Tag Archives | options for rookies

Options Education

As launch time (April 1, 2011) approaches for my new education site: Options for Rookies Premium, I want to use today’s blog post to tell you why readers of this blog would consider joining:

What’s in it for you

Those of you who know me from this blog recognize that I bring passion to the options education business. I care about you and your options-related problems.

For me, this new venture is not only about earning an income for my efforts.

This gig is about providing an outstanding product at an extremely attractive price. A full year Gold Membership costs less than most mentors charge for a single one or two hour session.

For me, Options for Rookies Premium represents an opportunity to become personally acquainted with a wider audience of traders who want to learn to use options. There are solid reasons why understanding how to use options is important for anyone’s financial future.

But right now, I’m telling you why Options for Rookies Premium represents an excellent value for you

  • This is an interactive education, with live meetings (on video if you cannot attend) at which you control the agenda
  • I want my eagerness to teach to rub off, and make you eager to learn
  • Do you want answers to specific questions? Just ask
  • Would you like to have a group discussion on a given topic? We do that also
  • Have a topic to suggest for a spontaneous seminar? If the other members in attendance like the idea, you get your seminar
  • I’m making myself available to you, as part of a group. You gain access to an experienced options trader and teacher. I am someone who wants you to understand how options work. Those members who get involved in the discussions stand to gin the most
  • To begin, there will be four one-hour sessions per month
  • We’ll also follow a trade together. Via blog posts, video, or live meetings, I’ll explain my thoughts at each stage of the trade – from entry to exit. You get to see how decisions are made – and that’s a learning experience difficult to find (without paying big bucks). I’ll consider alternatives for each trade. Deciding when to exit is also part of the experience.

    Please keep in mind that conservative and aggressive traders have different points of view, and I’ll fit that into the discussion whenever possible. Some decisions will be too conservative for you, while others are too aggressive. When you recognize that, you’ve come along way towards defining your own comfort zone.

  • Members are invited to suggest a trade to follow and/or to contribute to all discussions.
  • There’s a Gold Member’s blog
  • I’m preparing video courses (extra cost) that work for those who prefer the more traditional learning experience.

The cost?

Gold Membership is $37/month. With a 30-day money back guarantee.
This is an incredible value.

Join as a Gold Member and become part of the group.

***

March 2011 issue of Expiring Monthly will be published later today. If you are not already a subscriber, now is a great time to begin a subscription.

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Options for Rookies Premium. Planned Content

Premium Content

This page is where the premium content begins. Below is a description of current plans: 

The idea behind the premium site is that it allows members to have greater access to an experienced trader and teacher who can offer answers to your questions and provide more personalized service.  Please understand that this does not include telephone calls or hours of e-mail questions.

I'll be available for live sessions, answer questions, follow trades in detail, offer courses and write blog posts.  The blogging emphasis is on 'follow that trade' posts.

Blog Posts

1) The primary posts will involve 'Follow That Trade' in which I initiate a trade (Members: please suggest trades at the appropriate time).  Then we follow the position – as often as necessary – with detailed analysis.  If I consider and reject an adjustment; when I make an adjustment; when I exit or plan an exit – each of those items gets described in a post. 

A trade plan with updates as needed – for each new trade.

In short, my decision-making process.  Questions and comments from members are encouraged.  Criticize, offer alternatives etc.

These trades are intended to be a learning experience, and are not trades specifically made to earn a profit.  I must repeat that the trades may not be as carefully chosen as one would when planning to earn money from the trade.  Some trades will be from my own portfolio (which will be disclosed when that happens), some will be in a paper-trading account, and some will be real trades from Members.

The plan is to follow 2-3 trades simultaneously, posting as needed.  If feasible, I'll follow a 4th trade.  But it's very important not to be swamped with too much diversification. If the market gets volatile, it's impossible to manage several trades (and write about each in detail) simultaneously.

2) Other posts on a variety of topics, just as I do here, at Options for Rookies.  But those posts will not be made available outside the Premium site.

Live Sessions

1) Question and answer sessions.  To begin, it's twice per month, one hour each. I'll offer more sessions if there is sufficient demand.

Sessions recorded for members who cannot attend.

Objective: For members to have access to ask questions, get immediate replies and have an opportunity to ask follow-up questions.  We will have to find the right format to allow the questioner to get a good reply plus allow time for as many people to speak as possible.

