trading weekly options for a living...

WklyOptions

Well-known member
269 24
Hi, T2W traders,

Going forward, I hope to post the weekly options trades for the next couple of wks - hopefully to stimulate other options traders to learn chart-reading skills with clarity & precision.

No matter the options strategy (and Greeks being exploited) - price movement is a major determinant of all options trades being profitable or unprofitable.

Here are the 4 trades closed for the 1st full week of May:

May 2014: WYNN (5/2/14) (+6.8%) in 9 days. EXPE (5/5/14) (+36.2%) in 4 days. F (5/8/14) (+46.8%) in 3 mos. FDO (5/9/14) (+17.8%) in 1 wk.

EVERYBODY can learn to read charts well. Any indicator can do the job - however, I learned a while ago that using multiple time frames helped greatly to identify, isolate, follow/monitor, and enter/execute into all my trades.

As a weekly options trader, I primarily focus on the Daily & Hourly charts - and key off the M15, M30, charts for precision entry signals.

Of course I make sure that my trade direction is in "alliance" with either/or/both the Weekly & Monthly trends. These trends are created by the sum of the largest institutional traders - so my weekly trades must "respect" their price action power.

On average, I follow approximately 40 sectors/ETFs, plus some 75 very liquid, very volatile market leaders/stocks to trade per week.

I try to capture 2-5 trades per week - and I ALWAYS FOCUS on PRECISION - my weekly goal is to WIN every single trade! If I'm setting STANDARDS for myself - I might as well set the highest, right?

I know there are very experienced traders and chart readers in T2W here - so I will not overload this thread's post with technical details. If readers/members want precise details and go over charts to the 4 trades above (closed trades), just PM me and I can send you details of the trade setups, the waiting part, the entry, and the trade mgmt all the way thru the exit.

Briefly, the technical features I require include:

1. Trading at Key Support or Key Resistance - as defined by at least a double bottom (or top) - but can be triple or quadruple bottoms (or tops).
2. Higher time frames (Weekly and/or Monthly) have dominant trends - e.g., uptrend defined by upward sloping EMA(20) plus prices above the EMA(20) line.
3. I wait for a pull-back against the dominant trend.
4. I key off the M15/M30 charts for entry.
5. I use At-the-Money options to maximize exploiting extrinsic time value. I do this by selling credit spreads. I use credit spreads about 90% of my trades.
6. Sometimes if the higher time frames are extraordinary in strength & momentum, I will use Out-of-the-Money options (calls if going upside) to pay a small debit per option - and try to maximize leverage & profitably if the BIG MOVE occurs before expiry of the weekly option. This is the #1 problem with buying Out-of-the-Money weekly options - all of the factors including the direction & magnitude & appearance of the BIG MOVE - must be perfect! Using OTM options require that i accept the possibility of 100% total loss of the debit - and may require a 2nd re-entry (to fire a 2nd "bullet" into the setup). Of course - the ADVANTAGE is if that if/when my analysis is correct, the profits can easily be 300% or more! I use OTM debit trades about 10% of the time.

Since I key off the M15/M30 charts for entry - almost 100% of my trades immediately become profitable quickly. This is a CLUE itself - if the trade entry does not become profitable quickly, I must be ready to hedge/adjust/exit.

Later this weekend - if I find an ideal weekly option trade setup - I will post it here with some of the technical details as above applied to its setup.

Over the past several years of trading weekly options - there is hardly ever a week where I cannot find at least 1 solid trade setup. However, the setups may happen on Mon - Fri anytime!

This is why trading is very difficult - requires diligent stalking, tracking, plus conviction to execute the proper trade.

Well, that's it for now - pls feel free to PM me directly with questions or if you want a copy of the trades above in PDF format. I will post more if/when I see the next solid trade setup(s).

Thank you.

WklyOptions
 

WklyOptions

Well-known member
269 24
Week of May 11th, 2014

T2W members,

I have been looking at the GM price action. At this time, have opened a Weekly Option trade on GM:

Sold to Open GM May(17th) $34 Call - received credit of (+$0.53) per option.

Bought to Open GM May(17th) $35 Call - paid debit of (-$0.13) per option.

Net Credit = (+$0.40) per spread.

Max Risk = (-$0.60) per spread.

Duration = 5 trading days maximum.

Profit Exit = Will exit if spread net debit is (-$0.05) or less to close the spread.

Alternate Exit = Buy to Close GM May(17th) $34 Call at debit (-$0.05) or better.

