- ETF Option
Trading
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option pricing model
ETF Option trading method that combines the directional trading
of the ETF with the counter trading of the ETF Option 'against'
the underlying trade.
2/20/2009 - feb expiration: since the 2/9 synthetic option
sell -89c|+86p against the open long AND then the 2/10/09 spy
reverse into sell - the market has continued to sell off giving
a sell addon on 2/19 - the trade being a pmd failure through the
2 blue squares triple break.
expiration continued the selling giving an addon profit AND a
synthetic option buy for march expiration done against a trailing addon short +77c|-74p
- the position still an initial short-addon short uncovered for
additional partial profit or option trades if the selling
continues.

2/10/2009: the open spy etf long with the spy synthetic
long continued to a price momentum divergence high test of left
side resistance, which was additionally a mex extreme - giving
partial profits for the etf and for the options AND a synthetic
short against the remainder of the option position.
i had left the trailing etf long 'uncovered' against the
stimulus-financial plan unveiling for the possibility of more
upside - the 'plan' or lack there of reversed the market AND a
gave a mode reverse to the spy. as the reverse channel had
already hit, and there was a spike up from that price with mex
flow down, there was a trade setup at the red dot to reverse the
buy - this synchs with a faster 'timing' chart which was already
'in sell' at the time - this followed by a 15 min addon.


2/6/2009: trading has been choppy with the green dot1 buy
done on the next day after the mode reverse missing a partial
profit AND a 'hard' reverse giving an exit at a loss - there was
then another V reverse back up BUT in this case there was never
a setup to consider after the mode reverse --- there had been
another mex extreme to do a synthetic long against what was then
an open short AND 'against' the synthetic short shown below.
there had been another mode reverse back into buy BUT no setup
before the close - the buy was then done the next day at the
green dot as a centerline shift reject with mex flow that was
into-through the 2 yellow square triple top breakout AND with
'lots' of left side room to trade through.


1/29/2009 red bar: going back
to 1/26/09 there was a mode reverse into buy without setup AND
then the green dot buy was done as the entry on 1/27/09 - the
move going to the yellow line for a profit AND an option trade
selling the 90 call and buying the 87 put.
the mode
reverse to sell was without setup AND with the synthetic short 'against' the trailing buy
i still held the long overnight - then 1/30/09 the reverse was
done at the red dot.
1/23/2009 red bar-yellow dot mode reverse: exit 82.44 long
at 82.58 after 83.98 partial - there was no sell setup after the
mode reverse. the spy etf underlying is flat with an open
option position = long a short jan 96 call-long jan 94 put
exited and rolled to a short feb 88 call-long feb 84 put - short
feb 84 put - long feb 83 call.






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At the time of the dia 15min yellow circle
the 60min mode chart was still in buy-this was before the
red bar - this then became the sell entry to that mode at
the red dot as a right side pmd failure break of the left
side support area where the period went to its highs.
After this trade was done there was a subsequent retrace
after the 60min extreme BUT the mode remained in sell - red
dot2 was a momentum resumption sell addon as a reject of the
left-right blue line with mex flow and the ttmf hook.


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The iwm discussion below from talks
about how the iwm 60m sell was a time where a 'core' trading
method setup was taken ahead of the actual mode reverse -
that setup being a double top pmd high reject-purple square
triple break with diagonal breakout potential. Then
red dot2 was done as an addon - a pmd failure break of the
left-right price with the momentum resumption-ttmf hook -
very similar to the dia addon except that was a price
reject-failure where this is a price-failure break - these
are setups from the same method concept of trading
left-right prices from previous price action.
Now compare this to chart2 from yesterday's trade journal AND
the repeat of the same trade setups used for day trading - where
red dot1 was also a pmd swing reverse-an additional setup
component coming from the floor pivot reject into the entry AND
where red dot2 was an addon as a pmd failure of the left-right
price from the buy price action - this setup also including a
price reject component so it is a combination price
reject-failure AND price failure break.
Further compare the euro addon sell to the dia 15 min chart -
where in that case the same setup was used to enter the swing
because it was the first setup available after not trading
around the initial reverse - in the case of the euro since there
was an initial trade setup-trade the setup became and addon.


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Still wanting to compare repeated method
setups -vs- time frame and position trading or day trading -
consider the euro chart AND are you flat in the area of the
green circle initial reverse because you didn't have a trade
setup on this chart or your 62t timing chart?
The green dot is another pmd failure setup - either as an
initial entry if not long around the green circle-an addon setup
if already long - the setup being a shift reject of the 2 yellow
squares-blue line where the breakout was now as chart support
entering at the green dot as a pmd failure.
This is a price reject-failure entry AND IF the entry area
synched with a left side price from the price action of the sell
swing this would be combined with a price failure break like the
euro chart2 above - look to the left of this area AND do you
have the 12508 price on your chart which then becomes the yellow
circle area and where the sell swing reversed was --- having a
pmd as a retest of this area 'trying' to reject as resistance is
a very common occurrence AND the combination setup exists where
this is additional a price failure break entry of that price.