If questions cover too wide of a knowledge range, then I will offer beginner sessions and 'beyond beginner' sessions.  The idea is to find the right arrangement so that members get to ask their questions. 

I will always reply to written questions.  Members will be pleased with written replies, but the immediacy of live answers is lost.

 

2) Seminars.  These are very similar to the Q and A sessions.  The difference is that this time, I'll take a question or topic from someone in the 'room' and try to talk about that for about 30 minutes.  Audience participation and questions always welcome.

Sessions recorded for members.

 

3) Webinars.  No specific schedule.  I do not expect these to occur frequently.  These are prepared in advance and require a lot of time.  I'd prefer to devote that time to live sessions with members.

 

Discounts

Everything from Expiring Monthly, to my e-books and private consultation is offered at a discount. 

Non-members pay 50% higher tuition for courses.

 

Courses: Additional fee required

Some courses may be offered live, but most will be pre-recorded.

I hope to have one or two courses ready by the planned launch of March 1.

Shortest course will be a single 2-hour class.

Longest course: I'd guess it to be 10 to 12 sessions of about one hour each.

The only significant difference between a live and prerecorded class is the ability to receive immediate replies to questions and the possibility of adding a follow-up question

Each course has it's own question/comments page and I'll answer such questions as quickly as possible

You may take the lessons at your own convenience. If you prefer, you may repeat any class before moving on.  

As long as you remain a member, you may re-take each class as often as you want to do so.

If your membership lapses, so does your access to the recorded classes.

 

This site is intended to be for rookies, but that covers a wide territory.  Newbies to options are welcome, as is anyone who has been trading for a few years.  If enough more experience traders ask to join, I'll plan content for them as quickly as possible after launch.

I suspect more material will be added per member request, but this is an outline of what I will offer at the beginning. 

This is a different approach.  Most experienced traders who offer access, do so with individual mentoring (and of course that must be more costly).

There will also be a pre-launch special price for the month of March.  It's too soon to talk about those details at this point.

I'm currently working on building the web site/blog.

 

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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.

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What Other Bloggers are Saying

 

Register (free) forTradeKing Webinar: Adjusting Iron Condors

Oct 12, 2010;  5 PM (ET)

 


I've often mentioned that I avoid trading near-term options, especially as expiration draws near.  My primary reason:  Negative gamma increases, and that's more risk than I want to accept.

If you are interested in a bit more detail as to why this phenomenon occurs, Jared at CondorOptions and Steven at Investing With Options recently disucssed how time to expiration affects delta (charm) and gamma (color).

If those terms: charm and color are unfamiliar, Wikipedia offers definitions for readers who want a more mathematical description.  Charm and color are among the less well-known Greeks.  They are not Greek letters, but are considered to be options "Greeks."

Charm or delta decay, measures the instantaneous rate of change of delta over the passage of time.  Charm can be an important Greek to measure/monitor when delta-hedging a position over a weekend. Charm is a second-order derivative of the option value, once to price and once to time. It is also then the (negative) derivative of theta with respect to the underlying's price.

Color or gamma decay  measures the rate of change of gamma over the passage of time. Color is a third-order derivative of the option value, twice to underlying asset price and once to time. Color can be an important sensitivity to monitor when maintaining a gamma-hedged portfolio as it can help the trader to anticipate the effectiveness of the hedge as time passes.

***

Jared concludes: "Delta decay is of particular interest to traders holding ATM or OTM options near expiration, especially when those options are serving as portfolio hedges."

Steve puts it this way: "So we know that gamma increases in magnitude over time. This is known as charm. So if you are selling puts with 5 weeks left, you will have less overall “heartburn” than if you sell puts with 5 days left. The tradeoff is less theta, but that’s for another post."

 

For more detail refer to these posts.  I understand that this is the Options for Rookies blog.  If the idea of charm and color feel too advanced, all you really have to know is that gamma increases as expiration approaches, and that holding short option positions into expiration comes with extra risk.  I know you have heard that idea before.

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Open a TradeKing account today

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Options Crossword Puzzle

Something different today.

If you are are crossword fanatic, this puzzle will not please you.  It's not symmetrical and has many other flaws.

To compensate, there are prizes.

