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Track that Trade

Mark,

RE: content for Options for Rookies Premium. May be already planned, but I’d find a complete life-cycle of Track a Trade for differing strategies to be the most useful.

Including the pre-screening/selection process of the underlying or the option, to the entry point, to the trading plan w/ focus on risk management, as well as commentary or Q&A re: the tools or trading platforms being used (e.g. stop loss/limit orders in place, contingent orders of certain type, etc).

Although the risk management may be dependent on each person’s personal risk tolerance, it would be great to make the criteria explicit for discussion. Thanks for the stimulating and educational content.

Regards.

Ed,

***

Thank you for the important comment.

I plan to do almost all of that. However, I cannot do the part about pre-screening the underlying, nor will I be able to do enough about the entry decision to meet your needs. However, the fact that you requested an even more complete tracking of a trade than I had planned raises an important issue.

I will prepare a trade plan and explain why I chose the specific options traded. However, for the purpose of showing members how to make money with options, I cannot tell anyone whether to be bullish or bearish or how to time a trade. I make a trade based on the assumption that once you decide to make a trade, you can learn from how we track that trade and use that knowledge to manage your own positions.

I’ll discuss all adjustments and will include the ‘trades not made’ and the rationale for that. Based on reader comments, there will be other topics to discuss. I’ll follow that process until we decide to exit to cut losses, or until it’s time to take the profits. There is one basic premise:

Options for Rookies Premium is an education site. It is not a site where you can get trade recommendations

One of my basic principles is that I will never recommend a trade for any reader. I know that many option gurus do this. They sell subscriptions to services where they tell subscribers what to trade, and sometimes even make the trades for their customers by managing the money.

I will not play that game and neither should you. If I don’t know you, your financial circumstances, your monetary needs and how much risk you are willing to take, how can I recommend a trade for you? If I don’t know whether you are trying to earn a small supplement for your retirement account or are fresh out of school and (lucky enough to) have a new job – and are willing to take some substantial risk for the right reward, how can I recommend a trade for you?

On the other hand, you don’t know my track record, nor do you know how conservative or aggressive my recommendations would be.

At Options for Rookies Premium, I’ll help each member learn about options. I want members to understand how options work, and not merely memorize a list of trades, and then guess which one to use when it’s time to make a trade.

Nor can I know when markets are going to rise or fall. And I don’t know if]]whether VIX will decline to the 10 level and stay there for a decade, or whether it will once again move beyond 30. Because I don’t know, when making trade decisions, I make the best trade that I can – a trade that suits my needs.

I want to teach you do to the same,and find trades that meet your risk profile, comfort zone and profit objectives. No one can do that for you.

If you truly want someone else to make recommendations and/or manage your money, I recommend that you buy index funds with whatever portion of your assets you decide to devote to the stock market.

Options for Rookies Premium is being constructed to provide guidance, instruction, sample trades, live conversations, etc. This is all designed to help the newer options trader gain insight into the world of options. That includes what options are, how they work, and how to make trades using them.

My goal is to teach each member how to make profitable trades. But members must learn to make all decisions regarding those trades. I’ll answer questions, provide the lessons, offer suggestions, but I cannot make the trade/no trade decision.

When choosing trades to track, the purpose is to use the example as a learning opportunity

The trade is not going to be chosen because I believe it will make money. In fact, it’s possible that a poor trade will be chosen deliberately. Why do that? Because it has a good chance to quickly offer a decision-making opportunity (a learning opportunity).

Being required to exercise judgment and adjust a trade presents a wonderful chance to learn important lessons and techniques. Although you don’t want to face the same situation with your real trading, it is inevitable that you will. This is one opportunity to gain some insight as to how one experienced trader handles the situation.

You are correct, the specific adjustment would not be the same trade chosen by everyone. However seeing my decision and thinking about it allows the member to know why he/she likes or rejects my suggestion. That trader understands why a specific trade was chosen or why he/she would do something different. It’s understanding the reasons for the trade that is important. That’s how we learn. That’s the goal for the Premium web site.

If anyone is going to join, hoping to find trade recommendations at a very low cost for such a service, that’s not going to happen. There will be education only. No suggested trades.

If you prefer to find someone to pick trades for you, I’m not your person

The point is that a trade that is opened, works as designed, earns a profit, and is then closed offers nothing in the way of education. And the primary purpose of following these trades is to learn something. It is not to earn a profit.

Thus, I should place more emphasis on this point:

  • Become a member of Options for Rookies Premium to learn
  • Do not join with the expectation that there will be recommended trades
  • We do not recommend trades. Not ever
    • Why? Because a trade that is suitable for me is not going to be suitable for you
    • I don’t know anything about you (or any member). How can I recommend a suitable trade? I cannot, and neither can anyone else, despite the fact that other do just that, and charge thousands of dollars for making inappropriate trade recommendations
    • Options for Rookies Premium is intended to provide education. My goal is to have members think for themselves. My goal is not to try to make profitable trades
    899
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Following Live Trades

Mark,

Out of curiosity, if we're following one of your own trades at Options for Rookies Premium, would you be able to writeup a quick sentence or two each time (at most once per day) you re-evaluate the position to describe why you decided to hold it, make an adjustment, or close?

I understand most of the time, it would be 'underlying moved X, still Y% away from shorts, reward still worth risk, holding position' or some such. But still, I think a lot of us would be extremely interested.

