Trading Options, The Common Mistakes

Common Mistakes When Trading Options

Hi, my name is Michael McNelis and I am an Options Strategist with Key2Options. I want to share some of the common mistakes I see options traders make so that you can accelerate your learning curve and become a profitable trader.

As with most endeavors, we learn things by making mistakes. Options trading is no different. Let’s take a look at some of the most common mistakes I see in options trading and how you can avoid them.

  1. Not having a plan
  2. Buying options with too short of a duration.
  3. No understanding of implied volatility
  4. Failing to Diversify Strategies

Not having a plan – One of the Mantras at Key2Options is plan the trade and trade the plan. Prior to entering a trade, we review 10 years of historical trades to find optimal trading parameters for the strategy you have chosen. Prior to entering into a trade, we know how we will manage the trade if the market moves higher, moves lower or stays the same level. With Key2Options, we help you make rational trades not emotional trades.

Continue reading “Trading Options, The Common Mistakes”

DailyWatch 10272016

Today’s Markets

In Asia, Japan -0.3% to 17336. Hong Kong -0.8% to 23132. China -0.1% to 3112. India +0.3% to 27915.
In Europe, at midday, London -0.1%. Paris -0.3%. Frankfurt -0.1%.
Futures at 6:20, Dow +0.2%. S&P +0.2%. Nasdaq +0.2%. Crude +0.5% to $49.44. Gold +0.4% to $1271.
Ten-year Treasury Yield +4 bps to 1.83%

Today’s Economic Calendar

8:30 Durable Goods
8:30 Initial Jobless Claims
9:45 Bloomberg Consumer Comfort Index
10:00 Pending Home Sales
10:30 EIA Natural Gas Inventory
11:00 Kansas City Fed Mfg Survey
1:00 PM Results of $28B, 7-Year Note Auction
4:30 PM Money Supply
4:30 PM Fed Balance Sheet

 

Market Summary

The S&P futures are trading at 2140 in morning trading.

The S&P has been in a range since September. We have traded between 2100 and 2191 with most of the time trading an even tighter range of 2120 -2170.

I would expect to see some fire works by this time next week. The Vix futures is a  critical point. one way or another i would expect to see a decent size move breaking this market out one way or the other in the next week. I learned early on to follow the bond market. Bonds continue to decline therfore i am looking for equities to decline. We are seeing strength in the dollar which should cause headwinds for oil and gold.

I remain longer term with our previous calls. Short oil under 50. Stay short gold. You can use below 1270 as entry to get short if you do not have a position.

Long : Vix and Dollar

Short : S&P,Gold and Crude and bonds

Register for a $10 trial to Key2Options by clicking here $10 Trial 

To learn about State Modeling go to  www.Key2Options.com

DailyWatch 10262016

Today’s Markets

In Asia, Japan +0.2% to 17391. Hong Kong -1% to 23325. China -0.5% to 3116. India -0.9% to 27836.
In Europe, at midday, London -0.9%. Paris -0.8%. Frankfurt -1.1%.
Futures at 6:20, Dow -0.5%. S&P -0.4%. Nasdaq -0.6%. Crude -1.5% to $49.22. Gold -0.1% to $1271.90.
Ten-year Treasury Yield +2 bps to 1.77%

Today’s Economic Calendar

7:00 MBA Mortgage Applications
8:30 International trade in goods
9:45 PMI Services Index Flash
10:00 New Home Sales
10:30 EIA Petroleum Inventories
11:30 Results of $15B, 2-Year FRN Auction
1:00 PM Results of $34B, 5-Year Note Auction

 

Market Summary

The S&P futures are trading at 2131 in morning trading.

Apple’s soggy post-earnings performance , a flood of other earnings news and weaker oil prices are weighing on equities, with U.S. stock index futures swimming in the red. Of the 150 S&P companies that have reported so far, 75.3% have beaten analyst expectations, but poor corporate forecasts appear to be the negative catalyst behind the share pullback and others feel the results haven’t been good enough. “We’re seeing positive but not spectacular growth,” said Jon Adams, senior investment strategist at BMO Global Asset Management.

We have seen really no change since my last post.All markets we cover ave not really changed and we are still staying with previous calls for now:

Long : Vix and Dollar

Short : S&P,Gold and Crude

Register for a $10 trial to Key2Options by clicking here $10 Trial 

To learn about State Modeling go to  www.Key2Options.com

DailyWatch 10172016

Today’s Markets

In Asia, Japan +0.3% to 16900. Hong Kong -0.8% to 23037. China -0.7% to 3041. India -0.6% to 27498.
In Europe, at midday, London -0.9%. Paris -0.6%. Frankfurt -0.7%.
Futures at 6:20, Dow -0.3%. S&P -0.4%. Nasdaq -0.4%. Crude -0.3% to $50.19. Gold -0.1% to $1253.80.
Ten-year Treasury Yield Flat at 1.80%

Today’s Economic Calendar

8:30 Empire State Mfg Survey
9:15 Industrial Production

 

Market Summary

The S&P futures are trading at 2125 in morning trading.

