OPTIONS STRATEGIES

    
How to trade the  market trends

 
A strategy that has been tested real time for 20 years straight on real markets real money





Strategies, tools, and solutions for minimizing risk and volatility in option trading
 An intermediate level trading book, The Option Secrets 2, provides serious traders with strategies for managing and adjusting their market positions. This  features new material on implied volatility; Delta and Theta, and how these measures can be used to make better trading decisions.
 option spreads , calendar and combinations.

- We have discussed the concept of utilizing a butterfly in our classes and in our trade signals, symmetrical and asymmetrical butterflies. We highlighted how we use these set ups for relatively cheap directional trades with clearly defined risk (premium paid) versus reward (spread between two front strikes less premium paid). But is there another application for this type of spread? Certainly. What if we had a good reason to believe the price of an underlying was going to price "X" at expiration. A butterfly is perfect for this type of thinking. You want the butterfly to go directly to your price point in the butterfly which is in the middle and sit there. For a specific example, let's look at Facebook (FB). Through a quick technical analysis it is not a big leap to say that FB is in a secular bull market (genius!). But what is remarkable is looking at the Open Interest in the weekly options. The 10/25 55 line has nearly 28.5k options in open interest. The strikes around there have about 15k. If FB is in the neighborhood of 55, this is where the fight is going to be! Why? That's where the buyers and sellers have the most skin in the game. It's not a sure thing, but more times than not, significant open interest acts as a magnet come expiration. So, we sent out a signal to buy the FB 10/25 54/55/56 call butterfly. We bought it for about $0.10. So, if FB does indeed go to 55 at expiration, we stand to make $0.90. Not bad for a $0.10 investment.