Will update trade notes & adjustments (if any) on daily basis.

Let's see how the GM price action unfolds now...

WklyOptions

PS - feel free to PM your questions...
 
Last edited:

WklyOptions

Well-known member
269 24
T2W members,

I have been looking at the GM price action. At this time, have opened a Weekly Option trade on GM:

Sold to Open GM May(17th) $34 Call - received credit of (+$0.53) per option.

Bought to Open GM May(17th) $35 Call - paid debit of (-$0.13) per option.

Net Credit = (+$0.40) per spread.

Max Risk = (-$0.60) per spread.

Duration = 5 trading days maximum.

Profit Exit = Will exit if spread net debit is (-$0.05) or less to close the spread.

Alternate Exit = Buy to Close GM May(17th) $34 Call at debit (-$0.05) or better.

Will update trade notes & adjustments (if any) on daily basis.

Let's see how the GM price action unfolds now...

WklyOptions

PS - feel free to PM your questions...

Well, here is the update to the GM Weekly Option trade,

The US market was down 3-digits today. GM did retreat some (on so-called more recalls being required). However, the price action on the GM Hourly and Daily charts were not as weak as expected.

In addition for the past few days, the GM Weekly call credit spread never really moved into a highly profitable trade.

Key Trader Clue = if the markets are weak, but the GM price action is only partially weak AND the GM call credit spread never really dropped to < ($0.10) in value = then it may be time to exit (else get burned if GM rips up higher in price).

So today - I exited the GM trade at a Net Credit of (+$0.39) - effectively at break-even from the entry price.

No profit - but, also, no loss! Just had to respect the price action and the fact the call credit spread never went into the ideal profit region desired.

Time to move on...next weekly option trade coming up soon...

Thanks.

WklyOptions
 

WklyOptions

Well-known member
269 24
HUM had posted better-than-expected earnings results last week and its price action remained bullish.

Today the intraday price action was strongly bullish and remained thru the entire trading session.

Bullish trade on HUM using weekly options today:

Sold to Open HUM May4(23rd) $121 Put @ (+$1.22)
Bought to Open HUM May4(23rd) $118 Put @ (-$0.45)

Net Credit (+$0.77)
Max Risk (-$2.23)
Max ROM (+34.5%) in 1 wk

Time to let this HUM trade unfold...

WklyOptions
 

WklyOptions

Well-known member
269 24
One of the most common trading misconceptions (and there are many!) is that learning to trade well can lead to consistent profits and financial freedom and wealth.

Embedded in that statement above are two critical incorrect assumptions:

1. Trading can lead to consistent profits. In fact < 5% of individual traders can churn out a profit > $100k in one trading year. Even more discouraging, < 5% of individual traders can produce consecutive 2-3 yrs of profitable trading.

2. Trading profitably leads to financial freedom & personal wealth. Here, there is a major disconnect - having the ability to profit and generate income DOES NOT equal the ability to create personal wealth and financial freedom.

Becoming truly wealthy requires a very specific set of critical success factors:

3. A focus on specific STANDARDS to accumulate assets that appreciate and/or generates income.
4. A passion to measure one's well-being (or self worth) with increasing assets (or net worth).
5. A high internal valuation of accumulation >> consumption.

There are many thoughts and opinions on the above issues to be discussed - especially for the trading newbies and individual traders here at T2W.

I just wanted to initiate some observations above - to generate topics for more input later from the perspective of the home-based trading career professional.

Attention to all traders - I know and have seen professional traders able to make profits, but never become financially free!

The trading career pathway has very discrete metrics:

6. Learning to achieve consistent profitability.
7. Learning to achieve financial freedom = trading profits (plus perhaps other income sources) is > than living expenses (monthly).
8. Learning to build wealth = actively allocate profit % to investment projects towards assets that appreciate and/or generate income.

Note that (6)-(7) require the home-based trader to trade time for $.

However in (8) above, the home-based trader is now able to generate passive income hopefully that is >> living expenses. Now time is freed up from the trading process - and this starts the 2nd "career" into the wealth-building pathway.

In closing, learning to trade profitably on a consistent long-term basis may be possible - but the statistics indicate it is possible only for a small minority of traders. The topics/support available thru T2W are certainly beneficial "tools" available for the individual trader.

But also don't forget - profitable trading <> wealth & financial freedom.

