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VXX Calls - 14 May ExpiryThis is the second part of my May trade and I attempt to break up my holdings. VXX is based on the volatility index and is an inverse reflection of the S&P500. Currently, the market is pretty bullish and I expect it to continue at least for the next month. My strategy is to not go for the high-risk, high-reward trades. But steady high probably trades that I can compound on. My 20k loss in Feb, showed me that for my strategy, its better to cut my losses fast and small if I get a hint that things are not panning out. As a small loss is easier and faster to gain back especially since I structure my trades monthly. A huge loss just means more months required to paying back... My strike is also pretty far away and should be well padded. Sold 130 Calls @ 0.25 Strike 17 BP Block: 37K Max Gain: Est $3,250 % Distance to Strike: 74% ATR is also low which means volatility is pretty passive
CBOE:VXX
by Ronin_trader
5
VXX Sold Calls - 11 June & 18 June ExpiryVXX is based on the volatility index and is an inverse reflection of the S&P500 . Currently, the market has returned to it's bullish move especially after the bearish spike from inflation. The US economy also seems to be strengthening. My big worry is if the IN variant hits the US and if it will have an impact on the market. There are also good S/R lines to resist potential upside movement Sold 50 Calls @ 1.4 Strike 65 - Expiry 11 June Sold 50 Calls @ 1.25 Strike 67 - Expiry 18 June BP Block: 50K Max Gain: Est $5285.76 % Distance to Strike 65: 65% % Distance to Strike 67: 70%
CBOE:VXXShort
by Ronin_trader
Japanese Yen futures short call verticalPure TA. Oversold territory, so take care of the trendline. Max profit: $213 Probability of Profit: 72% Profit Target relative to my Buying Power: 20% Max loss with my risk management: ~$250 Req. Buy Power: $1038 (max loss without management at expiry, no way to let this happen!) Tasty IVR: 34 (average at futures) Expiry: 36 days Sell 2 !6JM1 Jun4' 0.0093 Call Buy 2 !6JM1 Jun4' 0.00935 Call Credit Call spread for 0.90cr each Stop/my risk management : Closing immediately if daily candle is closing BELOW the box, max loss in my calculations in this case could be 250$. Probability of loss in this way: ~20% . Take profit strategy: 50% of max.profit in this case with auto sell order at 0.45db. Probability of profit this way: ~80%. Of course I'll not wait until expiry in any case! If you liked this article, check my other ideas. Anyway: HIT THE LIKE BUTTON BELOW , and for fresh option ideas FOLLOW ME( @mrAnonymCrypto ) on tradingview !
CME:6J1!Short
by TanukiTrade
Options vs Stocks: Which Is Better?If you are wondering whether to trade options vs stocks, then this article is for you. There’s no simple answer to that question because it depends on how much money you have and your risk tolerance level. This blog post will cover the 7 topics that you need to know to answer the question “Is Options Trading Better Than Stocks?” 1. What Is The Difference Between Buying Stocks and Buying Options? Let’s keep it simple: When you buy a stock, then you own a share of the company and get paid dividends. Buying options, on the other hand, means that you only have the right to buy or sell a stock at a specific price before the option expires. But you don’t own the stock (yet). As you will see in a few moments, options trading requires much less capital than buying a stock, and therefore it’s very attractive. But it can also very confusing. My goal is to make it simple for you. Let’s start with an example: 2. Which Is Better: To Buy A Call Option On A Stock Or To Buy A Stock? Let’s use Apple (AAPL) as an example. Right now, the market price (at the time of this writing on May 6th, 2021) of AAPL is 128.70. Let’s assume, you are bullish on Apple and expect AAPL to go higher. So you could buy 100 shares of AAPL, but this would come with a high price: 100 shares * 128.70 per share = $12,870 If you have a small account, this might be too high of an investment. The good news: You can trade options instead. When you buy a CALL option, you have the right to buy 100 shares of AAPL at a set price (the strike price) on or before the expiration date of the option. You could buy a call option that expires on June 18th. Today is May 6th, so you have 43 days before this option expires worthless The price of the option is $3.75. Options come in “100 packs”, so your investment to buy this call option is only $3.75 * 100 = $375 Why Buy Options Instead Of Stocks? First of all, it’s much cheaper: Compared to the investment of 12,807 to buy 100 shares, that’s only 3% of the money that’s required. And because of that, options more profitable than stocks. Let me explain: 3. Are Options More Profitable Than Stocks? Since you are bullish on AAPL, you expect the stock to go up. Let’s say that over the next few weeks, the stock goes to 140: Let’s take a look at the profits from your stocks first: You bought 100 shares of AAPL at a price of $128.70 per share. Now each share is worth $140. So your profit is 140–128.70 = 11.30 per share * 100 shares = 1,130. Based on your investment of $12,870, that’s 8.8% Return on Investment (ROI). That’s not bad, but let’s take a look at the call option: How Are Options More Profitable Than Stocks? The call option that you bought gives you the right to BUY 100 shares of AAPL for $130 before June 18th. So if AAPL shares move up to $140, you can buy 100 shares of AAPL at $130 and sell them immediately at $140. This means that your profit per share is 140–130 = 10. And since you are trading 100 shares, your profit would be $1,000. But keep in mind: You paid $375 for the right to do this, so you need to subtract this from your profits: 1000–375 = 625. Your total profit is $625. Doesn’t sound much, but based on your $375 investment, that’s 167% return on investment (ROI). In summary: You made more money in terms of absolute dollars on the stock ($1,130 vs. $625), but the money you needed to make this profit was much less: $375 vs. $12,870. And that’s why your ROI is 167% when trading the option vs 8.8% when trading the stock — even though the stock price is exactly the same. Pretty cool, huh? 4. How Much Money Do You Need For Options Trading? As you can see from the previous example, you need MUCH less money when trading options vs trading stocks. When trading options, you can get started with as little as $2,000. Check with your broker about the minimum requirements to open an options trading account. So if you have a smaller account, trading options might be much better for you than stock trading. 