Long-dated government bond yields are up nicely again today nearly across the board. Leading the way are Spanish 10-years, up 11 basis points to 1.156%. The U.K. 10-year Gilt yield is higher by another 9 basis points to 1.09%. Janet Yellen’s Friday afternoon speech – in which she suggested the Fed might have to tolerate higher-than-otherwise inflation – makes for a good excuse to sell today. Continue reading “DailyWatch 10172016”

DailyWatch10122016

Today’s Markets

In Asia, Japan -1.1% to 16840. Hong Kong -0.6% to 23407. China -0.3% to 9680. India +0.1% to 28082.
In Europe, at midday, London -0.4%. Paris -0.2%. Frankfurt -0.2%.
Futures at 6:20, Dow -0.1%. S&P -0.1%. Nasdaq -0.2%. Crude +0.4% to $50.97. Gold +0.1% to $1257.40.
Ten-year Treasury Yield Flat at 1.78%

Today’s Economic Calendar

MBA Mortgage Applications
10:00 Job Openings and Labor Turnover Survey
1:00 PM Results of $24B, 3-Year Note Auction
1:00 PM Results of $20B, 10-Year Note Auction
2:00 PM FOMC minutes

 

Market Summary

The S&P futures are trading at 2132 in morning trading.

The Federal Reserve is in the spotlight with the central bank due to release minutes from its meeting in September this afternoon. The text will be closely analyzed to see how close the three dissenting Fed members from the last FOMC meeting were from reeling in more support for a 25 basis point increase. Though the market is pricing in a ~60% likelihood of a rate hike at the December 14th meeting, economists note that there is plenty of data to be released yet, which could push a rate hike into 2017. It’s a foregone conclusion that the Fed will skip any rate action at the November meeting with the wildcard presidential election only a week later.

We have said we are in a range of the S&P futures from 2120 to 2190. Yesterday, we bounced off the lower level support.

I am beginning to think we may see a severe correction. Bonds, gold and S&P are all rolling over. Crude has bounced but has yet to break through its resistance at 51.67

Scary scenario is S&P at 1400 by the end of the year.

Holding with previous call:

Long Vix and Dollar

Short S&P,Gold and Crude

Register for a $10 trial to Key2Options by clicking here $10 Trial 

To learn about State Modeling go to  www.Key2Options.com

Options Trading Strategies

Options Strategy – Key2Options Platform

Options gives you options. In traditional stock buying, most people buy and hold stocks. Some call it buy and hope. The expectation is that the market at some point will go higher and your stock price will go up. Does the market always go up? Of course not. The market can trend up, down or sideways for periods of time. Why not capitalize on major moves using options? We can use option trading for hedging positions, for capital appreciation as well as generating income.

What is an option?

An option is a derivative financial instrument that specifies a contract between two parties for a future transaction on an asset a reference price. The buyer of the obligation gains the right, but not the obligation, to engage in that transaction, while the seller incurs the corresponding obligation to fulfill the transaction.

There are two types of options, calls and puts:

  • Call Option: an option which gives a right to buy the underlying asset at a strike price.
  • Put Option: an option which gives a right to sell the underlying asset a strike price.

The trader makes a determination on the direction of the stock/Index (known as underlying). From there, the trader can decide on a strategy. Let’s assume a trader thinks a stock will make a move to the upside (bullish). A trader can choose a strategy like: Long Call, Bull Call Spread, Bull Put Spread, or Naked Put just to name a few.

How is a trader to determine whether to choose long call or bull call spread? As a member of Key2Options, traders can build a quantitative model, then backtest their hypothesis to determine which strategy would work the best for a particular underlying.

Step 1

Have a hypothesis to build a quantitative model. Example: Buy Apple on Monday, sell on Friday.

Step 2

Build and back test you model using a long call strategy, use inputs for money management as well as expiration dates and choice of in the money, at the money or out of the money options.

Step 3

Run a backtest to see how your model performed.

Step 4

Refine your model by changing inputs to find optimal trading

Step 5

Trade your model commission free directly from the Key2Options platform using Tradier Brokerage Inc.

Once you have tested your model, you can trade it or try another option strategy. Long Call is just one bullish option strategy. Complete the same process using a Bull Call Spread to see which bullish options strategy performed the best. Perhaps naked puts returns better than long calls!

With Key2Options, we give traders the ability to analyze data without the need to have any computer programming. We supply the data and the platform, you input your strategy.

By going through this process, you can determine the best options trading strategy. At Key2Options, we help traders make rational trades, not emotional ones.

 

 

 

 

 

DailyWatch 10032016

 

 

Market Summary

The S&P futures are trading at 2157 in morning trading.

We are still in the trading range on the S&P from 2120-2190 level.

We are seeing a struggle from the bulls and the bears in several markets.

The S&P is in the middle of its trading range, crude oil is trading at 48. Its range is 40-51.

Gold is trading at a range of 1300-1377. Currently, gold is trading at 1319.

Watch the dollar as a catalyst. it has been trading in a tight range and look it will breakout or breakdown.

Register for a $10 trial to Key2Options by clicking here $10 Trial 

To learn about State Modeling go to  www.Key2Options.com