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Buy the rumor-sell the news has been the
recent move centered around the election - moves that have
been 'captured' both with underlying and option trading ---
the buy being a mode reverse then shift-reject with mex flow
up through the 2 yellow square triple top breakout with left
side breakout potential - AND the sell being the reason for
this chart.
Technically this isn't a mode related trade as it occurred
before the reverse BUT it is a method selective base setup - pmd
high double top start point - triple break entry with left side
diagonal breakout potential --- synched with the fast chart
focus line sell into the 2 right side points which is
additionally a left-right triple bottom breakout.
I won't usually trade before the mode reverse if for no other
reason than there is an option trade participating in that
direction IF I don't get a setup after the reverse - BUT this is
a case where the method setup 'overrides' the mode.


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Ratio
Option Trading
A couple of weeks ago I was
discussing-showing some ratio put trades that I was doing where
I was buying 1 put-selling 2 out of the money puts the point
of the trades were to take advantage of the volatility where
these could be done at a nice credit, have directional
participation to the short strike, buy stocks well below their
current price if they were put to me-with that cost basis being
lowered further by the profit-credit that would first be gained
before this point.
As the
market has had a big recent move up what do you think about
doing the same trade BUT on the call side where you bought 1
call-sold 2 calls is this the same essential trade that had
been done with the put ratios when the markets were down so far
BUT done with calls in the direction the recent market move?

Ratio Option Trade - Buy 1 Put Sell 2 Puts

rimm: the stock was up all day against
market direction AND i decided to include this with the 1:2
ratio put buy-sells that have been done recently. the
trade was done using december options after the initial reverse
at a stock price of 52.00 --- what would the strikes-prices be
using 97.5% volatility - what-where would your maximum profit be
if the stock wasn't put to you - what would your stock cost
basis be if it was put to you?
*******************************
when i had written previously discussing a 1:2
ratio put buy-sell in order to first gain directional
participation AND then to possibly have a stock that you want in
your portfolio put to you at a cost basis well below current
price - i showed an IBM trade that i did when the stock was
86.92 and the stock IF put to me would have cost 64.80.
after doing this someone else showed me 2 similar
trades that they did BUT using a 5 point spread on 1 and a 2.5
point spread on the other. yes the ratio was done at a
credit however they did go to january instead of november to get
the fill AND yes this did give them a stock at a lowered cost
basis - BUT besides having to wait to january they also didn't
get the same kind of directional without being put.
since then we have seen some additional market
movement - the 10/10 low-10/16 higher low AND although i am in
not trying to say that there had been a bottom made OR that
these prices were going to hold - they do give some areas to
make some additional trade decisions around.
for instance consider the top chart of xyz which
closed 10/17 at 62.75 - had a 10/10 low of 52.00 AND a 10/16
higher low of 58.30 --- IF i now buy 1 60p 3.50 sell 2 55p 2.00
- i am selling the put below the higher low price AND my cost
basis if put to me is 49.50 which is below the 10/10 low - i
also have directional participation on a break of the higher
low-hold of the low.
now i would still rather try to find stocks where
i could do this kind of trade with 10 points between the
long-short put BUT wanted to show an example of a trade that i
could do with some of the decision parameters in a 5 point width
--- always assuming that i want the stock in my portfolio if it
is put to me.


Anyone have stocks
either personally OR in retirement where the
retirement account also allows you to sell puts against
cash?
Consider: you want to buy xyz
which is currently at 86.25 but dont want to do this as a stock
buy AND also dont want to simply sell an 85.00 put for instance
to get the stock put to you at a lower price --- you want to
give this room to go down another 10% BUT you want to do the
trade today would you do the following:
Buy 1 85 put sell 2 75 puts
--- model this for november options using 68% volatility
noting that the otm put has 75% miv. After you do this the key
thing I want you to know-understand what would your cost basis
be for the stock if it was put to you?
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Option Trading Modeling
Model the trades-question on the following
charts.


ETF Options Trading - Training
Introduction
Audio:
audio1
audio2
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i mention trading options AND some people tune out thinking they
are too confusing or risky
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position trading -vs- day trading - not an either-or
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something that could be traded profitably before real
money day trading
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what to trade
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sector participation that wouldn't futures day trade
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single etf - portfolio approach
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Option
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buying options - selling options
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basic strategy - option buys OR covered sells
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expiration math -vs- directional math
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multiplier
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delta
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at the money
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intrinsic value
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call option
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put option
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underlying -vs- call option





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