5. Can You Lose Money Trading Options? Let’s talk about the risks of options trading, specifically the question “Can you lose money trading options?” The answer: YES, of course! In the example above, you could lose the premium you paid for the option, i.e. $375, if the stock price does not move above the strike price of $130. If AAPL remains below $130 until the expiration date of June 18th, your option expires worthless. And here’s why: With a call option, you have the right to BUY 100 shares of AAPL for $130. If AAPL is trading below $130, let’s say at $128, you don’t want to exercise your right to buy AAPL at $130. Because then you would pay MORE for the stock than you would if you bought it right away. Making sense? So if AAPL stays below $130 until expiration, your option expires worthless and you lose the premium you paid for the right to buy the stock. Can You Lose More Than You Invest In Options? When you are BUYING options, you can not lose more than the premium that you pay when buying options. So that’s good. However, when you are SELLING options, that’s a different story, and we will cover that later. So in summary: When BUYING options, the maximum amount that you could lose is the premium you pay when buying the option. 6. What Are The Risks Of Options Trading? YES, there are risks when trading options: a) Selling Options Can Be Dangerous. As you have seen, when BUYING options your risk is limited to the premium you pay when buying the option. However, as a seller, there’s a lot more risk. In some cases, you can have UNLIMITED risk. We will cover this in detail in a later article. b) Buying Out Of The Money Options. Risky before the probabilities are low. c) Know What You’re Doing When trading options, there are a few more things to consider: Call options vs put options Strike Prices Expiration Dates … and then there are also these pesky “Greeks” like delta, gamma, theta, rho, etc. And when you have more things to consider, there are more possibilities to make mistakes. So make sure that you understand all these factors before you start trading options. We will talk about “The Greeks” later. Are Options Riskier Than Stocks? YES. Because it’s easier to lose ALL of your investment. Let’s continue our example from above: Trading Stocks You bought AAPL at $128.70 per share. If AAPL drops to $125, then you would lose $3.70 per share, or $370 for 100 shares. Based on your initial investment, that’s only 2.9% Trading Options You bought the 130 Call Option for $3.75. If AAPL doesn’t move above 130, you lose ALL of your investment, i.e. 100%. Yes, the investment is much lower, but instead of losing 2.9% as you would when trading stocks, you would lose 100%. Selling Options And when selling options, you can lose A LOT of money. Selling options can be very profitable. In fact, I made more than $75,000 in less than 5 months selling options… … BUT it’s also very risky. Compare options vs stocks like riding a bicycle and riding a motorcycle: Riding a motorcycle gets you to your destination quicker. And it can be more fun. But it’s also much riskier than riding a bicycle. 7. Can You Really Make Money Trading Options? Absolutely! There are many advantages to trading options, and it is possible to make money with options. Is there a safe way to trade options? You need to know what you are doing, and you need to have a solid trading strategy. Find a strategy that you understand and then practice it on a simulator. And when you are ready, start making money with it. Can Option Trading make you rich? When trading options, you will often see returns of 167%, 200% or even 300%. Therefore, it’s easy to believe that options trading can make you rich. But keep in mind: With these high returns, comes high risk. Yes, you can make 200% or 300% when trading options. And you can lose ALL your investment, as you have seen above. Don’t think of options trading as a “get-rich-quick-scheme”. But when used correctly, options trading is perfect to grow a small account into a bigger one. Summary: Should I Trade Options YES! Should I trade stocks or options? Why not do both? Best of both worlds! Is options trading worth it? YES! It can be very rewarding! As we just covered with trading options, there are many, many advantages. If you are not trading options yet, I highly recommend that you start looking into them.
NASDAQ:AAPLEducation
by rockwelltrading
1
CLOV SHORT PUT VERTICALStrike below 0.618 FIB, and oversold divergence. Max profit: $135 Probability of Profit: 68% Profit Target relative to my Buying Power: 29% Max loss with my risk management: ~$130 Req. Buy Power: $465 (max loss without management at expiry, no way to let this happen!) Tasty IVR: 66 Expiry: 50 days Sell 3 CLOV Jun18' 8 Put Buy 3 CLOV Jun18' 6 Put Credit Put spread for 0.45cr each, because IVR is relative high. Stop/my risk management : Closing immediately if daily candle is closing BELOW the box, max loss in my calculations in this case could be 130$. Probability of loss in this way: ~20% . Take profit strategy: 50% of max.profit in this case with auto sell order at 0.23db. Probability of profit this way: ~80%. Of course I'll not wait until expiry in any case! If you liked this article, check my other ideas. Anyway: HIT THE LIKE BUTTON BELOW , and for fresh option ideas FOLLOW ME( @mrAnonymCrypto ) on tradingview !
