Forex Is Crazy

OPTIONS INVESTORS ARE MORE EDUCATED, AFFLUENT AND STRATEGIC THAN THOSE NOT USING OPTIONS, NEW OIC-SPONSORED STUDY FINDS CHICAGO (April 29, 2010) - The Options Industry Council (OIC) today released the results of the latest study conducted by Harris Interactive Inc. and found that not only are investors who use options more educated and affluent than investors who don’t use options, they also tend to be more strategic investors who are more open to new ideas. The Options Industry Council (OIC) sponsored this study, as well as studies in 1995, 2000 and 2005, to assess interest level, knowledge and usage of options by investors to better direct its options education efforts. The studies are also important for financial advisors, showing them how options investors make attractive clients and prospects. Each study consistently found that options users consider themselves more knowledgeable investors than investors who do not use options. Furthermore, the studies have shown options users ...

In addition to posting trading results each month at OPEX, I'm also going to start listing my options education goals for the month but I'll do this with calendar months on the 1st each month. I'll also update my progress for the previous month. So on Saturday I'll post my first goal list for May. I made a preliminary list and its pretty daunting. I've got so many known areas of things I need to learn and undoubtedly new ones will present themselves. In the past I've struggled with trying to do too many things at once at the expense of all of them getting done inefficiently. So I then tried to step back and concentrate on just one thing (life CFA study) and hope to knock things off the list more efficiently, that didn't work either. So hopefully I can find that right mix. I don't have any time restraints so there isn't an excuse. I will continue to make the same type of small trades that I'm comfortable with and see how the learning curve goes on...

I pretty much took the day off on Wednesday because I was running errands. I checked in after the close and had another one of those lucky days where the naked puts I sold moved in my direction by 50%, so I got up this morning and was looking to close those out but it was too late. It wasn't a huge deal, it was $180. I had sold naked $17 puts on (BAC) for .38 and they were .19 at the close yesterday. I had done the exact same pay early last week, literally sold for .38 and bought back for .19 and was looking to get back in it again. Well I got that chance but missed getting out a second time. This made me notice something though, I'm currently only putting on positions sizes that don't scare me, nor get me real excited. They aren't big enough to make me want to check in every 20 minutes and they're small enough that if the worse case scenario happens I'm OK with it. I don't know what the right position size is for me right now, I think until I get a grasp on...

I have spent most of the week just watching the market and going through my long watch list of stocks. Throughout the week have been able to take my long watch list with about 50 names and narrow it down to about 16 names which I am interested in. I will be looking at these select few of stocks this weekend in more detail and put some trade ideas together. Below is a copy of my 2nd pass watch list: I will post any ideas that I come up this weekend.

So I am getting past my mental block when it comes to size. I am going to play with the iron condor a little more but with very small size when it comes to risk and contracts. Which will in turn lead to a low reward. But I want to get more experience with this type of trade and the only way I am going to do that is by trading it. So I am going to use the SPY for such a trade. I am going to sell the 123/124/115/114 Iron Condor for a $0.35 credit, leaving my risk at $0.65. In the chart above I have highlighted in grey the area of profitablility for this trade. It is bascially profitable betwee 114.7-123.37. I think we have hit an intermediate top at 122.12 which kind of pisses me off as I got stopped out by $0.30 from my puts that I bought the other day which would now be in a profit of about $450. But that is niether here nor there, my timing was wrong. I also think that the January highs will be a very important level if we go down that far at around 115. Here is the Risk Profile from ...

I have been wanting to get involved with the XLE ETF for sometime now. But felt that my trading account would not give me enough time for the position to work out. So today I did a buy write at the $62 strike with May '10 expiration for $60.54 with the ETF currently trading at 61.66. Not sure why I did not just sell the $62 put, for some reason I wanted to actually own something. I think it is very likely that I get called out by May expiration which I am fine with and would look to initiate a new position in the same name. But if I do get called out by May it would be about a % gain for 24 days. If you look at the weekly chart I posted above 61 seems to be an important level on the weekly as it was resistance for several months. With this trade I am maxed out of my available $10k in the investment account either until I add more funds or if by May expiration I am called out of this position or the puts I have sold on NLY and ANH expire worthless. We will see in 24 days.

