To ask a question, please leave a comment below.
To reach me via e-mail: premium (at) mdwoptions (dot) com
Hi Mark, I am Howe from Singapore. As I am very new to trading not to mention Options Trading, Its important for to learn as much as possible.
To let you have a better understanding of my limited knowledge, please let me describe what are things I know.
I have took a trading course around Feb 11. Basically, I have learn technical analysis using candlesticks patterns/breakout patterns, fibonacci retracements, VIX, Tick and Trin to determine which direction the underlying will move. I will also use related sector index to see if there is an similar patterns.
Then I will decide what would be my target profit and stop loss before I enter a trade if there is any good indication. So far I have been scalping on paper trading using USD$3500 capital for about close 2 months, profiting about USD$2000.
My area of interests would be:
1. Learning and applying non directional options strategies like eg. Put/Call spreads, Iron Condor and Butterfly. Most people knows how to enter a trade with these strategies, however they have problems exiting the trades if something goes very wrong or how to profit from these strategies before the contracts expires. I am one of them. The other thing is I do not know when to apply these strategies effectively, like eg. when the underlying is consolidating, should I use Iron Condor, Butterfly, Spreads or etc. The reason why I would like to know is I can enter a trade with minimum risk.
2. Learn other methods of trading eg. Swing Trading. Currently, I am scalping counters like JPM, MS, BAC and GS purely based on support and resistance. I would like to learn more methods so as I can be more versatile in my trades.
Sorry for this lengthy post. Hope you can advise me on which membership I need to sign up in order to be able to learn these topics. Many thanks.
You raise many points in your note, and I will address each of them.
First, I want to thank you for including your background information. That is very important information and allows me to provide an answer that is suitable to you.
1) You have not ‘learned’ technical analysis. That is a difficult skill to develop and takes far more than one course. I know that when I say that – you are torn between believing me and believing the person who taught the course.
You learned the basics. You learned what to look for in the charts. However, that is all at a very basic, elementary level. I assume you understand that if using these charts were that easy, then no one would ever lose any money when trading. The charts are merely the beginning and it will take a lot of time for you to be able to make good use of them. I am not telling you that the education was worthless – only that it is insufficient.
By all means, use what you learned. But don’t count on it as if it is ‘THE TRUTH.’ Learning to read the charts is going to take time and experience.
2) You may believe that you can determine in which direction the underlying will move, but believe me you have not. Ask your instructor – “how good are these charts? How often can I expect my prediction – based on my chart readings – to be accurate? Should I make large bets based on these charts?”
At this stage of the game, I would expect your accuracy percentage to be about 50%. In other words – no better than random. However, I am not a chart expert, I do not use them, and you may decide to ignore this warning about their ability to predict direction >in the hands of a novice chart reader.
3) I am glad that your methods have been making money when scalping. It may turn out that your talents are best used to trade stocks. One word of warning: Options are not stocks (as I am sure you already know) and must be traded differently.
4) I can help you with the concept of managing those non-directional positions. How to size the trade properly; how to estimate when risk is approaching an uncomfortable level – other than by using the amount of money lost as the ONLY decision-making factor. Yes, it’s important to control risk. Sometimes we adjust – or make a change to the position, rather than exit. I can help you understand when one is preferable to the other.
I cover such topics as taking profits and exiting. In short, I can give a thorough course on trading iron condors, credit spreads, and to a lesser extent,buttterflies (which are really the same as iron condors – except that the option sold has the same strike price in the butterfly and different strike prices in condors).
5) The problem with this is that this material is best learned via the courses and I am way behind in making them available.
I can send to you written information (book and specific blog posts) – and then reply to your questions. If that is okay with you, then you can join as a Gold Member. [Bronze Membership doesn't provide any quality premium information].
I will give occasional talks – but the topic cannot always be one that is best-suited to you, unless others also want to hear about iron condors etc.
I know there is a big time difference, but if you can attend the live meetings – held at least four times per month, you can ask questions and learn other stuff about trading options that is not specific to your request. But it is information that will help you to develop needed skills.
