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options ebook

 
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dtdtrader



Joined: 15 Sep 2004
Posts: 24

PostPosted: Wed Sep 15, 2004 9:30 pm    Post subject: options ebook Reply with quote

Steve, at one time you were making reference to an options trader ebook. Is that information still in the works? I am trying to trade options and would welcome any insight you may have. Thanks and congrats on the new forum. This website and service has great potential.
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candlestick1
Site Admin


Joined: 27 Jun 2004
Posts: 503
Location: Houston, Texas

PostPosted: Wed Sep 15, 2004 10:12 pm    Post subject: options ebook Reply with quote

yes, that is still in the works, however due to the change in ownership of the candlestick Forum, I am trying to get everything that was promised done in the order they were promised. Fortunately what was going to be written about options can now be put in a video where the different strategies can be explained with much more detail. It is coming but in the mean time, please ask any questions about option trades here on the forum, I can answer them much more directly until the CD comes out.
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cody
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PostPosted: Wed Oct 13, 2004 6:46 am    Post subject: Re: options ebook Reply with quote

Is it practical to buy puts very short term using candlestick analysis or has the price already been effected too much by the time you receive the first signal?

How do you determine if you are paying too much for an option?

Looking forward to the video.
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candlestick1
Site Admin


Joined: 27 Jun 2004
Posts: 503
Location: Houston, Texas

PostPosted: Wed Oct 13, 2004 9:06 am    Post subject: Stock option trading Reply with quote

Trying to trade stock options on a short term basis gets difficult because of the disadvantages that are built into the system. Especially the thinner traged options, you are at the mercy of the specialists. The bid ask spread is the first hurdle. Then you need a big enough move in the underlying stock to make the percentage mover greater than the bid/ask spread.

I usually want to see enough time to trade the option to beable to take advantage of a significant trend in the stock price. Shooting for a short term trade can rack up many losses in the attempt to get the big gain short term
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n7kon



Joined: 09 Oct 2004
Posts: 52

PostPosted: Thu Oct 14, 2004 7:56 am    Post subject: Options Reply with quote

I have been trading options for about two and a half years now. Here are some the things I have learned.

1. Pick a group of stocks you like I keep my group down to about 25 at most
2. Learn how they react to the market conditions.
3. Analyze them with candle sticks and oscillators you like.
4. Paper trade these stocks and learn one strategy at a time.
a. I only use buy puts, buy calls, bull put spread
5. Once you feel you know your stocks and your strategy then try small trades at first and donít get greedy
6. I usually buy my puts and calls at the money or one strike down.
7. I look for a delta of .50 or better. The delta is roughly the percentage of the move you will get.
8. I never buy any option that is less then 45 days out gives you time to be correct.
9. Nothing hurts more than to be correct on your call just not the time frame.
10. Before you put the trade on always have a stop and a target selected.
11. After I pick my target price for the stock to climb or drop to I see what the option will be worth on expiration day if it hits my target that day. That is what I put my exit price for.

Candles are great tools for trading options with. I use the candles , stoís (12,3,3), and (MACD 12,26,9).
Any way that is some food for thought.
I have been trading options for about two and a half years now. Here are some the things I have learned.

1. Pick a group of stocks you like I keep my group down to about 25 at most
2. Learn how they react to the market conditions.
3. Analyze them with candle sticks and oscillators you like.
4. Paper trade these stocks and learn one strategy at a time.
a. I only use buy puts, buy calls, bull put spread
5. Once you feel you know your stocks and your strategy then try small trades at first and donít get greedy
6. I usually buy my puts and calls at the money or one strike down.
7. I look for a delta of .50 or better. The delta is roughly the percentage of the move you will get.
8. I never buy any option that is less then 45 days out gives you time to be correct.
9. Nothing hurts more than to be correct on your call just not the time frame.
10. Before you put the trade on always have a stop and a target selected.
11. After I pick my target price for the stock to climb or drop to I see what the option will be worth on expiration day if it hits my target that day. That is what I put my exit price for.

Candles are great tools for trading options with. I use the candles , stoís (12,3,3), and (MACD 12,26,9).
Any way that is some food for thought.
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n7kon



Joined: 09 Oct 2004
Posts: 52

PostPosted: Thu Oct 14, 2004 7:57 am    Post subject: Reply with quote

sorry did not notice I pasted this twice
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abbo



Joined: 12 Sep 2004
Posts: 148
Location: australia

PostPosted: Thu Oct 14, 2004 7:52 pm    Post subject: Reply with quote

Hi cody,
I believe n7ron is exactly right with his guidelines. I would add that the most important thing is to protect your capital so limit your losses at all costs. I generally find if you are not having success with the play within 2 days then get out because options move so quickly and if you are trading from the long side your market capital will be syphoned away very quickly( either by time decay or more likely by the market makers that dominate play). I try to limit losses to a [b]maximum[/b] of 20% of the trade value including costs and never put on more than 20% of your total trading capital on any one trade. I also find it useful if you take a trade that works your way to take half of any profits early to add a buffer on exit should the trade be a one day wonder and go against you. I find options trading in the majority of cases should be very short term (couple of days say) and leaving anything else to ride a fast trend you are luck to pick is play money for cream.
Only play stock with large volumes and likewise options that are heavily traded (and so has high open interest ) That way you are able to move in and out more easily and the spread is often closer
I like to trade contracts with a minimum of 4weeks and preferably 6 to 8 weeks to expiry and never long with under 3 weeks to expiry.
ABOVE ALL: potect capital and dont stick in a losing trade hoping it will come back--even if it does come back you are a loser because the violation of trading discipline sets its own trend that will wipe you out in the long run
With more understanding of the options game there are many variations to the order of play but keeping it simple is I think a good principal By all means learn the operation of the different combinations available but I think the bread and butter stuff of simple long call and long put is the best way to play until you are very experienced
Could rave on forever but hope this helps a little
We all would be interested in your thoughts/experiences as every input is valuable and everyone has different ideas that may be useful to another player even if it is only a catalyst for a development of trading strategy
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