Ok. So I now have two seperate accounts in IB. One is for my investments and one is for my trades. I will continue to track it all on the same sheet. But I will add something that distingueshes them, not exactly how I will present it yet but I will keep you all posted. With that said a while back I had sold some puts in ANH and NLY in an attempt to get long the stock. In my investment account I have sold 5 May '10 7.50 puts @ $0.60 putting my basis at 6.90 with the stock currently trading at 7.12 and earnings coming up this week. I also sold 2 May '10 17 puts @ 0.28 on NLY putting my basis at 16.72 with the current stock price at 17. They also report this week. Let me also note that my trading account has $6k of capital and the investment account has $10k. In the investment side I will mostly just sell puts and write covered calls and look to collect dividends.

    Sent to you by Dominic via Google Reader:     The TESTED Method via Psychtrader by Darren on 2/4/10 Some have said that trading is 90% mental and 10% technical and that successful traders learn to remove emotions (or at least control them) from their trading decisions. The TESTED method is a process to help remove emotions from your trading and allow yourself to be proactive in your trading. An example follows that shows how important it is to use the TESTED method and the process used in the proper order. The first step, and probably most important, is the Target and that is where we will begin. Target A key decision that needs to be made is where you think a certain stock is headed, or at least where it's capable of heading. We'll use a metaphor for trading that involves a trip. Let's say we wanted to hold a conference in Las Vegas, and so a plan was mapped out and a date was agreed upon. Some of us would fly others would drive, and some might actual...

I am starting to like this guy just as much as Dr. Steenbarger. This is convenient since Dr. Steenbarger just announced that he is winding down his blog after 3 years or so and 3700 ish post along with three books, he is going to go work for some proprietary trading firm and will not be able to post as much.     Sent to you by Dominic via Google Reader:     Safeguarding Techniques via Psychtrader by Darren on 1/18/10 In Adlerian psychology there are what's known as safeguarding behaviors and they have a place in trading as well. Basically, we as humans want to protect ourselves from three threats to the self. Physical harm - we might get sick, die, etc. Social threat - we might not look good in the eyes of others. Loss of self-esteem - we might not look good in our own eyes. What follows are the six primary safeguarding techniques that we all use to protect ourselves from the threats listed above. Symptoms Developing symptoms provides an opportunity ...

    Sent to you by Dominic via Google Reader:     Re-framing via Psychtrader by Darren on 1/12/10 As a former therapist, one of the areas I would focus on with clients is the way in which they would perceive their situations. Using a technique called re-framing; I would help them see their "problems" from a different perspective.  Often times, clients would be able to overcome roadblocks simply by combating their negative perception of situations. This was quick and a huge relief for my clients and similar techniques are used elsewhere. In my wife's marketing career she would work on value re-framing with products for the company she worked for. In other words, she would bring about new value to an existing product simply by finding a new market or context for that product. Drug companies often use this same technique during clinical trials of drugs where the drug didn't do A, but it sure did do B. Rather than scrap the research done on the drug; they simpl...

This is exactly what we are doing with our blog. It is our electronic trading journal in addition to a virtual trading room.     Sent to you by Dominic via Google Reader:     Trading Journals via Psychtrader by Darren on 1/8/10 The image to the left should be recognizable by most of us as the American alphabet. It is from these 26 letters that billions of people are able to communicate on a daily basis. We learn the alphabet early on with rhymes and rote memorization so that we may contribute to society through our interactions. We all progress at different speeds, but eventually we all get to the point where we can recognize all the letters in the alphabet. It is at that point that we build upon that foundation and begin to spell words like C-A-T and T-R-E-E. These words are then combined to form sentences which consist of several words. From those sentences we form paragraphs and so on until we are able to write and communicate with others through pattern...

His post are always so relevant. I always take something away and can relate to many of his posts.     Sent to you by Dominic via Google Reader:     Core Ideas in Trading Psychology: Introduction to Trading Psychology via TraderFeed by Brett Steenbarger, Ph.D. on 4/24/10 This post will begin a review of the key ideas from my three trading psychology books and the roughly 3700 blog posts on this site. Wherever possible, I will link to posts and resources pertinent to each topic for ready reference. But first an introduction to trading psychology. The relevance of psychology for trading is based upon two important realities: 1) Trading is a performance activity, much like athletics or performing arts. Psychological variables influence both the acquisition of skills in any performance field and the application of those skills. While there is much more to performance than mindset alone--talents, skills, and interests must align--the wrong mindset can great...