NASDAQ:CLOVLong
by TanukiTrade
When To Sit On Your Hands When TradingNow, as you know, I like to use the PowerX Optimizer to find the best trades according to the PowerX strategy, along with The Wheel Strategy. So here’s my morning routine. Usually, I’m in front of the computer at 8 a.m. Central Time. That is 30 minutes before the US markets open. I run the scanner on PowerX Optimizer, and it finds possible trades based on my criteria. My Criteria For Finding Stocks My criteria, for starters, is I like to look for long and short signals because I like to play the markets both ways. I want to see at least a 60% return on my investment. I also want to see stocks that have a closing price between $5 and $250, because I don’t like to trade stocks that are below $5. I want to see a profit factor that is higher than 3. This means that for every dollar that I would have lost trading the strategy, I would have made $3. I also want a risk-reward ratio of at least 2%. Usually, there are anywhere between 4 & 8 stocks that come up on my scanner every day. I use three criteria to find A-plus trades. So here’s what I’m looking for. Number one, I’m looking for gappiness. I look back to see if the stock had a lot of gaps over the past year. I look back over the past 13 months. Number two, I’m looking for is trendability. What does trendability mean? It means that I want to see nice trends to the upside and the downside. And the last thing, number three, is I’m looking at the P&L chart. What does the P&L chart mean? Now, this is one of the strengths of the PowerX Optimizer software, and this is why I use it every single day. The P&L chart basically shows you what would have happened if I had traded this stock according to the rules of the PowerX strategy over the past year. So I can take a look at the trading report where I see for the past few trades, what I would have made in profits & losses. When To Sit On Your Hands Anyhow, this morning (at the time of this writing) I just saw EVRI on my scanner and it passed MOST of my criteria. First of all, it did pass all my scanner criteria, otherwise, it wouldn’t have come up here. Also, it did pass 2 out of my 3 criteria in terms of gappiness and trendability. But when it came to the P&L chart, it didn’t meet my criteria. So this is where this morning I did the most difficult thing for a trader. I was sitting on my hands. You see, at the beginning of my trading career, I had this little voice in my head and this little voice in my head said, “If you don’t trade, you don’t make any money.” Well after I forced some trades, I realized, well, if you don’t trade, you also don’t lose any money. This is why it’s so important. In the beginning when I got a new tool, or when I had a new trading strategy, I wanted to trade it. All I wanted to do was trade. However, when there’s nothing to trade, DON’T TRADE. This is why I use the PowerX Optimizer. It a fantastic job of keeping you out of trouble. So now, as you know, I am trading two strategies. In addition to trading the PowerX strategy, I’m also trading the Wheel. So also for the Wheel, I started looking for trades. Let me show you what I was looking for this morning. One of the trades that I thought, ahh you know what, this might actually be a decent trade was Marriott, (MAR), but when I looked, however, there wasn’t enough premium in there to sell according to the Wheel. I looked at another stock that came up on my radar this morning, which was (PENN). There was some great premium in there but PENN sounded rather risky. You see, for me, it is very, very important that I have a great track record. Now at the beginning of my trading career, I would have forced these trades. I would have said, “Oh my gosh, I cannot be done working after one hour,” because this is what happens sometimes in the morning. I sit down in front of the computer at 8 o’clock, which is half an hour before the open, and I run through the PowerX Optimizer, and don’t find anything. Now, one of the things that of course, I do every single day, is that I check my open positions, and in the PowerX Optimizer, I have my watch list. So first I look for new trades, and secondly, manage my existing trades. I don’t, however, need to overmanage my account when there are days where there is nothing to trade. What I used to do way back when I was still new to trading, and nothing would come up, I would adjust my criteria. I said, yeah, you know what? Instead of getting a 60% return on my investment, why don’t I lower it to 50%, or why don’t I lower the winning percentage to 35%. Maybe lower the volume to 200,000. I had to learn the hard way early in my career not to do this. Summary So anyhow, in summary, there will be days when you’re all excited, but you see, in order to make money with trading, two conditions have to be met. Number one, you have to be ready, and number two, the markets have to be ready. You may be ready but if the markets are not ready, you got to sit on your hands. The beautiful thing as traders, it’s not that today is the trading opportunity of a century. No, tomorrow there will be more trades, on Wednesday will be more trades, on Thursday. Every single day I’m running the scanner according to PowerX Optimizer and I will find more opportunities to trade. So today, one of the hardest lessons, and this is why I wanted to share it with you, sit on your hands. Anyhow, if you enjoyed this video, do me a favor and click on like so that more people will see it.
TVC:SPXEducation
by rockwelltrading
Long call vertical spread for Twitter 55% PoPFib 0.78 hit after event, trendline kissed 4 times: 4hr / 1hr TF in oversold territory Max profit: $500 Probability of Profit: 55% Profit Target relative to my Buying Power: 56% Max loss with my risk management: ~$200 Req. Buy Power: $882 (max loss without management at expiry, no way to let this happen!) Tasty IVR: 5.5 (relative low) Expiry: 46 days Buy 2 TWTR Jun18' 48 Call Sell 2 TWTR Jun18' 55 Call Debit Call spread for 4.41db each, because IVR is relative low. Stop/my risk management : Closing immediately if daily candle is closing BELOW the 52.5$ breakeven line, max loss in my calculations in this case could be 200$. Probability of loss in this way: ~25% . Take profit strategy: 60% of max.profit in this case with auto sell order at 6.1cr each. Probability of profit this way: ~75%. Of course I'll not wait until expiry in any case! If you liked this article, check my other ideas. Anyway: HIT THE LIKE BUTTON BELOW , and for fresh option ideas FOLLOW ME( @mrAnonymCrypto ) on tradingview !
NYSE:TWTRLong
by TanukiTrade
6
How Earnings Season Affects OptionsAs most of you are aware, it is earnings season. So today we’re going to talk about how earnings season can impact options trading, because, as you know, I trade options. Now, just a brief intro. Earnings season happens quarterly, meaning four times a year, and this is when corporations reveal their financial results for the previous quarter. Now, the results of a company’s earnings report can have a major impact on the stock price, and options will often price in the expectations for a big post-earnings move before the event. This is why it is likely that options premium are more expensive during this time. Implied Volatility One thing to know about this and how it can impact your trading is implied volatility. See, there several things that make up an options price, including the market’s expectation for future volatility, and that is called implied volatility. So why is this important? Well, as the buyer of an option, higher implied volatility means that you are paying more for your contract. So if you buy an option before earnings and hold through earnings, you put yourself at risk for a so-called volatility crash. Now, part of the reason implied volatility goes up so much ahead of earnings is because traders don’t know which way the stock is going to go or by how much. I mean, remember Netflix at the beginning of March? Who would have known that Netflix would soar 17%? But you see, once a company reports earnings, there is no more