6) I will have a course on iron condors (Additional but reasonable, cost. At $37 per month, I cannot offer those courses). However, I do not know when. these take far longer to produce than I had imagined.
7) I cannot teach you anything about traditional ‘trading skills’ used by scalpers or swing traders. It is my strong belief that options are not the best vehicles for those traders.
The best thing about options is that they were designed as risk-reducing instruments. They are not designed as tools for the quick in and out trader. Options allow a trader to measure and manage risk. Think of it. There is nothing else that allows a quick, reasonable accurate estimate of risk. And not just market movement. There are also other risks such as time decay of option positions, risk of incurring more (or less) volatility in the market place. Plus other risk factors. With options, you can reduce or eliminate any specific risk factor. That makes them unique in the investment world, and it is not a good idea to waste all of that to scalp. . You can do that just as you have been doing with other vehicles. there is no need for options.
Options are different ad offer many benefits – and risk management is at the top of the list.
8) You can learn trading diversity elsewhere. In fact, a trading coach is the best solution to your needs. However, two warnings: a good coach is difficult to find and I think it is far too early in your career to be looking for a coach. It’s necessary to learn and practice for a longer time. The coach refines the skills. Skills that have not yet been developed.
I can er what you need in the options area. I wish I had more courses for you. However, it’s only 437 per month – and you can have a full refund of the first month’s fee if you decide this is not for you. Just request that refund via e-mail within 30 days:
premium (at) mdwoptions (dot) com
I have questions regarding using SPX versus SPY as well as determining the limit/credit price to input and choosing appropriate strike prices with consideration for volume/open interest when initiating a condor trade in the ‘track that trade’ you have considered.
I receive your earlier email response about the easy adjustment with 20 lots for SPY versus 2 lots for SPX. I suppose 20 lots is easier to adjust because you might be just adjusting part of the position and possibly even multiple times, provided commissions are not a major issue. This also means for easier adjustment, more lots might be better when one initiates the trade provided one has the relevant capital when using the more expensive SPX in reality (SPX being more worthwhile in terms of commission charges). I wonder if I am correct.
I have difficulty with trying to determine the limit/credit price to put in. (Kindly see bid ask values for SPX below) I am thinking it will not be advisable to use (2.50-2.10) for the put spread and (8.00-8.20) for the call spread especially when the call spread is negative in value. Should I start with the mid of each bid-ask spread to do the calculation? Or is the last done price a good starting point? Lastly, if the volume is thin, is it still advisable to continue with a particular strike price? How important are open interest/volume in determining the strike prices to use and is there an advisable minimum value for them? Hope you may be able to advise with some basic calculations.
Last Bid Ask Vol
1. 1240 1.64 1.25 2.10 62
2. 1250 2.60 2.50 2.90 1277
3. 1410 8.60 8.00 9.10 7682
4. 1420 7.45 6.30 8.20 39
What platform do you use? I have been paper trading on TOS and wondered what do you use to train your members.
I have been using Interactive Brokers for paper-trading. I don’t like it, but use it because I’m familiar with the platform. In fact, I have not yet found a paper-trading account that’s any good for my purposes.
TOS is the most realistic, but they give fills that are too optimistic. The danger there is making customers too overconfident.
I am a reasonably seasoned iron condor trader but still working to perfect my knowledge. I have questions like what adjustments would I make with 30 days left vs 12, should I go further out for iron condor in low IV environment, should I trade SPY or SPX. Consequently I was excited to see your Gold Membership. My concern is my ability to partake in the live sessions, which seem like the one of the most valuable aspects of membership. If I am unable to participate in the live sessions, do you feel your program would be beneficial for me? And if so what resources would be available to me?
Aren’t we all? Perfection is quite a target!
First, the sessions are available on video. But that is not the same as being there with the ability to get involved in the conversation (headset is necessary to participate verbally. But most prefer to communicate via keyboard. Microphones don’t work as well).
I’ll respond via e-mail.
Are your videos archived? How do I access them?
Yes they are.