You need to do the studying and put in the effort(s) and time - to learn about the wealth-building process. You will discover that it is very "different" and very separate - from the trading career process.

Thank you.

WklyOptions
 

WklyOptions

Well-known member
269 24
HUM had posted better-than-expected earnings results last week and its price action remained bullish.

Today the intraday price action was strongly bullish and remained thru the entire trading session.

Bullish trade on HUM using weekly options today:

Sold to Open HUM May4(23rd) $121 Put @ (+$1.22)
Bought to Open HUM May4(23rd) $118 Put @ (-$0.45)

Net Credit (+$0.77)
Max Risk (-$2.23)
Max ROM (+34.5%) in 1 wk

Time to let this HUM trade unfold...

WklyOptions

T2W traders,

The HUM trade was exited today - and the Weekly Options Puts expired Out-of-The-Money (OTM)!!!

I was able to capture the entire credit.

Result = (+34%) in 1 week!

My next Weekly Option trade is all setup - next week is a shortened Memorial Day week. Even better for Weekly Options trading!

I will post my new Weekly Options trade later here - stay tuned!

Have a great Memorial Day Holiday wknd! Thanks.

WklyOptions

PS - I use primarily the Hourly & Daily charts for technical analysis/entry setups. Just email me if you want a copy of a Technical Analysis pdf guidebook on the use of Divergences. My entries are usually keyed off Divergences. And several types of Divergences have high reliability > 80% win rates!
 

WklyOptions

Well-known member
269 24
PCLN Bear Call Credit Spread

Jun 2014 - PCLN @ $1211.25

New Entry Alert: Spread Order (Weekly Options)

Sold to Open (-1x) PCLN Jul1(3rd) $1210 Call @ (+$12.37)

Bought to Open (+1x) PCLN Jul1(3rd) $1230 Call @ (-$5.14)

@ Net Credit (+$7.23)

Credit Received: (+$7.23) or (+$723) per spread

Initial Max Risk: (-$12.77) or (-$1277) per spread

Maximum Return on Margin: (+56.6%) in 4 trading days

Bet-size allocation: allocate 1% of portfolio value

PCLN has been in a bearish trend & momentum bias over the past couple of months. More recently it has established Key Resistance at $1292.66.

The Hourly and Daily charts indicate ongoing bearish trend & momentum bias.

Plan:

1. HOLD positions.
2. Extract the extrinsic time value of the short (-1x) PCLN Jul1(3rd) $1210 Call option.
 

WklyOptions

Well-known member
269 24
Jun 2014 - PCLN @ $1211.25

New Entry Alert: Spread Order (Weekly Options)

Sold to Open (-1x) PCLN Jul1(3rd) $1210 Call @ (+$12.37)

Bought to Open (+1x) PCLN Jul1(3rd) $1230 Call @ (-$5.14)

@ Net Credit (+$7.23)

Credit Received: (+$7.23) or (+$723) per spread

Initial Max Risk: (-$12.77) or (-$1277) per spread

Maximum Return on Margin: (+56.6%) in 4 trading days

Bet-size allocation: allocate 1% of portfolio value

PCLN has been in a bearish trend & momentum bias over the past couple of months. More recently it has established Key Resistance at $1292.66.

The Hourly and Daily charts indicate ongoing bearish trend & momentum bias.

Plan:

1. HOLD positions.
2. Extract the extrinsic time value of the short (-1x) PCLN Jul1(3rd) $1210 Call option.

Hi, T2W readers,

PCLN made a strong bullish move yesterday that has put the bearish call credit spread into a net losing profile. Hence it will need to be adjusted and held longer than this week as originally planned. :-0

Tomorrow is the day of the jobs report release in the U.S. Given the shortened holiday trading week here - and the decreased trading volume - the report may trigger a more-than-normal volatility impact. Also note that U.S. equities markets will close at 1pm EST.

Today's adjustment (PCLN closed at $1237.84 :!:):

1. Bought to Open (+1x) PCLN Jul1(3rd) at (-$3.20) today.

Contingency plan:

2. HOLD for release of the jobs report tomorrow morning. If the report unleashes a strongly bullish price move > $10 in the PCLN price action, the entire campaign may be exited with break-even or even some profitability.

3. If the price action is strongly bearish - the campaign will be held to expiry tomorrow into the closing period.

4. If the price action is mediocre - neither strongly bearish < $1215 or > $1250 - then the campaign will be rolled forward into the Aug expiry period.