uncertainty, and this is when implied volatility drops, and in some cases, so does the options price. So if you bought an expensive option, there’s a chance that you have to sell it to close at a lower price even if a stock moves in the direction you want it to. And let me show you a very, very specific example of a volatility crash and why it is so important that you understand the concept of volatility and how it can impact your options trading. So I want to show you right here we see Seagate. Seagate reported earnings last week. And so here is the pre-earnings options data. The day before Seagate, STX, was trading at $61.45, and an At-The-Money call with a 61.50 strike price was going for the last traded price of $1.74, and the implied volatility was 128%. On the other hand, the put was going for $1.82 and the implied volatility was also 128%. Now, this was the day before earnings. Now let’s talk of what happened the day after earnings. So again, here Seagate was trading at $61.45 before earnings, but then the next day, Seagate dropped to $59.33. So it fell dramatically and therefore, and the price of the 61.50 call is only a penny. So it’s not surprising that the call is not worth anything, but here’s the key. Even though the stock fell quite substantially, the put only went from $1.82 to $2.51 so it went up because puts go up as the stock goes down. So this means that the put only went up to $0.70, $0.69 to be exact. You see this is how the volatility crash affects the option price, because even though the put is worth more now, and is now in the money, but it also lost a lot of value due to the decline in implied volatility. See, the previous day, it was 128%, this implied volatility, and the day after only 96%. So you have to factor this in when trading options into earnings. How Is Implied Volatility Measured? So let’s talk about this implied volatility thing and how is this measured, right? You know me, I’m all about practical stuff, so I don’t want to bore you with the math behind it and I don’t have to. The good news is that there are plenty of places online that calculate the implied volatility for you, and I want to show you exactly how you can see if the implied volatility, is high, low, or average. Here is the easiest way to do it. You compare the implied volatility to the stock’s historical volatility for exactly the same time frame. The implied volatility measures the market expectation for future price action. Now, the historical volatility measures the volatility for a stock that already occurred over a specific time frame. All you have to do to see if the implied volatility is high, low, or average compare it to the historical volatility. We can use the implied volatility of AAPL Apple’s Q1 earnings season. Apple was trading at 142. For an at-the-money call, expiring in four days, the implied volatility was 71%, and for the put was 70%. The historical volatility of Apple. And this is something that you’re charting software can show you, it makes sense to look at it in 10, 20, 30, 40 days increments. So if we were to look at the past 10 days, the historical volatility was 37%. But the call was trading at 71%. So what does it tell us? It tells us that the premium on this call, and also on the put, was running more expensive than usual. So now we can see, how this is affected by earnings. Now, let’s take a look at the implied volatility of an at-the-money Apple call from the same time that expired later out at, let’s say March 19th. So for calls expiring March 19th, you see right now the implied volatility is much, much, much lower at 43% for the call, and 43% as well for the put. The historical volatility over the past 60 days was 40.69%. Now compare this to the 43% and we see that it is pretty much in line here. So this means that the premium that was on these calls and puts on options that had 53 days until expiration was pretty much average. Why You Shouldn’t Sell Options Into Earnings Options traders are always talking about implied volatility and historical volatility, and now you know what it is. Now I want to tell you why I don’t sell options into earnings. I mean, even though the stock moves in the direction that you want to, your option premium is getting sucked out of there because of the volatility crash. You see, and this where, as an option seller, you might say, “don’t I want the premium to be as high as possible?” and yes, of course, you do. But let me make you very clear why I don’t sell options into earnings. If you have been following me for a while, you know that I love trading the Wheel, and as part of this strategy, we are selling options. Well you see, earnings plays are hit-and-miss. Sure, everybody can get lucky and most people who start trading expect their account to explode from one or two big trades. This is where we have some stocks that are jumping just dramatically. Looking at Intel, INTC over the last three earnings. Huge gap down right when we had earnings, then there was another earnings play, and Intel really crashed down hard again. Then also here during the last earnings season, initially, Intel went up but then started crashing down. You see, some people like these earnings plays because they believe the hype that they can make a lot of money with very little work involved, but see, trading just doesn’t work this way because, in reality, the key to becoming successful in trading is consistency and growing your account systematically. That’s what I mean when I talk about generating SRC profits, right? SRC is an acronym that stands for Systematic because I like to trade what I see and not what I think. This is why I use indicators and have a trading strategy that tells me when to trade, what to trade, when to enter and when to exit. The R stands for repeatable and by trading my plan, I’m able to find repeatable profit-making opportunities. The C in SRC profit stands for consistency. You see, I’d rather make slightly less money more often than biting off all my nails waiting for a big winner. As you know, part of my systematic approach to trading is to use The Wheel Strategy and the PowerX strategy. Now, especially with The Wheel strategy that, where I’m trading right now with you here, the idea is to get paid while you wait to buy the stock, and because I’m collecting premiums on the puts that I sell, I’m looking for stocks with higher volatility, right? This means making more money, and as a rule of thumb, I look for stocks with an IV, implied volatility, of at least 40%. The Wheel strategy can relatively safely produce profits, but I don’t recommend you to trade into earnings, at least that’s not what I do. So I will not target options with an expiration date that includes the company earnings report. I am trading options before we are running into earnings. So this is why I think it is very important that you know when trading options, whether it is buying or selling, that you don’t trade into earnings. At least that’s what I do because earnings are a wildcard and there’s just too much uncertainty. Remember, I’m not looking for fireworks here, I’m looking to systematically grow my account through consistent and repeatable strategies. Where To Check For Earnings Now, I want to give you two more resources, if you want to see for yourself who is reporting and when. These are two websites that are pretty cool that I personally use. So the first one here is “stock earnings.” If you go to stockearnings.com or they even have stocksearning.com, they will show you see the notable earnings that are coming up this week. Now, another one that many people like to use is earningswhispers.com. So that’s another great source for finding out when companies will report earnings because this way you can make sure that you’re not trading right into earnings. It’s always good to know when they report earnings if you have any open positions, whether you’re buying stocks or selling stocks so that you’re not caught off guard. So I hope that this helped you to see how earnings impact option prices and why I never sell options into earnings.