Rules

It's best to print the puzzle, fill it in, copy, and send via e-mail.

If that's impossible, send a list of correct words, in numerical order, across first, then down.


1) First correct entry wins a one year subscription to Expiring Monthly, a $99 value.  To learn more about the magazine, visit this page.

2) For those who don't see this blog early in the day, I'll offer the same prize to every 25th entry (note that's the 25th, 50th etc. entry, not just correct solutions), if that entry has the correct solution.

3) One entry per person.

4) Submission deadline: Aug 19, 2010 5AM Eastern Time (USA)

5) To enter, send e-mail to:   contest (at) mdwoptions (dot) com.

Please do not send to any other e-mail address.

Have fun.

 

 

Puzzle_#1_100816
Puzzle_#1_Clues

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Expiring Monthly: Gifts for Subscribers

As you know I'm working with four other option bloggers to publish Expiring Monthly: The Option Traders Journal.  Our plan is to bring you the finest collection of option related content each month  The premiere issue is ready for publication one week from today: March 22, 2010.

To celebrate the launch, and to encourage those of you who are undecided about subscribing ($99/year) to make a final decision, we are offering gifts to randomly selected new subscribers.

To be eligible for the random draw, subscribe this week, Monday Mar 15, through Monday March 22, 2010.

We are not ignoring current subscribers.  We have a group of prizes set aside for you.  There's no need to take any action.  You are entered into the random drawing.

***

Among the offerings:

Autographed (Adam Warner) copy: Options Volatility Trading: Strategies for Profiting from Market Swings 


Autographed (Mark Wolfinger) copy: The Rookie's Guide to Options: The Beginner's Handbook of Trading Equity Options 


Mentoring session with Mark Sebastian


The Complete Guide to Option Strategies: Advanced and Basic Strategies on Stocks, ETFs, Indexes and Stock Index Futures by Michael D Mullaney


The Option Trader Handbook: Strategies and Trade Adjustments  2nd ed; George Jabbour and Phil Budwick


2 weeks subscription to the Condor Options newsletter (Jared Woodard)


My new eBook: Lessons of a Lifetime


Understanding Options
by Michael Sincere


Autographed (Mark Wolfinger) copy: Create Your Own Hedge Fund: Increase Profits and Reduce Risks with ETFs and Options

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One week from today, is the launch of Expiring Monthly
It's the electronic options magazine that's all options all the time. 
Lovingly created by five options bloggers (disclosure: that includes
me), a one year subscription is $99.  That's twelve monthly issues. Subscribe this week and you'll be entered into the random draw for gifts.

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How Kite Spreads can Become Embedded Back Spreads

James and I have had a back and forth discussion regarding whether certain positions are back spreads.  The discussion began here and there's an interesting aspect that's worth consideration:

How can a kite spread – in which you own a limited number of long options (on top) turn into a position with back spread properties?

First, some definitions:

a) A kite spread is generally purchased as insurance when an iron condor or credit spread threatens to move into the money.  It's either a bullish position using calls, or a bearish position using puts.  It's constructed by buying one option (the kite string) and selling (usually) 3 or 4 farther OTM vertical spreads (the kite sail).  A more detailed description is available.

b) 'On top' means closer to the money.  It's a call option with a lower strike  than the options being protected.  Or it's a put option with a higher strike than the options it is protecting.

Example:  Please note:  These are randomly selected fictional trades, generated today, with RUT @ 675.  I don't have prices for these 'old' trades. The discussion involves the appearance of the portfolio, how it came to be constructed and says nothing about profitability.

Assume you sold 20 call spreads:  RUT Apr 650/660 when RUT was trading below 600. 

As RUT moved above 620, you became concerned about the position and decided to make an early adjustment (a Stage I adjustment). The trade you chose was to buy 2 RUT Apr 640; 670/680 kites [This is the C4 variety]

Adjustment I:

Buy 2 Apr 640 calls

Sell 8 Apr 670 calls

Buy 8 Apr 680 calls

You now own 2 Apr 640 calls and are short a total of 28 call spreads

The market continues to move higher, and when RUT passes 635, you are very uncomfortable with your position.  It's time (you decide) to get out of some of those 650 calls.  The simplest trade is to buy back a few of the Apr 650/660 [typo corrected] call spreads, but you decide to buy kite spreads instead.

