Choosing An Effective Option Trading System

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If you are an experienced investor or an upcoming one, you surely want to make the best out of your investments. That should mean, you want to maximize on every opportunity in order to get sustainable gains as well as consistent returns from your investments. If that is the case, then you may want to consider setting up an option trading system. As you may now know, option trading is one of those highly valuable and profitable investment instruments in which you need to take keen interest.

Option trading allows for the use of several strategies and techniques and having a system that allows you to take advantage of such versatility and flexibility will be an immeasurable addition to your investment. After all, option trading is a highly profitable venture and using a trading system will enable you to carry out your trading effectively and profitably.

For any investor, investing in a venture that generates consistent income needs to be taken seriously, and option trading should not be an exception. It can be a lucrative way of having a worry-free future. In fact, as you will realize, option trading is a good way to survive the market during harsh economic times or inflation. As such, investing in a system that will enable you to maximize on such benefits should not be such a bad idea.

Information to any investor is power. Consequently, an options trading system that will give you services and provide you with helpful resources such as links to other websites, tutorials, virtual communities and many other helpful information sites should be a good investment. If you are a willing learner, these resources will enable you to enhance your learning considerably.

As you make your considerations for a trading system, it will be very helpful to factor in several things. One, you do not need a complex system for you to trade effectively. All you need is a simple system that will enable you to carry out your trading activities effectively and, needless to say, profitably. Two, you need a system that is user friendly with easy and clear navigation process. Three, you want to have a system that enables you to meet your trading goals and objectives. Your ultimate goal of having a system is to be able to maximize on your profits besides trading effectively. Therefore, the system in which you are investing needs to address this.

Although using a trading system will be good, it is advisable that before using such systems in a real trading environment, you should carry out demo trading sessions in order to familiarize yourself with the system. You want to be sure that the system you are considering to use will work, as it should. What better way to test this than by using a demo or a free-to-try kind of system. You also need to be sure you will get relevant support when you need it.

With these pointers, you should be able to get and use a good trading system to advance your investment.

 

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Implied Volatility: Earn a Living Trading Options – Video 5

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Hey tradeologists, we’re going to do our daily review today and basically it’s a very simple process.  As always, all we do is take a look at the numbers.  We manage by the numbers.  We take a look at our delta, gamma, theta, and vega.Take a quick look at profit and loss figures for the day.

Weare in pretty good shape here,I think.  We’re getting close to expiration.  We have most of our trades in the May options.  We’ve got about 11 days left on that.  What we aregoing to do is take a quicklook at our deltas.  We’re 45deltas long.  Our gamma is at  155 which is pretty normal the closer we get to expiration.  Our theta is a nice $77 at this point and our vega is at 111.30 so we’re looking pretty good here.

We are going to keep an eye on that gamma because gamma and theta go together.  Obviously what we want to do is we want to capture as much theta as possible.  Really these trades are theta positive trades.  If you want to get more information on theta-positive trades, that’s how we make our money.  We collect on average $76 every single day going forward.  We’ve got a nice profit open but we’re still early.  This is the crunch time for these trades.  Eleven days before expiration; this week our profits are just going to explode.

We’ve got $330 open on a profit figure.  We’ve got $174 just today.  If we go over to our analyze tab here, we can see that this white line is our current profit and loss position.  We’re not quite on center but you know we’re still looking pretty good here.  I think that we’ve got a little bit ofroom to move on the upside and I’ll show you the VIX in just a second.  All we do is take a look at this picture, we take a look at our monitor tab and take a look and see exactly where we are today.  All of our numbers look good.  Everything is positive and we’re starting to get into a really profitable position here.

Remember this white line here is our current profit and loss and that will continue to move up the closer we get to expiration.  We’ve only got 11 days left and this last week before weget into expiration week is going to be absolutelycritical.  We should be up around here just over the $1,000 level before Friday.

We’re going to continue to monitor this trade and hopefully we’ll get an opportunity here, if we start to get towards one ofour breakeven points, to add to ourposition.  And especially during the last week before the week of expiration, that’s a great time to put on some trades because we will just crush the theta on that.  So what we want to do is just keep an eye on this and take a look at our picture.  Our picture looks really, really good.  We’ve got plenty of upside room and plenty of downside room as we get closer to the expiration date, especially expiration week which is coming up after the end of this week.  Today is Monday, May 5.  This line is just going to start shooting right up here.  I think we’regoing to be in absolutely excellent shape.

We don’t have to do any adjustments to our positions today.  I think we’re in really good shape.  The reason that I think we’re in really good shape is because of the VIX.  Remember the volatility index really gives us kind of a hint of wherethe market is going to go.  When this goes up, remember, the market goes down and when this goes down the market goes up.  It acts as a contrary indicator and indicates fear in the market.

You can see we have these two peaks back here on January 22 and right around March 17.  We have these two huge up days on the VIX which meant huge down days in the markets.  Since then we’ve traded down.  We had a bit of a trading range in here between 22 and 25 which was very, very nice.  That was last month.  We had a great trade last month.  We did very, very nicely in there.

We’ve since broken down below the 22 level which was a prior support and was broken and is now probably  going to act as resistance at this point.  We’ve got support down here at 1,750 so we’re probably going to be trading just in this range here.

I doubt very much at this point we’re going to go below 17.  I think probably we’re going to be in this range which will be absolutely perfect for our position because if the market goes up or down we’re going to be in a pretty sweet profit territory up here.

This is our expiration line, the green line.  Eventually this white line will move up to meet this green line and that’ll be exactly what our profit is going to be for the month.  Our maximum profits can be anywhere from $1,852 toprobably around $1,100 or $1,200 for the month and remember that’sonly like one or two contracts.  Each one of these positions only has one or two contracts on so our open profit is, you know…  Take a look at our real figures.  There’s $334 on one or two contracts on each one of these positions.  If we had 10 contracts, we would be up about $3,000 right now.  So you know there’s plenty of profit potential.

This is our demonstration account.  I don’t want you to think that you have to trade in large lots here to make a lot of money.  If you’re interested in doing these types of positions, you only have to put up maybe a couple thousand dollars of margin in order to make $1,000 a month.

This happenedand this is not part ofthe daily review.  I just want to give you an idea that when the prices do move against our breakeven points, and they did this past month, that gives us an opportunity, and I really mean opportunity,to adjust our positions and add to our positions.  That’s whycapital allocation is so important.  We don’t put all our money into thesetrades at the beginning of the month.  We let them run and then take advantage of the opportunities when the prices dorun up against our breakeven point so we can add to the position.  In the beginning of the month we had maybe a thousand dollar profit potential on these positions at the beginning.  Now we’re up to almosttwo thousand dollars because we had the opportunity to adjust our positions.

When theprices move against us, they’re opportunities to add to your position and now you can see that, in fact,we’ve almost doubled our profit potential for the month.  We’ve added an additional $2,000of margin.  We start out with $1,600 in margin and we’re almost up to$2,000 in profit potential.

So that’s it for the daily review.  We’re doing very well.  The closer we get to expiration, the theta should get up to around $200 a day and that’s like with only one contract on each one of these positions.  If you were doing ten contracts, your profit would be close to maybe $1,800 a day or $2,000 a day.

So the profit potential is definitely there in this kind of business once you learn how to manage your position based on the numbers.  You have a good profit picture here.  It’s only a matter of size as far as how much money you want to make and how much risk you actually want to take.

As always, trade with confidence and have a great day.

 

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