NASDAQ:INTCEducation
by rockwelltrading
Trading For A Living: How Much Money Do You Need?In this article, we’ll talk about how much money you need to trade for a living. I’ll share with you my three-step approach and give you an example from my trading account. “How much money do you need to trade for a living?” is one of the most frequently asked questions I get. “Can I start with $5,000 dollars, do I need $25,000 dollars, or maybe even more?” You see, this is a super important question. Now, here’s the deal. There’s no standard answer because making a living is different for everybody. Some traders can live on $5,000 a month. For others, trading for a living means making at least $15,000 a month. Let’s talk about step number one. How Much Do You Want To Make Each Month? Step number one is figuring out how much money you want to make per month. This is the first thing determining what your income goal should be, and it really depends on a few different factors. For example, what are your monthly expenses? How many dependents rely on your income? That’s different for every trader. Additionally, what income do you need to buy cool stuff like cars, boats, whatever it might be? These are just a few examples of what should be taken into account when you figure out how much income you need to generate every month. Now, as boring as this sounds, it definitely helps to make a budget. You don’t have to account for everything, but you should list your major expenses. So in your budget, there should be, for example, expenses for housing. In housing, you include your mortgage, your insurance, your taxes, and expenses for your house maintenance. The next thing to account for is transportation. Unless you’re using a helicopter, for most people this is a car payment or a lease. This also includes car insurance. The next major category is food. Food includes groceries and also restaurants. Now, the next major category is utilities such as gas, water, power, Internet, TV, phone insurance. Some of you also buy your own health and life insurance. You also need to consider any medical expenses like co-pays. The next one is a fun one, travel and entertainment. Where do you want to travel? How often do you want to travel? What else do you do for entertainment? You have to factor these activities in too. This next one is not so fun. This is of course the dreaded taxes we have to pay. Now you need to add all of this up and you will get to a number, which is the amount you need to make each much to cover your expenses. For me personally, this number is $15,000. So you know what my number is, and I’ll show you how I trade for a living so that I can make this $15,000. What Is The ROI of Your Trading Strategy? Now that we have figured out what your number is, it’s on to step number two: factoring in the return on investment, or ROI, of your trading strategy. I like to trade the PowerX Strategy, and I also like to trade The Wheel Strategy. These are my two favorite strategies, and for both strategies, I want to see at least 30 percent ROI based on my buying power. Let me explain what this means. As an example, let’s figure out 30 percent of my buying power. I’m trading a margin account and this means that I can borrow up to 100 percent of my cash from my broker. Let’s say I were to put $20,000 in cash in this account. $20,000 in cash into a margin account would give me $40,000 in buying power, so back to my ROI, the return on investment. I want to see at least 30 percent based on my buying power. So in this example here, if my buying power is $40,000 and we want to find out what 30% would be, we take 40,000 and multiply it by 0.30. This comes to 12,000, so this means that I want to make at least $12,000 per year with $40,000 in buying power in a margin account. To find the ROI based on the cash I put in, which is $20,000, we take the $12,000 (profit we would make with margin) and divide by $20,000 (cash I put in), this comes to 0.60, or 60 percent ROI based on cash. I know this sounds like a lot of numbers, but here’s the good news. This is the most complicated step. Now, I know that for some of you 30% sounds low, doesn’t it? I know that most traders would like to see 50% or more ROI, maybe even 100–200%. But you see for me, it’s more important to be able to generate SRC profits which stand for systematic, repeatable, and consistent. I’ll take 30% in SRC profits any day over 100% in irrational profits trading stocks like GameStop. For me, 30% is good enough to support my lifestyle, but hey, every trader is different, just make sure that you use YOUR number. By the way, if you don’t know your ROI yet, trade your strategy on a simulator first. After 40 trades on a simulator, you will get close to your strategy’s ROI. Determining Your Account Size Let’s move on to step number three because now things get exciting. So step number three is where you use a formula to determine your account size, and I want to give you the formula right now so that you can plug it in. Everything that I do is very, very systematic. Now you know how much income you must make every month, this was step number one. For step number two, you learned how to figure out how much ROI you can expect from your trading strategy. Here is a very simple formula that you can use to calculate how much you should have in your trading account so you can generate the amount of money every month that you determine. In order to determine the buying power you need in your trading account, all you need to do is take the desired annual income that you determined in step number one and divide it by the expected ROI that you determined in step number two. Let’s say that you want to make $10,000 per month. If you want to make $10,000 per month, that would be $120,000 per year. For some, this might be very realistic. So this is step one where you used a budget to figured this out. For step number two, say you’re using either the PowerX Strategy where you can easily make 30% a year, or you’re using The Wheel Strategy which can also help you to make 30% per year. You have determined that you can make 30% per year based on your buying power. Here’s how you would figure out how much buying power you need in your trading account. Your buying power should equal $120,000 desired annual income divided by 0.3 (30% ROI). This means that you need $400,000 in buying power in your account. Now, $400,000 in buying power would mean if you’re using a margin account, you only need $200,000 in cash. This might be more than you expected, and that’s okay. You can actually trade for growth in the beginning. I just want to show you what your goal needs to be if you have a smaller account right now so you know at what level you can actually start trading for income, and at what level you can quit your job. Have Realistic Expectations If right now you’re looking at this example here and you currently have $10,000 or $20,000 in your account, that is really good, but don’t quit your job just yet. I like to keep it real, right? With me, it’s real money, real trades, and also realistic expectations. Well, that is possible if you have a decent-sized account, but let me cover another example so you can see how simple the formula is, and how it works in action. The Numbers In Action So let’s say in step number one you determine, like I did, that you want to earn $15,000 per month, $180,000 per year. Now, again, we are assuming that we’re using The Wheel Strategy and the PowerX Strategy, which gives me 30% ROI per year. Here’s how I determine how much buying power I need to have in my account in order to make $15,000 a month consistently. Again, we take our desired annual income, which is $180,000, divided by 0.3. So that would be $600,000 in buying power. Now, $600,000 in buying power means that you need to have, if you’re using a margin account, $300,000. This is how this worked out for me. At the beginning of the year, on January 11th, 2021, I put $250,000 in cash into a margin account, and this gave me $500,000 in buying power. So $500,000 in buying power, and at the time of this writing on April 26, 2021, my profit thus far this year is $72,908 in REALIZED profits. This means that on average, over the past four months, I made $18,277 per month. Now, my goal was to make, as I told you earlier, $15,000 per month, which means my goal would have been to make $60,000 in a 4-month span. Since I’ve earned $72,908 over the past four months, this means I’m overachieving this goal. This is the important thing because the question is “how much money do I need to trade for a living?” Summary As you can see it’s quite easy to calculate the money that you need in your trading account to trade for a living. However, it is completely unrealistic to open an account with $5,000 and expect to trade for a living, unless making a living means making $125 per month. And I know that there are many people who tell you that you can start with $5,000, and then they do some magic math and tell you they can show you how to turn that $5,000 into a million dollars within a year. This just isn’t realistic. It’s probably not what you want to hear, but I know that this is what you need to hear. The good news is, if your account is not large enough yet to trade for a living, that’s absolutely fine. You can trade for growth and use money management to grow your account. The main difference when you’re trading for income vs trading for a living as I do is, every month I wire profits out of my trading account into my personal checking account. While you’re trading for growth, you keep all of the profits that you make and keep them in your trading account. If you’re still at a smaller account, that is absolutely fine, but now you know what level you need to get. If you’re here right now and you need to get there, then during this time you might need other sources of income. I wanted to do this article to show you a really simple formula so that you can determine how much money you need in your account to trade for a living. Remember, it is possible to make a living trading. It is possible, it is doable. Just have realistic expectations and a plan.
