3 Things You Need To Be A Successful Trader

by OptionPundit on November 10, 2014

So you think you can trade? Many traders, especially the beginners tend to think that trading is easy.

Ready2Trade

Attracted by glitzy returns promised by various marketing campaigns, new traders tend to think that investing or trading is going to be an easy money making machine. And I am often asked why is it so?

One of the key reasons is that contrary to traditional business, it is much easy to start a trading business. Have extra cash, open a discount brokerage online account and voila, you are all set. Money rolling in!!

The reality is much different. Ask any experienced trader and he is going to tell you that trading is probably the toughest thing you will do for an easy life. There is no doubt that many traders have made a lot of money, much beyond what one could do from day-to-day job, but this also a fact that even professionals find it difficult to trade market. Ever heard of Warren Buffett’s famous bet where he says that majority of the professionals can’t beat simple S&P500.

I personally think that one needs to experience at least one full market cycle before concluding that trading business is yours. In current market cycle term, it means having at least about 7 years of experience i.e. Bear market of 2007-09 and then bull market from 2009 onwards. While some may say this market is different from XYZ times, yes it maybe but just like any other business trading and investing also boil down to some common attributes.

It goes without saying that in order to operate a business successfully you need to understand it well i.e. all inputs, all the levers that control the output. Be it things like why should you trade, which market, long-term or short-term, which strategy and why, which broker, which system and the list goes on.

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I have been searching to find what makes a good trader, what allows some people to excel, while others continue to languish? In this quest I have been talking to many successful traders and based on my research and conversation, I have summarized into three human qualities. The good news is that all three can be learnt. The bad news is that you have to TAKE ACTION.

So lets get started.

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30 Year Bonds, Which Way Forward?

by Ethan on September 18, 2014

Scottish Poll Results #ScotlandDecides will be available tomorrow. The GBP condor trade idea can now be closed for +50% collection of profit in just two day. If you followed it, please close the trade and book your profits.

Now over to the the 30 Year bonds.

The 30 Years Bonds futures are trading at 136.06 (as of this writing), testing an important support level at 135 which has been very well respected as both support and resistance multiple times since 2010 very obvious if you look at the attached weekly chart.

Bonds, Which way Forward?

Right now, I am bearish bonds. There are 2 reasons for my bias:

  1. One, recent weeks’ price action has been very weak
  2. Two, I am not seeing strong commitment from bulls even though price is testing a strong level.

Should price close below 135 at the end of the week, I would look for a setup to go short and update to IFO subscribers. NO action, unless price confirms.

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Regards
Ethan

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Scottish Referendum – Opportunities for Options Traders

by OptionPundit on September 16, 2014

Scotland’s independence will be determined by Scottish Referendum poll results on 19th.  Polling stations in Scotland will be open from 7am until 10pm on Thursday 18 September for the public to cast their vote on independence. A key question before determining any trading opportunity is when will Scottish referendum result be announced?

According to The Guardian-

“The unofficial estimated time of the result is around 7am on Friday morning, but the lack of precedent makes this hard to predict.

All these timings are based on Edinburg timezone. In order to check timing on global level, you may want to use this world clock.  Counting starts when the polls close at 10pm on Thursday 18th so early results could trickle in from around 1am and best guess will be that most of the results will pour in from 3 – 6am. Whatever it maybe, assume that from 10pm on Sept 18 till 7am Sept 19th, it will be volatile.

So what does Scottish independence mean for Option Traders? Are there any trading opportunities for Option traders?

British Pound Movement (Past 2 years)

Attached chart shows British pound weekly movement for the past 2 years.

During the past several years, markets have gone through multiple crises e.g. Greek (Euro exit) crisis, The fiscal cliff, Cyprus, Euro Crisis to name a few. The QE infinity taps were open and nothing really mattered much in-spite of lot of noise before the event. Will it be different this time? I don’t know.  What I know is that currently implied volatility of British Pound aka cable (GBP) is at record high levels. Options are pricing roughly 2% or 350 pips move in either direction. Dec futures are trading at around $1.62 level as of this writing and thus based on implied move that range is $1.59 to $1.65.

 

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Based on the currentl IVs, here is a trade I am envisioning-

  • Sell to Open Weekly 6b Futures 166 Call
  • Buy to open Weekly 6b Futures 167 Call
  • Sell to Open Weekly 6b futures 157 Put
  • Buy to Open Weekly 6b futures 156 Put
This will generate $0.0020 credit (Multiplier is 62500). The options expires on Sept 19th i.e. Friday i.e. the day of Scottish Referendum Poll Results. If however, the trade is already profitable, before the announcement, you may want to book profits beforehand.  The risk is to lose $0.0080 thus reward/risk of this condor is 1/4.
A watch-out though- before you follow this trade make sure you know how condors work? make sure you understand how future options work and also make sure you have a full plan before entering into the trade. Even though this is a high probability set-up to keep $1, there is also probability of losing $4 that every $. There is NO FREE lunch.

Disclaimer- As of this writing I am in GBP condor trade (different strikes as I entered into it last week). I also have other GBP trades. I might open, change strikes, close etc, anytime without prior notice. AS ALWAYS, All e-mails are for educational and entertainment purpose only. These are NOT trade recommendations. You should do your own due diligence and follow your own trading plans.

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Emerson Electric (EMR) – A Bearish Trade

Emerson Electric Co. (EMR) is a diversified global technology company. The Company is engaged in designing and supplying products and technology, and delivering engineering services and solutions in a range of industrial, commercial and consumer markets globally. The Company operates in five business segments: Process Management, Industrial Automation, Network Power, Commercial and Residential Solutions, and […]

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Tesla Motors Double Top or New Break Out?

Tesla Motors (TSLA) just hit another all time high and then quickly slipped below the previous 52 wks high. Points from such extremes are of importance. Is TSLA going to make a new high or making a double top? From technical charting perspective, there can be both bullish as well as bearish case. However, as […]

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