***

Hi davmp,

When writing Follow that Trade, I hope to make it as realistic as possible.  And I'd want to provide information that is of interest to members.  But consider what you are asking:

'At most once per day.'  On most days I NEVER look at the position.  Not even once.  During some weeks, I never look at the position.  Unless I have a position that is very sensitive to theta (and that's a soon to expire position), I see no need to take the time – unless something has happened to the price of the underlying asset.  Sure, if there is a huge decline in implied volatility, I may take a peek to see if the position is worth closing.

When I own an iron condor and the market doesn't move, why would I want to look at the position?  The answer is that there is no reason, and part of good risk management is knowing how to use investing time effectively.  When a position obviously requires no attention, that is what I give it.

I do not make a decision to hold every day.  Holding is my default decision.  I know when to look at the position to see if things are still okay with the trade.  I know that dull markets and positions that gain by collecing theta can be very dull to follow.  The compensation for that is the huge probability of making money on the trade.

More exciting markets make for more interesting opportunities to make adjustments and use those as educational opportunities for readers.  On the other hand, they are often – but not always – money losing situations.  Thus, I'd welcome those with very mixed feelings.

davmp – there are alternatives.  I may initiate a (paper) trade that is far from neutral – a trade that will likely require an adjustment soon.  That's good for educational purposes, but wrong from the persepective of attempting to manage a winning trade.  Thus, I have decisions to make, and that's why reader input is important. 

Consider an adjustment

When I look at the position and believe there is some reason to consider an adjustment, I'll write about that – even when I don't make the adjustment.  And it cannot be only a sentence or two because there is nothing valuable I can pass on in that type of post.  If you see nothing, assume there is nothing to report.

davmp – who would want to see this day after day: "nothing done"?  That would be a major turn off and not at all helpful.

I am hoping that no one will actually enter into the trades I make – for reasons I've stated before, but will offer timely comments when the comment is useful.

davmp: I want to provide information that interests you.  But try to look at this from my perspective:  I would never take the time to calculate: how much the underlying moved, how far it is OTM in either percentages or standard deviations, or comment on whether the reward was worth the risk. [You may assume it is, or else I would be out of the trade].  I don't do that now and I want this to be a realistic experience.

The trades I make and follow on OFRP (and Members will be encouraged to submit trades) are not to be actively traded.  It is necessary to be aware of what the market is doing, but if the underlying moves 0.1%, I do not bother to look at the position.  I want FTT to be realistic, so I will not look at positions for the sole reason of being able to issue a report. 

Follow the Trade is real life.  It requires patience until action is needed – or at least considered.  That's why I hope to follow more than one trade at one time.  That will eventually present a real problem when the market gets volatile (and that is the reason why I trade only one underlying asset) and there are several positions at risk simultaneously

I try to never turn down a request, but what you ask is not possible.  It's not in the best interests of readers. 

858

December 2010 issue of Expiring Monthly was published yesterday.

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Options for Rookies Premium

Options for Rookie's is a place to learn about options, ask questions, suggest topics for discussion, and most of all, a blog where we can exchange ideas and dialog about options.   The best part for me comes from intracting with readers who take the time to post comments or questions.

The focus is, and will remain: options education for individual investors. This blog will continue to be published in its current format.

Announcing:I plan to launch a new website: Options for Rookies Premium.  Launch date (tentative): March 1, 2011.

 

Options for Rookies Premium: Brief Description (more details at a later date)

Options for Rookies Premium is a membership site that serves a different audience.  It offers more traditional options education in a classroom setting.

Free sample I intend to offer free membership to everyone for two weeks. I hope that will be in mid to late February.  Once that two-week period ends, the site will be launched officially, and available only to paid members. 

What do you get for becoming a member?

* Live Question & Answer Session: One hour, 3 times per month. In a virtual meeting, members ask questions and receive immediate replies.

* Live seminars: Once again, a virtual meeting at which I'll choose one topic for a lengthy discussion.  Estimate: 30+ minutes.  These are spontaneous discussions, with no advanced preparation.  I'll take a topic from suggestions of those who attend. These sessions will be recorded. 3 times per month.

* Follow a live trade via blog posts.  We'll follow a trade from entry to exit, including all risk management decisions.  I'll be counting on members to suggest trades (no trade ideas now, please).  These are learning experiences and not intended to be money-making trade recommendations.

* Video posts when appropriate

* Discounts on almost everything: yearly membership, e-books, private consultation, courses.

* Webinar: An occasional pre-recorded webinar on a relevant topic.  Topic requests accepted. Frequency unknown.

* Written Questions and answers: I'll answer questions as I do on this blog.  The difference is that those questions should focus on topics covered on the Premium site.

I hope to offer more as time passes.

Guarantee: Unconditional, no questions asked refund of the month's fee – before paying for the next month.  If you pay for the next month, it's reasonable to assume you were satisfied with the current month's content. Limit: Once per person.

Membership cost: Undecided, but it will be reasonable.

  ***

Courses: Extra cost

I'll be teaching courses for option rookies.  There will be basic beginner classes, as well as classes for traders with some experience.  I will leave more advanced education to other instructors and mentors.  As regular readers of Options for Rookies already know, the importance of risk management will be a major component of any trade discussions.

Non-members may take courses at the full rate.  Members pay 1/3 less.  Unconditional money-back guarantee: If you are not satisfied after the first session, just let me know and the refund is yours.

Your input

That's the plan and it's subject to improvement. The main purpose of today's post is to seek your input.  Please let me know your thoughts. Suggestions and comments requested.

855

 

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