Blog post, explaining where everything is.
Please let me know if this works. for you
I’m interested in becoming a gold member on your site. My hesitation is that most of the site is not functioning very well. I first entered as a bronze member and was unable to view most of the free bronze member material. Despite a negative experience with the site I am impressed with your “job description” and thoughts about option trading.
I attempted to join as a gold member, but when I hit the final submit button, I got an error page.
The site needs some bugs worked out of it. I look forward to that time so I can join.
I’ve been making changes almost every day this past week. Trying to make navigation simple.
If there is any specific change that you [or anyone else] would like to see – to make navigation easier, please let me know.
Truth: The information is all here. I thought it was easy to navigate. Apparently I was incorrect.
Thanks for the comment.
We are trading the underlying for liquidity providing that pays rebates. We want to consult with you to use options for hedging when market makes moves because even moderate moves build up with significant inventory of underlying.
The straightforward idea for hedging is to buy ATM calls and sell underlying for delta neutral hedge. We can handle automated continuous adjustments to the underlying.
However, outright buying of ATM calls creates huge vega risk. We want to discuss specifics with you to see what you suggest to reduce vega. Our thoughts are to use short ratio butterfly so that it neutralizes vega but leaves delta to hedge our underlying position. But perhaps you have some better advice.
I will be happy to sign up for your Gold membership but can’t find the link to pay or register.
Also, please consider a 1 on 1 consultation for 30 to 60 minutes of your time?
I replied to your separate e-mail message. I feel out of my depth when dealing with forex products. I have never traded them.
I was very interested in attending yesterday’s Tradeking webinar: Iron Condor and Volatile Markets, unfortunately I had a scheduling conflict.
It it possible to outline the approach you spoke about in the webinar? Is it possible to get a copy of the presentation?
Thank you very much for your assistance.
P.S. I’m very familiar with the basics of the iron condor.
Got your email reply and looking forward to when TK releases the webinar.
Thanks for your prompt reply.
I am trading a 10 contract iron condor on the spy etf rather than 1 contract on spx index. I find this is working quite well as I can adjust easily without risking too much of my account. I have been also simulating many adjustments on this live trade. This method has helped me follow your excellent lessons and visualize on a real trade with many simulated adjustments. When and if I adjust for real I believe I will have a good feel for making a favorable adjustment.
There is NO DOUBT that it is far easier to adjust a 10-lot SPY position than a one-lot SPX position. That makes it worth the extra commission cost.
The truth is that I can guide you with suggestions for adjusting, and offer ideas that make it easier for you to consider alternatives, but the bottom line is that you will learn what works for you by experience. If you want to discuss a specific situation that you face (or faced), feel free to do so.
I was wondering if it is possible to send you an attachment. I took a screen shot of my trade and it might make it easier to discuss as I take it to completion. The file would be a .png picture file.
you could answer this by email if convenient. I was not sure if this was the proper forum to discuss this topic.
Sure send it to premium (at) mdwoptions (dot) com
If you want to discuss the trade in the forum, you an attach the image to the forum entry.
I look at a blog every day that comes out about 1 hour before the market opens. They report the market direction and whether the movement is “sharp” – as in sharply up, or the opposite if applicable. They refer to pre-market activity. Just who is privy to this info? Obviously, they are, because they are always right. Perhaps you could address this in today’s class.
See video for live meeting dated 120117
What is the duration of this course, like how many months?
The course has no specific duration.
It has been recorded and you may view the individual lessons at your own pace.
Plus, I’ll respond to your questions.
Right now, the videos are included – at no extra charge – and come with the monthly membership fee of $37. Do not be fooled by the price. This is a top notch options education.
I subscribed–apparenty four times in spite of getting “404 errors” several times and then being told that “page is not avaiable”–when I logged in and viewed account it shows four subscritpions active all started on 28 July–can you pleasemake sure this is corrected to one subscrition ? Tx
My contact information Dkiash@aol.com
I left a phone message for you – just before this post appeared.
