A Consistent Trading Plan Helps Traders Make Money: Here’s a Starter Kit

Successful traders must have a formula for evaluating strategies which, on average, will make money. As a floor trader of options for more than 15 years, I was able to derive an income from utilizing the Bid/Ask Spread. Customers would approach the pit, through their broker, and get the best market they could for making the trade. As far back as the mid 1980’s, the liquidity in the options pits was somewhat suspect. This lack of liquidity made it difficult for customers to make money, for the floor trader; however, it was an ideal trading environment.

Today’s markets have changed dramatically. Markets are electronic and there are few trading floors. Instead, algorithms trade in front of customer orders to induce the customer to buy, or sell, at typically unreasonable values. There are however, extremely liquid markets which provide traders the opportunity to devise options trading strategies which meet their risk/reward profile. The main question is how to devise the strategy and what information will aid an individual in deciphering the appropriate market to trade. At Options Strategy Network we periodically provide the two tables below which enable traders to glean a significant amount of information in order to create trading ideas.  One can periodically locate them on our Facebook Page or on Twitter. Follow us there. The first Table below provides the 4:00 PM ET closing numbers for some popular Stocks, ETFs and Futures Contracts. It provides not only the closing prices, but a significant amount of information that one can use to quickly follow those underlying markets. The information includes: 1) the Relative Strength Index which is a measurement of potentially overbought and oversold markets, 2) Historical and Implied Volatility which are essential measurements of volatility for options traders, 3) ATR (Average True Range) generally an indication of market ranges for the last 14 days, 4) 9-Day Moving Average which provides the average closing level of the price of the instrument for the last 9-Trading Days and 5) Volume on the Day.

All of this information, in a nice neat package, provides a trader with an excellent starting point, particularly if they are contrarians looking for overbought and oversold conditions or options traders seeking to establish volatility positions by examining the difference between the Implied and Historical Volatility. Sifting through individual stocks, ETFs and Futures Contracts provides an excellent methodology for beginning one’s journey for establishing an appropriate position. The second table below provides an environment for examining Options Contracts, both Calls and Puts, on various instruments. The basic information included is: 1) Bids and Offers, 2) Bid/Ask Spread Percentage (an excellent indicator of liquidity), 3) Implied and Historical Volatility. That information is an excellent starting point for creating an options strategy that meets one’s risk requirements.

At Options Strategy Network we assist traders in understanding the essential components of Options Trading. Liquidity, Implied and Historical Volatility, the Skew, choosing the appropriate Options Trading Strategy and Risk Management are all of the essential requirements for Trading Options in a profitable manner. Contact us  to enhance your understanding of these issues. Our Private Webinar Training Sessions, for a fee of $75/hour, will enhance your options trading.
 
 
OPTIONS TRADING INVOLVES SIGNIFICANT RISK AND IS NOT SUITABLE FOR EVERY INVESTOR. THE INFORMATION IS OBTAINED FROM SOURCES BELIEVED TO BE RELIABLE, BUT IS IN NO WAY GUARANTEED. PAST RESULTS ARE NOT INDICATIVE OF FUTURE RESULTS.

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