I was really busy today and did not have the time to post the analysis for the 3 new trades that I added today. 1) PFE This is a stock that I tried to play via long calls but got stopped out but noted in my post about the trade that I would be interested in selling puts should the stock continue to pull back further ( Click Here to see Origninal Post ). Needless to say I was stopped out of my long calls. Since then I have been stalking the possible put sales as I eyed Support levels at 16, 15.40 and a bigger level at 14. My bet is that the 14-16 range holds for this stock. So today I sold the 5 Jan '11 $15 puts for $1 which would put my breakeven at $14. So lets answer the questions in order: Here are some questions that I want to answer: Is there an exit strategy should the stock rise? Why Jan 2011? You've never held anything that long. That's a maximum possible $1/$14 = 7.14% return for 9 months if you held until expiration, that hardly seems like the type of risk/reward ...

Although I am not making any trades right now I am using my time off to look for possible trade ideas, Analyze my trading results from the past 6 months, and set goals for the next 6 months. I think it is a great exercise to not make any trades at least for a couple of days upon returning from vacation, it allows you time to get back in tune with the market which I feel like I am doing. Plus I am just not comfortable jumping into positions with the major indexes and stocks and new bull market highs. Here are some of the things I am looking for in the next few weeks to months: 1) A bid up in VIX, I do not think we are out of the woods yet. There could be more frozen twinkies out there like the GS that can provide reason for selling. 2) Commodities to run through the summer, especially oil. 3) The dollar to pull back in reaction to inflationary implications from a run in commodities. 4) A run in Commodities could finally show inflationary pressures from low interest rates and we could se...

Yesterday I put on two new trades and before I could even make the time to post them I had already closed them out. The first was I sold May $17 puts on (BAC). I was tentatively looking for an entry point at $18 to write covered calls, but when it hit $18 yesterday I liked the price of the $17 puts at .38. I was more than willing to own at $16.62. So I sold 10 contracts, then this morning they are trading at .19 so I'm thinking I lock in 50% of the max gain in 24 hours with more than 4 weeks left until expiration. Though the original intention was to hopefully watch them expire worthless, once gain I changed my mind. But then shortly after I'm already questioning myself as to if I liked it when the stock was at $18, shouldn't I like it even better when it's at $18.50 and moved in my favor? I feel like having a plan doesn't mean anything if I'm going to over ride it 24 hours later. I also did the (POT) put spread sale that I saw on the IWO market primer. I actual...

In November of last year you may recall that I opened up an account with interactive brokers with $17,000 and my primary goals were as follows: 1) Develop a trading business plan. I do have a working document in place and plan to continue working on it over the next six months. 2) Learn as much as possible as well as try new strategies. I would have to say that the learning curve that I have tackled in the last 6 months, just amazes me. I have made more progress in the last 6 months than the whole 3 years I have been involved with the markets.   3) Remain profitable during the process. I actually set out a goal to make $500-$1000 a month not really knowing what to expect. As you will see below my total realized gain over the 6 month period that I set for myself came to $1,839 or 10.8% gain. I did not hit my target average monthly profit, but I nonetheless was able to remain profitable while learning a ton and trying out many different things. Link to Full trading results for A...

http://traderfeed.blogspot.com/2010/04/dr-bretts-coaching-insights-for-traders.html Sent to you via Google Reader Dominic

http://leighdrogen.com/caveat-emptor/ Sent to you via Google Reader Dominic

Dominic Di Bernardo has sent you a link to a blog: This is a must read. I know I have been guilty of this many times. This is actually something I am working on fixing as I try to be more and more "passively active". Blog: TraderFeed Post: Anxiety in Trading: Limiting Profitability by Micromanaging Trades Link: http://traderfeed.blogspot.com/2009/01/anxiety-in-trading-limiting.html -- Powered by Blogger http://www.blogger.com/

Another 1,000 Points Under the Belt : " The DJIA has traded above 11,000 twice now in the past two trading days, which was a level that hadn't been seen since September 2008. While there has been no shortage of discussion regarding the market getting ahead of itself, the 159+ days that it has taken the DJIA to clear the 10,000s range is actually longer than any of the other four 1,000 point ranges it has already cleared since the March 2009 lows. In the table below, we highlight the duration (in trading days) that it took the DJIA to clear various 1,000 point ranges on the way down during the bear market and on the way up during the bull market. For example, on the way down, the period of time that the DJIA last closed above 14K to its first close below 13K spanned a period of 21 trading days. If you think that was fast, the drop from its last close above 10K to its first close below 9K only took four trading days! As is typically the case, the market's declines were ...