TVC:VIXEducation
by rockwelltrading
2
S&P UpdateS&P 500 Index. Target of 4210/4220 area still in sight. Nothing to add so I refer you to last weeks update, everything remains in place. Must be noted though, that momentum does seems to be fading. More during the week. Closed all option positions in the last half hour when selling got heavy, probably just profit taking ahead of the weekend, but maybe not. An important target was reached on the Nasdaq which I will post soon. Profited on long Call, lost on long Put, profited on both short Calls and Puts.
SP:SPX
by csmottola71
Emotions In Trading: Biggest Account KillerTrading is fun and every trader is happy when their trades move in the right direction, but when a trade goes against you, you will experience a lot of emotions: Fear, anxiety, regret, doubt, maybe anger… … and these emotions in trading can lead to some bad decisions that could kill your account. In this article, I’ll show you how to control your emotions in trading so that you become a more relaxed trader. 1. Recognize Your Emotions When trading, you WILL experience emotions. The main emotions are: Excitement Greed Fear Anger Frustration Let’s talk about these emotions and how to deal with them. Emotion #1: Excitement When trades are going in your favor, it’s natural for you to be excited. We all love to see “green” in the account, but here’s the problem with that: when trades are going in your favor, you may be too excited and take on more risk. I have seen this over and over again, especially when trading “The Wheel” options strategy. During the first few trades, traders are usually very careful. They do a great job in picking the right stocks, then they take a few good trades and their account is up nicely! All of a sudden, they get overconfident. It seems that the trading system can’t lose, and so they increase risk because “things always turn out for the best,” but that’s when trouble starts. You’re no longer looking for “the best” trades. You feel invincible and want to make as much money in a short amount of time as possible. You start trading with more & more risk, and start choosing stocks that you shouldn’t choose. Here are a few examples: TLRY, SPCE, WKHS, LABU The premium is attractive, and you thought: “I’ll be fine, and if not, I can fly a rescue mission like Markus usually does,” but then you get stuck in a trade, like some of you are. So please be careful when you experience excitement because it quickly leads to overconfidence, and the markets like to show overconfident traders who’s boss! Emotion #2: Greed Next on the list of emotions in trading is greed. Greed is okay as long as you don’t let it take over your trading. My P&L so far is $69,205 at the time of this writing: My goal is to make $15,000 per month, and thus far, I have made almost $70,000 in less than 4 months! I could get greedy now and say, “Why not $20,000 per month? Or $30,000?” But I am going to keep trading with discipline and make sure that my greed doesn’t get the best of me. Be humble! Be grateful for what the market gives you because if you are greedy and try to squeeze the last penny out of the markets, the markets WILL put you in your place! Emotion #3: Fear The next emotion on the list is fear. Fear is a natural human emotion that we all have. In trading, it’s easy to let fear take over because you can see your profits diminishing in front of your eyes! Here’s the problem with fear: it’s a very strong and powerful emotion that has the power to paralyze you, and cause you to have a bad day — a VERY bad day: You’re sitting in front of your computer all day staring at the “red” numbers — the unrealized losses. Your mind goes crazy because you’re already thinking about how bad your trading account will be when you realize all these losses. But what a difference a day can make. Have you ever realized how one day it looks bad, and the next day everything is green again? Here is what you should do when FEAR takes over: – Step away from the computer. Shut it down! Go outside. Do something else. – Take some deep breaths and relax. – Do not panic, this will cause you more harm than anything else! The market is always changing, it’s just out of our control; so instead of panicking, think about what we can control. Emotion #4: Anger Next on the list of emotions in trading is anger. It’s easy to get angry at the markets because it’s so unpredictable! You can never tell what is going on and when it will change. And why are there always losers? Dang, I should have bought 30 minutes ago… but now the price has gone up again?! Happened to me yesterday: Every single trade that I entered was timed wrong. I could have gotten a much better fill 30 min later! But: anger does not get us anywhere. Anger leads to revenge trading, which can lead to catastrophic losses. Keep in mind: Markets don’t know who you are. Markets don’t care who you are. Markets don’t know if you are in a winning or losing trade. Markets don’t care if you try to push them around. If you try to fight the markets, you’ll lose. It’s important not to let anger dictate your trades! Emotion #5: Frustration The last emotion on our list is frustration. It’s easy to get frustrated with trading for the same reasons that I just mentioned: You can never tell what is going on and when it will change. And why are there always losers? Dang, I should have bought 30 minutes ago… but now the price has gone up again?! Some people react to these events with anger, others with frustration. Frustration can lead to impulsive trading, and that’s not a good thing. The best way to deal with frustration is to take some time out from the markets for a few hours or even days until your head clears up. 2. Understand The Effect of Emotions While Trading In a moment, I’ll share a technique with you on how to control these emotions but let’s first talk about the effect of emotions on your trading. It’s ok to have feelings. It’s ok to feel these emotions — these are HUMAN emotions. The problems start when you ACT on these emotions while trading. As you have seen, each of these emotions is causing a reaction, and none of them is good. Emotions cause irrational behavior… … which leads to impulsive decisions, … which leads to and bad trades, … that often leads to losses or drawdowns. Emotions in trading can be the number one account killer, so you MUST be able to control them. 3. Control Your Emotions By using THIS technique I have been trading for 20 years, and I still feel these emotions. They say you shouldn’t have any emotions while trading, and based on my experience, that’s not possible! The important thing is to make sure that you don’t ACT on your emotions. So how can you control your emotions? Stephen Covey said it best in his book “The 7 Habits of Highly Effective People”: Focus on what you CAN control, and don’t worry about what you can’t control. And if you think about it, there are only 2 things you CAN control: Your Thoughts Your Actions You can’t control what the markets are doing, you can’t control whether Hindenburg Research is releasing a report on a company you’re in, you can’t control when a big hedge fund gets in trouble and has to dump a bunch of positions, but you can choose how you react. Let me give you a personal example: As you know, I am in RIDE . And the position is MASSIVELY going against me. I could be angry at short-sellers, especially Hindenburg Research. I could be frustrated with Lordstowns PR efforts, which suck. I could look at my unrealized loss every day and fear “What will happen it Lordstown doesn’t recover?” I could have a lot of negative emotions around it, and NOTHING would change — other than me getting bitter, and maybe even depressed. So I keep following my plan, which is selling more premium. This week, I will make $1,050 on RIDE , no matter what the price is doing. If it goes up, good. If it goes down… oh well, I can’t change that. I just know THIS: I won’t let emotions dictate my day, and I won’t let emotions dictate my trading. I believe the Serenity Prayer says it best: “God, grant me the serenity to accept the things I cannot change, courage to change the things I can, and wisdom to know the difference.“