You buy 5 Apr 650; 670/680 C3 kites.

Adjustment II:

Buy 5 Apr 650 calls (to close)

Sell 15 Apr 670 calls

Buy 15 Apr 680 calls

Comment:  Increasing position size is usually a poor choice.  The reason it's acceptable with a kite spread is that the adjustment trade (as a stand-alone position) adds no additional risk to the upside, other than the debit incurred when placing the trade.  It does provide plenty of upside profit potential when RUT is not near 680 at expiration.

When RUT moves past 640, one reasonable trade is to sell the 640/650 C spread.  This feels counterintuitive, especially when the upside is where risk lies and making the upside worse doesn't feel right.  But if you sell this spread between $6 and $6.50, the maximum loss is only $350 to $400 per spread and it does make the down side better.

The true rationale for selling the call spread is to use the proceeds to buy more kites, reducing my short position on the 650 line.

Adjustment III

Sell Apr 640/650 spread 2 times

Buy 3 more Apr 650; 670/680 kite spreads


The position now looks like this: [with errors corrected]

– 10 Apr 650 calls

+20 Apr 660 calls

-32 Apr 670 calls

+32 Apr 680 calls

James calls this a back spread and I'd prefer to describe this position as one that contains a back spread within.  The characteristic that gives this backspread-like properties is the fact that the extra long options are no longer 'on top.'  The long option is the April 660 call.

To completely eliminate backspread characteristics, there are alternatives:

a) Buy 5 Apr 650; 670/680 C3 kite spreads.  My preferred choice

c) Buy 5 Apr 650/660 C spreads. Perhaps sell one extra Apr 660 call to offset the cost cost, but only if the risk graph and your comfort zone allow that trade.  I see no good reason to make this trade

c) There is no necessity to make these trades, but if looking at the 'backspread' portion of the position is uncomfortable (too much negative theta), you can take steps to alter the position

That's how kite spreads can turn into positions that resemble back spreads.  And the process continues.  With RUT currently trading near 675, it's likely that anyone holding this position would have repurchased many of the 670 calls as part of a kite that sold more 690/700 spreads.

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Coming Monday: Special Promotion for new subscribers to Expiring Monthly:

Thank you gifts from us to you.  We'll be giving away, books, a mentoring session, and a trial newsletter subscription.  Still looking for more gifts.

Complete details available Monday March 15, 2010




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The Internet and Bad Information

While surfing, looking for interesting topics that are worthy of a blog post, I found these gems:

1) Which are the riskless strategies in options trading?  One that
will give money in any market condition.


2) Q: Which strategy gives the best profits?

    A: Any strategy that has unlimited upside profit potential e.g. Long
Straddle, which allows for unlimited profit if the stock trades up or
down.

***

I don't believe there is any question that should go unanswered.  If something is troubling you as an investor, it's a good idea to seek a reply.  But it's important to have confidence that the reply is correct and provides useful – and not dangerous – information.

Look at that first question.  This was not the query of a sophisticated arbitrageur, looking for ways to eke out a penny or two per trade – and then do that trade thousands of times.

This was a novice, asking for a method that will 'give' a profit in all market conditions.

I understand the need to know the answer to that question, but does anyone – anyone at all – really believe that if you use options you can have no risk with a guarantee that someone will 'give' you money?  Surely no one can be that naive.

The blogger who allowed this question to remain on the blog failed to offer a reply.  It would have been an easy matter to say: There are none.

Question 2 is in a similar vein.  The big question is what does the 'best profits' mean?  Is it the chance to earn a gigantic return on an investment, regardless of risk?  Or does it mean the best risk-adjusted return?  

Successful traders understand that one does not just measure profits.  The risk required to go after those potential profits must be considered.  Regardless of the question, the answer is pitiful.  Imagine telling a novice that the 'best profits' come from buying straddles.  That's irresponsible.  If I had to take sides, I'd say that buying straddles is a quick path to the poorhouse (not that I recommend selling straddles – that's also risky).

The bottom line is that there is plenty of information available on the wondrous Internet.  But the surfer must not believe everything that he/she reads.

At Options for Rookies, I sincerely try to give reasonable, and accurate, replies to all questions.

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Unsolicited from Jesse: Just would like to let you know that I really enjoy reading your Book, it's very down-to-earth and practical.

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