Reflections on the Kent State University Program in Financial Engineering: Investing in Your Career : " I had the pleasure today of talking with graduate students from the Kent State University master's of science program in financial engineering . They were interviewing for internship positions at trading firms; those internships can eventually lead to full time positions with proprietary trading firms, hedge funds, and investment banks. I can't begin to tell you how impressed I was with the students. They blend analytical abilities, strong teamwork skills, and a sound work ethic. Most of all, they are learning tomorrow's skill sets today. The Kent State program is unique in that it combines a quantitative and analytical focus with practical trading skills. The program operates a trading floor on site and provides students with experience in trading a variety of markets. Guest speakers from the financial industry visit the students and provide real-world insight...

Bespoke's Sector Snapshot : " Below we highlight our 6-month trading range charts for the S&P 500 and its ten sectors. The Materials sector is the most recent one to take out its prior 2010 highs. Now six of the ten sectors are trading at new bull market highs. The defensive sectors -- Health Care, Utilities, and Telecom -- are still below their prior highs, along with the Energy sector. Financials, Industrials, and Consumer Discretionary have really left their prior trading ranges behind in recent weeks, but one has to wonder how long this recent push without even a minor pullback can last. Want more actionable advice from Bespoke? Subscribe to Bespoke Premium today. "

Growing Your Trading Size: How to Take More Risk : " A developing trader recently asked me one of the most common--and important--questions that I encounter: How do I become comfortable growing my size and taking more risk? One advantage to starting out trading small is that you have the time to make all your mistakes without wiping yourself out financially. Many traders take imprudent levels of risk early in their development and never survive their learning curves. But learning to trade small has its downfalls. Once habituated to a given level of risk and reward, we can find it difficult to adjust to the much larger dollar volatility of returns when we trade larger. Nothing is more discouraging than making money over an extended period trading small, only to give it all back in a few losing trades once size is increased. That larger size, increasing the dollar size of both wins and losses, can also magnify emotional responses to performance. Ironically, this can be as pro...

42 Days and Counting... : " It has now been 42 days since the S&P 500 has had a pullback (one-day or multi-day) of 1%. Since 1990, there have been 10 other periods where the index went 40 days or more without a 1% pullback. The table below highlights these occurrences. The S&P 500 is up 8.75% over the last 42 days. As shown, the number of days without the 1% pullback ranges from 40 to 70, and the price gain ranges from 4% to 9%. So while there have been longer periods of time without a 1% pullback, the current gain of 8.75% without a 1% decline is at the top end of the range over the last 20 years. Interestingly, once the streaks ended, the decline of 1% or more never got worse than -2.53% before another gain of 1% or more occurred. Want more actionable advice from Bespoke? Subscribe to Bespoke Premium today. "

  I found this at The Kirk Report and thought you may be interested: http://www.thekirkreport.com/2010/04/reading-less-practicing-more-getting-experience.html Dominic

S&P 500 & All Ten Sectors Overbought : " The chart to the right highlights the current levels of the S&P 500 and its ten sub-sectors relative to their trading ranges. The chart is included each day in our Morning Lineup , which is available to all Bespoke Premium subscribers. For each index or sector, the circle represents the current level while the tail represents where the index or sector was one week ago. The light red and green regions represent between one and two standard deviations above (or below) the 50-day moving average (DMA), while the dark red (and green) shading represents more than two standard deviations above (or below) the index's 50-DMA. As shown in the chart, the S&P 500 and all ten sectors are currently trading at overbought levels, so the recent strength in equities has been a tide that's lifted nearly all boats. To further illustrate this point, we would note that as of yesterday's close 92.4% of the stocks in the S&P 500 ar...