Just received your voice message thanks so much for getting back to me so quickly–I will assume the multiple sign up situation is now under control in your capable hands—-hope you get the site issues resolved—! David
Thanks. Me too
PS I wasnt offended–actually you made me laugh when you said “ok David you can stop signing up now”!!!!!!
Sorry to pester you already–
I really like your pragmatic style–I have read your book several times and you seem much the same in person live as in print from a “delivery” standpoint.
I already learned something [funny I always was aware of this somewhere in the depths of my addled brain---but of course never articulated it--which means i did not really understand it----] regarding the vega risk situation especially in these indexes with ES near 1400. And BTW its the first time anyone ever made “vega” make sense in three sentences with a real live context–and then expanded on the implications by going on later to say–”by the way–you can make the trade–and manage vega risk if thats yur real concern”–[of course not for free]—–so thanks for that.
I am looking short above 1400 es—no suprise there so is everyone except the triple secret hidden huge huge buyer–like maybe a quadruple secret fund or the Fed——and you would think that enhanced vega-would actually be the opportunity one is looking for if you hope to take the other side of the risk play in a transaction–I [think] I mean–why would I want to be selling premium if in fact there was no “extra” risk element in the premium? Would I not be looking to be adequately compensated for taking the short side of the risk equation? This in fact is where I always used to screw up–and take peanuts going into a [potential] higher volatiaty setting rather than waiting and getting compensated for the added risk that likely was already seeping into the market but not shoing up big in implied volatilty yet. It seems to me that between the Fed acting as “in place put” at some level underneath the market–and the fact that likely anyone who wants to be hedged on the dowside is already hedged going into new life of contract highs—how do you balance this preminum versus risk question and not get creamed? I guess selling simple call spreads might be the best way? Sorry that rambled on for quite a bit–trying to ask a question while showing you how uninformed I am in the process so I can really benefit from your teaching—-likely these are beter left to a webinar setting in the future-one quick add’l question–in the “weeklys” segment–you are trading RUT–what expiration? I assume very close by based on the premiums–[although I have not checked the chains]—ok I’ll shut up now–thanks so much for squaring away the other matter—very impressive customer service—I have been in the consumer web business for 5 years now-and know things will go wrong—its how you handle the matter that counts—-tx again—-David
It will be difficult to “pester” me. But – please, that is not a challenge.
BTW, this is a page where no one will ever see the comments. Next time, please use the forum or any recent blog post. Thanks
It’s a neat feeling to have an ‘aha moment’ when understanding something that had not previously been clear.
We are always told not to fight the tape, but it is a death wish to fight the FED. Unfortunately, we never know when the FED is buying. In theory they should never do that, but…
To some of your questions:
Of course we never want to sell premium when not adequately compensated for risk. The problem is that we do not know until after the fact whether or no we were paid enough. If we know the market will be moving and that IV is going higher, we would be buying premium and not selling. So, we do the best we can with our trades – and we ALWAYS manage risk – and that begins with position size.
Balancing premium vs. risk. 1) Position size. Do not sell too many; 2) Sell spreads and not naked options. That cuts potential, but following both of these ideas guarantees that you will not get creamed. So yes, selling call spreads is a more intelligent strategy than taking open-ended risk that comes with selling naked calls.
Weeklys:The weeklys trades are always made on Mon or Tues. These trades expire Friday of the same week. I know there are new weeklys options with expirations longer than one week (1 thru 5 weeks), but I have not bothered with those yet.
Thanks. The true reason why I was able to get to it so quickly is that I was online when I received the messages.
Ok I lied–one more question. I stopped trading options [esepcially spreads] a while back because the commissions I was paying were ridicuous–can someone in your following suggest a broker that I can use and make [for example--] 6 lot rut trades in a strangle, vertical spread or an iron condor and not pay more n commissions than I recive in premium? “Ridiculous”–bond trade—$225 in premium recived—-10 lot on each side—-$78.00 in commisions going in and then coming back out–really pointless to do these trades—- Tx David
These days, commissions are much smaller. If you want to open an account at one of these brokers (except IB), let me know. If I recommend you, there is a small promotional bonus.
