market Order.

This little pricing game reminds me a lot of the negotiating you do at the Straw Market in the Bahamas.  You want the best price you can get for that straw hat you'll never wear again once you get home and the local wants to rip you off the best they can.  Man, I loathe that place!

Anyway, in your trading you need to be placing Limit Orders period.  It's the best way to get the most out of your trades.  We'll talk about some other advanced order types next time.  Good night!
 


                                             

Can You Feel The Pain?

What's up my people!  Man, being a Super Dad is tough sometimes!  This morning I woke up at 4:00 AM to take my oldest daughter to a kids Triathlon.  The First Coast Kids Triathlon here in Jax, FL is the largest kids Tri in the country.  I am SUPER proud to say my daughter won first place for her age!  She worked really hard and deserved that big Dairy Queen Blizzard she destroyed after the race.  Well, lets talk options.

This week I scored another good spread on the S&P 500 ETF known as the SPY.  I entered a 171/174 Bear Call Spread on Monday that expired worthless on Friday.  The SPY closed somewhere in the 165 range for the week so my spread was never in any danger.  I think I'm really starting to like using weeklies instead of monthly spreads.  The time decay is really fast and over the course of the month it appears I can make a little more income than using a monthly spread.  Having a good low cost broker really helps with the weeklies.  I mentioned in a previous post I use E-Option.  They are the lowest no frill broker out there.  And no, I'm not getting paid to push E-Option in case you're wondering.

Anyway, I came across this theory called Maximum Pain.  If you've heard of this and use it to come up with trade ideas let me know.  In essence the theory goes like this..

1. There are market makers (the people that make the real dough) who trade lots of options.

2. There is always going to be a point, more specifically a particular option strike price, where the market makers would lose the least amount of money at option expiration.

3. Seeing that the market makers don't like losing money, they will execute trades to move a stocks price (aka manipulate it) to the point (strike) where they will have the lowest loss.  This magic strike price is called Maximum Pain.

There are a lot of free websites that allow you to calculate the Max Pain for a particular stock for each weekly option expiration.  The question is how can you use this to your advantage?  Here's what I did this week.  I determined that Max Pain for the SPY weekly option expiring on Friday was 165.  On Thursday afternoon the SPY was trading over the 166 price point.  Max Pain theory told me that the SPY should be moving down by the end of trading Friday, right?  So, what I did was buy 10 puts (at 166 strike).  If you've been keeping up you know that if you buy a put and the price drops you make money!

To make what's becoming a long story short, on Thursday I bought 10 puts at $39 a piece and sold them Friday for $70 a piece!  Not a bad profit for one little trade.  I risked $390 and made $700.  With an advanced order you can even automatically get out of a trade if the whole Max Pain thing doesn't work.

Next time I'll talk about the different types of advanced option orders.  I'll also talk a little more about this Max Pain thing.

Well, my kids want me to come watch Disney Channel with them!  I hope you have a good weekend!

Still waiting for my first comment!

Don't Call It A Comeback!

What's up y'all.  I never thought Friday would come!  I accomplished a lot a field work this week trying to break up a good ole boy network of local fraudsters!  Sometimes at my regular job I wonder if anyone actually becomes wealthy without lying, cheating and stealing.  Anyway, enough about federal agent world.  Lets talk about options!

I didn't have a post last week partly because I was dead tired and partly because I was still licking my wounds from getting slammed during the last option cycle.  But like the Six Million Dollar Man (Remember that show?) I'm coming back stronger and faster!  I really believe the adjustment I made from using stocks to sticking with large ETF's will eliminate what happened to me last month.

With that in mind I thought I'd try something a little different.  Instead of picking a spread with the normal monthly expiration, which in this case would have been on June 22nd, I decided to try a weekly option spread.  Yes, you can actually trade weekly options the same way you trade monthly options.  In terms of structuring a spread everything is pretty much the same.  The primary difference is that the time value of the option deteriorates much quicker with the weeklies than with a monthly option.  Weeklies are listed each Thursday and expire the following Friday unless that Friday happens to be the third Friday of the month.

On Monday this week I placed a 171/175 bear call spread on the SPY (S&P 500 ETF).  This spread expired today with SPY never getting close to 171.    After the option expired worthless I was able to come out with a 0.75% profit.  That may seem like a pittance but if I got the same return for four weeks that would be a 3% return for the month which is right where I want to be.

One thing I wanted to clear up is the point when a maximum loss occurs with a credit spread.  In this case my break even point would be 171 plus the amount of premium I received.  My max loss would occur if SPY reached 175.  In this example the max loss would be $400 per contract.

Prior to opening the position my trade simulator stated I had a 96% change of winning the bet.  Those were good odds to me!  That brings me to another point. I read this week that a trader should make sure he's using a trade simulator and not just a probability calculator.  The App Store has a great simulator you can download right to your IPhone.  That's the one I use!

Well that's it for tonight.  I did experiment with another type of options trade today.  I picked up the idea from the web.  To make a long story short I bought 10 SPY 164.5 options (expiring today) at about 10:00AM for $32 a piece and then sold them at 2:00 PM for $52 each!  Not a bad profit for a few  hours.  Before I get into the theory behind the trade I want to experiment a little more first.  Could just be beginners luck!

Enjoy the long weekend everyone!