TVC:NDQEducation
by rockwelltrading
Unusual Options Volume SKLZ $20 APR 30 Call SKLZ earnings date is May 04 2021 Earnings run up and break of down trend. Stock moved with increasing volume today. Possible break of trend into run up for the earnings with good possible upside if it holds at current levels. April $20 Calls Lots of volume today 9,000+ contracts traded. Heavy open interest on May 21 $20 thru $35 strike calls indicating more up side. Consider 21 May options calls above 21.50. Down trend channel break $18.11 Trigger $21.50 Target 23.50, 24.57 resistance, stretch target 27.50 Wide SL close below $17.00 Close contract before ER to be on the safe side.
NYSE:SKLZLong
by marketaction_live
3 Tips That Turned My Trading AroundHow did I get here? To moving from Germany in 2002 to the United States, and came here with $30,000 in my pocket. I put $20,000 in my trading account, and I put away $10,000 for a living. It wasn’t easy in the beginning. It was quite challenging. Now things are different. I mean, thus far in the first four weeks of 2021, I already made more money than I was able to put into my trading account in the very beginning. I know if you are there in the beginning right now, you may have $10,000, $20,000, or maybe even only $5,000 or less to get started. How do YOU get started? This is what I want to focus on in this article. You see, I’ve been trading for a long time and there are a lot of things that I’ve learned the hard way over the years, and I want to go over three very specific things that helped me to become a much better trader. Don’t Focus On The Outcome Of Just ONE Trade The first thing here is don’t focus on the outcome of one trade. You see, at the beginning of my trading career, I was really stuck on looking at what happens with just one trade, or what happened on just one particular day, but it is so important that you keep the longer range in perspective here. Trading is a marathon, not a sprint. One of the few certainties in trading is that there will be losing trades no matter how good you are, but instead of beating yourself up about the P&L (profit and loss) of one specific trade, keep your eyes on the bigger picture. For example, I woke up one day, and I saw my account was down $12,000 and it actually got worse over the day getting as low as $17,000. Now I could have chosen to panic and focus on the red, but you see, this is why I say trading is a marathon and not a sprint. You need to focus on the broader performance over the course of a few days, a few weeks, or even a few months. Usually when you look at your account and you look at the P&L, what are your eyes usually drawn to? The red, right? You will focus on the one trade that is not working out in your favor. I can relate to this because I was just like this in the beginning. Think about it this way, your hand has five fingers. If you take a hammer and you smash on one of the fingers, you focus on the finger that hurts, and not on the other four that are fine. It’s human nature to focus on the bad stuff. But you see, when you do this, you’re losing sight of all the other good trades and also how you’re doing over the course of the year. This is super, super important, and you see, one of the keys to my success in trading is consistency and growing my account systematically. I do this through SRC profits. SRC is an acronym. The S stands for systematic. I like to trade what I see and not what I think. This is why use indicators and have a trading strategy that tells me what to trade when to enter, and when to exit. The R in SRC profit stands for repeatable, by trading my plan. By trading and following my plan, I’m able to find repeatable, profit-making opportunities. The C in SRC profits stands for consistency. You see, I’d rather make slightly less money more often than bite off all my nails waiting for the big winner. So focus on SRC profits. Systematic, repeatable, and consistent. So remember, it is more important to focus on this than on one trade, right? We will have losing trades and it’s unavoidable. Don’t Trade On Emotions The second thing to remember is, don’t trade on emotions. When you’re trading with your hard-earned cash, there’s certain to be emotions involved. When trading there are two main emotions to deal with: fear and greed. So as traders, we fear that we’ll have a loss, and lose money. There are actually two ways to control this fear. Number one, you want to keep your losses small. While losses are part of the business, if you keep them small you won’t be afraid of them. So I like to use, as a rule of thumb here, the 2% rule. The 2% rule means you never risk more than 2% of your account on any given trade. Think about it, if you have a $10,000 account, this translates into risking $200 per trade. Let me ask you this. If you have $10,000 in your account and you’re risking $200, are you afraid of losses? Probably not, right? If you lose $200, it doesn’t wipe out your account. You can live to fight another day. Now, number two is don’t trade with money you can’t afford to lose. I know you might have heard this before, but I just want to tell you a story from when I started. In the beginning, I scraped together $8,000 to start trading. This is before I moved to the U.S. and got serious about trading, and trust me, I could not afford to lose this. This was 23 years ago, and at that time I was 28. And when I was 28, 23 years ago, $8,000 was a lot of money for me. It was everything that I had in my savings account, so this is why I was super nervous when I lost money. It made me cramp up and it paralyzed me. I was checking my account every few minutes, anxiously see what’s going on. Have you ever done this? You check your account every 30 minutes? This is why it’s super important that you trade only with money that you can afford to lose. I know easier said than done, but keep in mind, if you don’t do this it will actually hurt your trading. On the other hand, there’s the fear of missing out or FOMO. That is another type of fear, which is really, really critical. This also happened to me at the very beginning of my trading career. So you see, how many times have you seen a stock that has skyrocketed, and then you beat yourself up for not getting in? If you’ve ever looked at a stock, see it take off without you, and thought, “Oh my gosh, I should get in” then tried to chase the stock higher, you’ve likely realized afterward that this was a problem. A classic example of this that you might remember is the craziness