Well, for now - time to enjoy the outdoor fresh air! Time for a workout. Then relax rest of today. :clap:

Tomorrow will be a new day - will be ready for trading action and adjustments! (y)

More to come tomorrow...stay tuned...same Bat time...same Bat channel! ;)

Regards,

WklyOptions
 

lloydbee

Well-known member
275 17
Hi Wkly,
I just saw this thread, good on you for putting in the effort to post these posts. I've done a similar thing for about 4 years and it can take a fair amount of time... so good effort.
Lloyd
 

WklyOptions

Well-known member
269 24
Hi Wkly,
I just saw this thread, good on you for putting in the effort to post these posts. I've done a similar thing for about 4 years and it can take a fair amount of time... so good effort.
Lloyd

Hi, Lloyd,

Appreciate your input! Also read thru some of your posts in other threads. Looks like you are an active options trader also. Do u trade weekly options? Or swing trade for couple of days/wks? Or longer?

Thanks.

WklyOptions
 

lloydbee

Well-known member
275 17
Hi, Lloyd,

Appreciate your input! Also read thru some of your posts in other threads. Looks like you are an active options trader also. Do u trade weekly options? Or swing trade for couple of days/wks? Or longer?

Thanks.

WklyOptions

Hi Wkly,
you are correct, I am an active options trader, my typical trade these days is about 2-3 days with some trades (strategies) running a little longer. I am definitely a short term trader though as I would never do a trade more than a month out.

I have been actively trading Weeklys since week Jun4 2010. Back then everything I knew about trading options changed for the better.

As you probably discovered from reading some of my posts I am an avid campaigner for Options and I believe no other form of trading compares or can compete with trading Options.

You could say I am an absolute Options junkie, I just love then, love trading them.
Lloyd
 

WklyOptions

Well-known member
269 24
FAS bullish diagonal call spread

Hi, T2W members,

Here is an options trade from today on the financial 3x ETF --> FAS. It is a bullish trade longer-term out to at least the Aug expiry (see attached Daily-Monthly charts).

I purchased an Aug OTM call - and then sold the wkly Jul ATM call. I plan on funding the Aug OTM call purchase by using several - and serial - selling of the wkly ATM calls. :cool:

I plan to adjust/roll on the ATM wkly options - if the extrinsic time value < ($0.10):

Sold to Open (-10) FAS Jul4(25th) $103 Wkly Call Option @ (+$0.84)

Bought to Open (+10) FAS Aug(20th) $107 Call Option @ (-$3.05)

Initial Cost Basis & Max Risk = Net Debit (-$2.21) = (-$2210) for 10-Lot.:cool: Bet size larger than normal b/c this is a very hedged strategy - low risk.

Plan:
1. Maintain short weekly call option as long as extrinsic time value > ($0.10).
2. If ETV < ($0.10) - plan to roll to the next expiry week.
3. Hold long Aug $107 call thru expiry - as long as Daily, Monthly charts bullish.
4. Look to generate income from short weekly call options to reduce Cost Basis. :smart:
5. Compound returns by reducing Cost Basis and rolling options as needed. :whistling

I'll post weekly updates on this FAS trade - or when major adjustments needed.

Regards,

WklyOptions
 

Attachments

  • FAS - Dly & Mthly TOS Charts - ZBT New Entry - Bullish.png
    FAS - Dly & Mthly TOS Charts - ZBT New Entry - Bullish.png
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WklyOptions

Well-known member
269 24
Hi, T2W members,

Here is an options trade from today on the financial 3x ETF --> FAS. It is a bullish trade longer-term out to at least the Aug expiry (see attached Daily-Monthly charts).

I purchased an Aug OTM call - and then sold the wkly Jul ATM call. I plan on funding the Aug OTM call purchase by using several - and serial - selling of the wkly ATM calls. :cool:

I plan to adjust/roll on the ATM wkly options - if the extrinsic time value < ($0.10):

Sold to Open (-10) FAS Jul4(25th) $103 Wkly Call Option @ (+$0.84)

Bought to Open (+10) FAS Aug(20th) $107 Call Option @ (-$3.05)

Initial Cost Basis & Max Risk = Net Debit (-$2.21) = (-$2210) for 10-Lot.:cool: Bet size larger than normal b/c this is a very hedged strategy - low risk.