Interactive Brokers charges 75 cents per option plus exchange fees.
OptionsHouse and TradeKing change a small fee ($4 to $5) per order plus 15 cents per contract.
Others charge a bit more, but sometimes they may offer something good in exchange for higher commissions.
I was going through the Greeks video—it get somewhere near half way through [although it seems to be loading all the content] then it simply stops [after the exercise about "adding" the Greeks----]–I don’t seem to be able to get it to play past that point. Any ideas? Tx David
I thought the sound was still working and that is why I did not take the time to make a replacement video.
Is there no sound?
Its not just the sound—the video itself stops entirely—right at the point where you are “adding” the Greeks–and i cannot get past that spot—
One other question—when you answered my question about brokers and reasonable commissions—you mentioned trade king—at base $4.95 plus 15 cents per contract–did you mean 65 cents? Thats what their site says in any event–maybe a referral from you gets a large discount off that 65 cents number? Tx David
Will work on the video asap
Yes, TK is 0.65 per. No such luck about referral. However, they do have promotions, so check out those promos before signing up with any broker. Often the promotion benefits both the new account holder and the person who refers them.
BTW when the video stop it returns to the original “click here to play” screen—-D
I was recommended by Michael Sincere to contact you with this question.
I have been stock trading since 2008 and investing since 1994. I have recently read several books on options trading looking for ways to better control risk through the use of options.
I would like to backtest a few of the stock trades that I have recently made substituting puts in place of the trailing stops that I currently use. Is there a website that provides historic options chain data and/or a backtest tool?
Thank you for your consideration and response.
My name is Mark.
The idea is viable. You can buy well-timed puts. However, be warned that this is very expensive and you are likely to discover that you pay so much for the put options that you have little or no chance to profit if the stock rallies once again.
I know of no web site that offers what you seek. There are companies that sell options data, but I do not believe that nay sell the specific data set that you want. And buying what they have to sell is very expensive (think thousands).
I wish you well.
I am very sorry. I was writing the question before my first cup of coffee and just saw the previous writer’s name.
Thank you for your response. Do you know of a good tracking spreadsheet in which you can record stock and options trades to create an equity curve with metrics based on the combined positions taken on a trade? I would use this for forward testing/paper trading if no backtesting programs exist.
Also, as all of my current stock trading is directional, ie: pullbacks in uptrends and breakouts of trading ranges, I have been considering the use of straddles or collars to add some non-directional stategies to round-out my trading and better smooth the equity curve. I know that these are not level 1 or 2 (beginner) strategies, but given my history, I feel more comfortable with identifying periods of unusually low volatility and estimating that a period of higher volatility is likely to follow.
Do you have any advice, comments or resources?
Thank you again.
I appreciate your needs. My expertise is in using options and teaching others to use them. You are looking for someone whose background is more in ‘trading.’
I don’t know of such an excel spreadsheet, but most people prefer to design their own. If that’s not you, perhaps a good Google search can locate something useful. It is also possible that your broker can offer some appropriate software. You would have to ask what they have. While you are asking, check out what they have in free back data. I believe that OptionsXpress or thunkorswim offers some useful data – but I do not know how many years it goes back.
I do not recommend collars for traders. I do love the collar for the mom, and pop investor who never hedges. But for trader, it’s a 3-legged strategy when you can sell a put spread (using the same strikes as the collar; but the same put but sell the put with the same strike/expiration as the call) and then there is no need to involve stock in the position. The p[ut spread and collar are equivalent and provide the same P/L and risk/reward.
To learn the basic option strategies, I (of course) suggest The Rookies Guide to Options. I encourage you to learn how options work – even though that may seem like a waste of time – before trading them.
I wish I could be of more help, but I have no experience using the items that you want to locate and use.
Amazon doesn’t appear to have copies of your 2008 book for Rookies, is there another source?
The publisher is temporarily in receivership (The owner is bankrupt).
I do not know when someone will buy the business and start to sell books.
I cannot find any paperback copies either.
