Some of you may be familiar with my trading style while others are not. I wanted to take some time explaining what we are doing here at Explosive Options and why we do some things. We may approach the trade from an unusual viewpoint but it works – and that is all that matters. This past week we booked some nice trades, 9 for 9 on trades outstanding from earlier in June. They didn’t start out that well of course but this last week relieved us all. I suspect if you have profits there is no explanation needed, but since we’re all in this together I feel obligated to share. We may not be perfect but with this approach we certainly won’t get hammered too badly. So, below I try to anticipate the questions in your minds and provide some answers.
- Why do you take trades off the table if the chart is not calling for it? This game is about taking profits when you have them. Options are wasting assets and time decay is a killer if you are a buyer of options. Hence, we have to recognize when we’re in a good (or bad) situation and manage effectively. We always have ‘options’ to make decisions, never feel you are locked into a corner. We can roll, we can sell upside calls, we can take half off the table, we can hedge or sell all of it.
- Why so many positions? Interestingly enough, I wasn’t asked this. However, my screens are always working and when I see opportunity I will let you know about it. If it means we open 14 positions, then so be it. Just be ready! This is about taking advantage where we can. If you are using good money management then taking on many positions should not be an issue.
- Why pick the strikes you do? I choose to play strikes at or near the money but more importantly is the delta of the option. I prefer those in the mid 40’s but have found some of the BEST gains are deltas that lie between 38-42, as when they rise to 50 that’s where the option really explodes.
- Why so many commodity names? Commodities are a group where I have had some great success over the last few years, so I look here for trade ideas. I go where the money is flowing, and these groups certainly provide the liquidity and big movement we need to see.
- What is necessary for us to win? Option trading is tricky and many traders don’t last too long. Why? Because they are greedy, impatient and full of revenge and rage. They remember the pain in the past and seek to ride out trades far longer than they should. I’ve been there, and so have you. I seek to find the trades with the best probability to gain speed, acceleration and velocity in the stock price. My technical tools have worked well for me over the years.
- Why do we need patience? This is always tough to explain, but suffice to say my timing is not always perfect. However, I trade based on the stock chart and not the option, therefore we must always look to the chart to see if we’re comfortable staying in a trade or not.
- At what point do you say ‘Uncle’ on a trade? Again, it’s about the chart and where the price is vs the option. Our Apple trade last month melted in the hot sun as we got blasted on the June play – it happens (not too often) but we come back stronger.
- Why on earth were you watching the market and sending emails while you were on vacation? I want you all to know I care about you and what we are trying to build here. I’m as genuine as they come and I’m really no different than YOU. While I’ve been at this for many years we can all learn from each other, I trust we’ll all be better off sharing. I have a responsibility to make sure you can take advantage of my trade ideas, I cannot leave you hanging. The market doesn’t know or care that Bob is on vacation – so if I have to help you on my OFF time then I will do it.
- Should we wait for your sell alert? NO need to wait for me, but you can certainly do so. Remember, I am not managing your portfolio but merely recommending trade ideas to you. I would caution you about being too greedy, be proactive and take advantage of situations.
- Why are you selling into a big rally? When long calls I will use big rallies to sell into every single time. Likewise, when long puts we’ll use big drops to unload positions. It’s far easier to sell when there are buyers than when the bids are taken off. Remember, we have time against us so when given the chance to exit for nice gains, we do it. If there are new trade ideas to be had we’ll do those, too.