Plan:
1. Maintain short weekly call option as long as extrinsic time value > ($0.10).
2. If ETV < ($0.10) - plan to roll to the next expiry week.
3. Hold long Aug $107 call thru expiry - as long as Daily, Monthly charts bullish.
4. Look to generate income from short weekly call options to reduce Cost Basis. :smart:
5. Compound returns by reducing Cost Basis and rolling options as needed. :whistling

I'll post weekly updates on this FAS trade - or when major adjustments needed.

Regards,

WklyOptions

T2W traders,

FAS closed down to $101.74 - the short Jul4(25th) weekly call option expired worthless Out-of-The-Money (OTM). (y)

On Monday, I will again sell a new At-The-Money weekly call option against my long Aug call position to exploit capturing more Extrinsic Time Value (ETV). This will also help to reduce the overall Risk and Cost Basis of the long Aug call option. :clap:

This is part of the plan - first exploit and lock up as much ETV as possible to get to a Cost Basis of zero on the long Aug option. Then look to adjust the long Aug call to a better strike/expiry to lock up profits.

More updates soon on Monday. Stay tuned...

Questions? Ideas/observations?

Regards,

WklyOptions
 

WklyOptions

Well-known member
269 24
T2W traders,

FAS closed down to $101.74 - the short Jul4(25th) weekly call option expired worthless Out-of-The-Money (OTM). (y)

On Monday, I will again sell a new At-The-Money weekly call option against my long Aug call position to exploit capturing more Extrinsic Time Value (ETV). This will also help to reduce the overall Risk and Cost Basis of the long Aug call option. :clap:

This is part of the plan - first exploit and lock up as much ETV as possible to get to a Cost Basis of zero on the long Aug option. Then look to adjust the long Aug call to a better strike/expiry to lock up profits.

More updates soon on Monday. Stay tuned...

Questions? Ideas/observations?

Regards,

WklyOptions

Hi, T2W traders,

Going into the closing NYSE session - FAS was trading at $102.

I made the following adjustment:

Sold to Open (-1x) FAS Aug1(1st) Weekly $103 Call @ (+$0.95) credit (y)

So now - the current position and trade campaign update is:

Short (-1x) FAS Aug1(1st) Weekly $103 Call @ (+$0.95)

Long (+1x) FAS Sep(20th) $107 Call @ (-$3.05)

Initial Cost Basis (Risk) = (-$2.21)

Adjusted Cost Basis = (-$1.26) :clap:

Plan: continue to short front week call option until the Adj Cost Basis = 0 (then will have risk-free campaign).

I'll update this post again if/when the next Adjustment is made.

Questions? Observations/ideas?

Thank you.

WklyOptions
 

WklyOptions

Well-known member
269 24
FAS campaign = now Cost Basis positive but NOT RISK FREE!

T2W traders,

Today during the NY session (in between trading Eurostyle binary options), FAS had declined sufficiently that the front weekly call option had only minimal extrinsic time value left over.

So it was time to roll out and down (in strike price) to the new front weekly call option to generate extrinsic time value that I can capture:

Bought to Close (+10) FAS Aug1(1st) $103 Weekly Call option
($0.09-$0.16)

Sold to Open (-10) FAS Aug2(8th) $100 Weekly Call option
($1.83-$2.02)

Filled at Net Credit (+$1.75).

Current position(s) =

Short (-10) FAS Aug2(8th) $100 Weekly Call @ (+$1.89)

Long (+10) FAS Sep(20th) $107 Call @ (-$3.05)

Prior Adjusted Cost Basis = (-$1.31) per contract/spread

New Adjusted Cost Basis = (+$0.44) per contract/spread :clap:

NOTE = the new Adjusted Cost Basis is now > $0 - which means that I have already recouped my initial investment of (-$3.05) per contract! (y)

ALERT = however, this FAS campaign is NOT in a risk-free position even if my Cost Basis is actually positive in my favor now!

The current FAS diagonal spread is a BEARISH spread - so IF/WHEN - FAS turns back to the UPSIDE, then I must be alert and be ready to adjust/roll out of the front weekly call option from its current short strike at $100! :sneaky: :!:

Again - a Zero Cost Basis (actually positive in my favor) does NOT equal Risk Free! Just an important Lesson Learned here.

I still must know the Risk Profile for all of the options spreads that I use in my arsenal to generate income from the options marketplace! :cool:

Well, I will continue to adjust and "harvest" extrinsic time value on the FAS front weekly call options through the Aug weeks ahead. I'll keep you posted asasp...

Regards,

WklyOptions
 
 
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