I do have an e-book version available. It is $10.
Let me know if you would like an e-book copy: premium (at) mdwoptions (dot) com
Well,am highly interested in your course,am a complete novice.I have traded option but through paid sites which I think are not much better than my basic standard.I will like to pay through paypal,have accounts with them,what do I do.derry
The best way to sign up through PayPal is to send $37 to me at PayPal, using this as my e-mail address: mark (at) mdwoptions (dot) com.
Next, via e-mail, let me know your preferred username and password.
I will set up the account and get back to you with information.
As a newcomer to the options world, I encourage you to proceed at a pace that is comfortable. Understanding the material is important.
We’ll talk more
Tried to access your introductory videos – that said “click to play” and they were not click-able. I have an iMac computer. Please advise.
All three videos updated. They should be visible on your Mac
On Friday, Dec 21 2012, I saw the VIX raised by 3.5 or 16.7% increase. No big deal considering that there is fiscal cliff. However, my condor position showed a $1000 loss for a day at close. This is because my put spread position SPY 126/123 has weird bid ask price difference. 126 strike price has ask:$.47 and bid: $2.96 – more than $2 difference!! I checked other strike prices and they are the same $1 to $2 price difference. Normally, the bid/ask difference at closing is 20-30 cents but during trading hours it is as less as 1-5 cents. Please tell me on Monday during the trading hours it will become normal. Is there any thing I should worry during the fiscal cliff. I had rolled in my put spread position to be safe to take about 4-5 point fall in SPY.
I do not have a good answer, but all will be well on today, Monday.
Sometimes the end of day market quotes can be very wide. The market makers do that do prevent a barrage of market orders that result from a piece of very late news. I don’t see how that can happen for only one series of options and not all of them, but with computers running the quotes, I suppose anything can happen. All I can suggest is that this should be ignored.
Did you know that the DOW futures declined by about 225 points immediately after the market closed last Friday? Perhaps the quotes started to change just before 3PM and then the markets closed and no more updates were permitted. I admit that I am just guessing here.
We should be concerned with our IC positions right now because we have no idea how the markets will react when the final news (solution or no solution) is released. However, I am holding my positions. If there is a violent reaction and if IV surges, and if I am aware of it when it happens, I’d be looking to open a new trade. But small size and only if the prices are attractive.
Are your videos/webinars available to view?
The videos are premium content. For members only.
If you want to see a sample video, I can make one available.
Does anyone know what Mark Sebastian means when he brings up the topic “Wheel of Fun?”
I heard him say that this is selling a cash coverd put, purchasing stock, selling a covered call.
He did not elaborate.
What months? In or out of the money?
Mark, will you please comment?
Perhaps this is a way to sell premium when volatility is so low?
I have no idea, never having heard that phrase. Google was not much help
When watching the replay of your March 20, 2013 live session, I noticed that you wanted subjects to talk about. My suggestion is to give your opinions on the pro and cons of using LEAPS as stock substitutes.
Good idea. Thank you.
Would you suggest, give opinion on, joining your option service with an IRA with a 700.00 balance? I can do covered calls, cash secured puts, and buy calls and puts?
Depends on what you want to learn.
I can help you with trading covered calls (and cash-secured pits). I have some prepared videos with detailed discussions. How to choose stock (only stocks that you WANT to own), picking strike price and expiration date. How to manage risk. This strategy is bullish and does best when markets are steady and higher.
If you already own stock, then covered call writing it a good strategy. if you would first have to buy stocks, then the difficult part is going to be choosing the stock. I cannot help with that.
But with $700, there is essentially nothing you can do. Unless you find a stock trading at $3 to $6, I urge not trading such cheap stocks.
So yes, you can join – even for only a month or two – and get some good ideas. However, I would try to save more money before venturing into options.
I am sure you are tempted to buy options and go for the big win. The good news is that you can lose no more than your $700. The bad news is that losing the whole $700 is the most likely result. Buying options is a very (very) difficult game.
I’m here is you want more information, but I urge patience – at least for now.
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