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

4 Responses to Track that Trade

  1. Ed Hwong 02/11/2011 at 5:29 PM #

    Thank you, Mark, for such a detailed clarification. Your views on education and _not_ recommending trade tips has been pretty clear from the short time I’ve been following your blog, and is one of the attractive things about your whole site that adds to your credibility. To clarify, I was not looking for trade tips, but I do find it educational to understand the criteria and the process of any trader at all phases of the process–similar to how you mentioned that it would be educational to see one viewpoint (yours) in the adjustment/risk management phases, I thought it would also be very educational to see the process in the pre-screen phase. In any case, I look forward to the Premium launch and participating. Best regards, Ed.

    • Mark D Wolfinger 02/12/2011 at 8:21 AM #

      Thanks Ed,

      That post was not ready for publication and contained a bunch of grammatical errors. It represented my notes.
      However it’s now out there and there’s noting I can do about that – except for making some edits.

      Thanks for understanding. I’ll offer as much of the trade process as possible. However, that will begin with the entry. You are of course correct that pre-screening is an essential part of the process, but because I look at that as ‘technical analysis’ and not the actual trading of options, it’s not something I can attempt to do.

      Pre-screening stocks is not something I do. In fact, except for a single recent earnings play, I have not followed any stocks for a long time. I’m an index trader because it works for me and my busy schedule.

      Regards

  2. Kamal 02/14/2011 at 12:57 AM #

    Hi Mark,
    I am a regular reader of your this blog, and I find it very very interesting & educating. I am curious to know more about the proposed Premium bolg; Is it already operational? Where do I get to know the pricing details please?

    Kamal