that happened with GME, GameStop, not too long ago. People started getting in at $20, then $40, then some at $160. Another typical example is Bitcoin. If you look back at Bitcoin here, what do you think? Where did most people get in in 2018? Did they get in when it was trading at $600 or $700, or did most people get in when Bitcoin was trading higher around $14,000, $15,000 maybe at $10,000? Most recently Bitcoin went up from $10,000 to $17,000. Where did most people get in on this move? Probably closer when it was topping $38,000. See this is where it’s the fear of missing out. For me, when I trade, I’m not going for these hot stocks. I like to trade based on my PowerX Optimizer and The Wheel strategy because they help me to keep my emotions out of my trading decisions by telling me what to trade, the best time to enter a trade, and the best time to exit. You see, if a stock has moved past my entry, I’ll pass on the trade and wait for the next one, because there will always, always, always, always be another trade. Trust me on this one, because if you are looking at PowerX Optimizer, and you see when you run the scanner every day, it is showing you a bunch of symbols. So for today, The PowerX Optimizer brought up seven symbols that I could have traded. Tomorrow it will be another two to eight. So obviously there is always another trade and this is why you shouldn’t be too scared. This is the next one and it is a big one because after all, why do we trade? We trade to make money, right? But there’s a saying, “Bulls make money, bears make money, but pigs get slaughtered.” You see, as traders, we want to take the trade that makes the most money. We want to find the next Tesla, the next Bitcoin, maybe the next GameStop, but often times when we find them, we’re getting in way too late. So how do we battle this greed feeling? Well, this is where we focus on SRC profits and having a solid plan. Have A Plan This is actually the third thing that I’ve learned in my trading career. Have a trading plan, and don’t make it too complicated. A solid trading plan is a cornerstone of being a successful trader. There have been times when somebody will buy a stock, and when I ask them when they’re going to sell they say, “When I made enough money” or as someone said to me recently, “After it went to the moon,” right? When is this? Probably never. You got to have a plan and this is why I have these two trading strategies, which is The Wheel trading strategy, and it is the PowerX strategy. So what is a trading plan? A trading plan tells you three things, and I’ve touched on these already. A trading plan tells you what to trade, when to enter, and when to exit. When it comes to exiting, we exit either with a profit, or we are exiting with a loss because losses are part of our business as traders. So let’s take a closer look at the three elements of this trading plan. First of all, what to trade. This is in general, a decision that you need to make. Are you going to trade options, stocks, or futures? It’s important to define what you want to trade so that you don’t get distracted. See, for me personally, I trade stocks and I trade options. I’m buying options according to the PowerX strategy, and I’m also selling options, according to the rules of The Wheel strategy. Now, the next question is when exactly are you going to enter? And this is super important, think back to the idea of FOMO, the fear of missing out, right? You need to know at what price you want to enter a trade and you need to be able to move on it so that you get in, right? This is where limit orders come in handy. So this is where here for example, with when to enter I’m using again the PowerX Optimizer because it tells me exactly what is the option premium that I should be getting in order to achieve my goals. So for me, it is super important to have a tool that gives you this information and not guessing when you should get in. This is why for me, it helps me tremendously to do this on indicators, and the indicators that I like to follow are the RSI, the Stochastics, and the MACD. By doing this, you see, I can take the emotions out of trading which was rule number two. This is where, again, the PowerX Optimizer for me is an indispensable tool. Originally it was just programmed for me, my head coach Mark Hodge, and my son a few years ago. Now it’s available for everyone. It saves me hours and hours because it scans for me. Since I have my rules in place, I can quickly scan the charts to see what I’ll trade and what I won’t trade which makes my life so much easier. You need a great trading strategy, you need to have professional tools, and you need to have the right mindset. We can talk about strategies until we are blue in the face, but if you are not following the strategy, it is absolutely useless. What else does a trading strategy have to tell us? Well, this is where we’ll talk about exiting, and we need to know when to exit either with a profit, and in order to define this, we are using a profit target, or with a loss. For exiting with a loss, I always like to use, when it is possible, to have a stop loss. Using the logic “when I make enough money” is not a proper exit strategy. I know this because I did that in the beginning, and I was just swinging for the fences. I entered a trade risking $100 and I wanted to make $10,000, but it doesn’t work this way. Now, what are great exits? How can you define exits? There are several ways. You can use support and resistance, right? What are tools for exit rules? You can go for a certain percentage, it really depends on what works best for you. For me, it is a profit target and a stop loss based on the average daily range. The average daily range measures how much a stock move from top to the bottom, and a good rule of thumb is for a stop loss, you use one times the ADR, and for a profit target, you would use two times the ADR. For example, let’s pretend the ADR is 40 points, or instead of 40 points we could just say $40. So this means that my stop loss should be when the stock moves down $40. So if I have an entry of $850, we minus $40, this means at $810 I would get out. Now for my profit target, I would use two times my stop loss. So here in this case it would be $80. So again, if right now, my entry would be $850 plus these $80, right? So I would exit at $920. Now let’s just say I’m trading 10 shares, right? So this means that I would lose $400 if I’m wrong, but I would make $800 when I’m right. So I’m making twice as much on my winning trades than I lose on my losing trades. So stop loss and profit target based on the ADR. Now for The Wheel strategy, I do it slightly differently. For this strategy, I use 90% of the max profit. I can’t stress enough how important it is to be prepared when you are trading. If you’re trading without a plan, you’re failing. If not in the short term, then for sure in the longer term. Summary So brief summary. What are the three things that really turned my trading around? Let’s quickly summarize it. Number one, don’t focus on the outcome of one trade. Number two, don’t trade on emotions. And number three, have a trading plan. So these are the three tips that really turned my trading around, and I hope that this helps and that it helps you also to take your trading to the next level.
TVC:NDQEducation
by rockwelltrading
3