Thursday, June 26, 2008

An Option Strategy That's Working Now?

Summer. One of the contributors to this blog is off trying to climb a mountain. Good luck Dan! However that's no excuse to stop writing - our customers certainly don't stop the good support and strategy set-up questions. We therefore will recap some of the latest questions worthy of sharing - more in a series coming!

Options Strategy - What's Working Now?

Has anyone had any promising results configuring a scan for unusual options volume? My results have been mediocre at best...

Our answer featured a short strategy that looked for spikes in put volume.

"SHORT- Heavy Options Vol w/2.5 put/call and 400%vol .50=SL Hld:25 MinsNo"
To repeat this is a short selling strategy. It looks for heavy options volume (trading 400% more than usual volume today) with a 2.5 Put to Call ratio.

The OddsMaker helped us determine the best position management rules for trading this strategy. They call for a $0.50 stop loss and a holding period of 25 minutes. This advice however can change with each new day's worth of history added to the backtest results. You should run the OddsMaker each day to determine if an advantage still exists.

Tip: Notice for the sake of easy record-keeping we incorporate in shorthand the trading rules into the name of the strategy. This helps later when we look back and try to understand how to trade it.

Update: Dr. Brett Steenbarger pointed me to this intriguing article by Hanna Capital, "Using Options For Short-Term Trading". I liked their trading rules and will seek to incorporate them into future strategies for The OddsMaker to judge!

Footnotes and Related Articles:

  • Check out the whole category of articles written about patterns we've modeled from various other authors and articles we've come across called: Strategy-Sessions
  • Use The OddsMaker to further understand what trading rules would produce the optimal trading outcome for this strategy in the recent market. Trading rules would include the answers to these questions: How long to hold each opportunity? When during the market session should this strategy be traded? Where should the stop loss be set?
  • Remember that these set-ups are sketches meant to give you an idea how to model your own trading plan. Use this 'as is' or modify it to your own liking as many others do. Know, however, that and all individuals affiliated with this site assume no responsibilities for your trading and investment results. The indicators, alerts and all other features are for research purposes only and should not be construed as investment advice
  • See this video on our Collaborate function to learn how to open these strategies inside Trade-Ideas PRO

Sunday, June 15, 2008

Trade-Ideas Going Mobile?

It seems that since the introduction of the iPhone SDK, many innovative companies are racing to develop tools for the next iPhone in 3G coming out next month.

E*TRADE also just released mobile trading capabilities exclusively for the Blackberry.

Combine these events with Trade-Ideas' new trading automation (with selected brokers), and we may be heralding a renewed emphasis of mobile trading.

Is there a demand for this kind of trading?

I imagine a trader headed out to lunch, to the bathroom, or to get a haircut and wanting to still know when an alert comes through a particular strategy.

I don't frankly know so I've placed a poll to find out on the right hand side of the blog. Let me know with a click or a comment if this would be interesting to have enabled in your Trade-Ideas or Scottrade or any other TI-powered account.

Wednesday, June 11, 2008

One Trader's Transition to Automated Trading: Insights for You

Dave Mabe is a trader first and entrepreneur addicted to trading second - my kind of fellow.

Following his slow transformation from entirely discretionary trading to one that relies increasingly on automated trading fascinates anyone reading his posts on the subject.

He describes a path whose benefits include, among others, less time behind the computer, less stress and fatigue, and even better vision - all while trading profitably.

Just like in trading, Dave scales into this new automated trading approach (which involves new tools and new thinking) by keeping lot sizes low. This manages his risk while he keeps his ongoing discretionary, manual trading method. Dave records every trade during this transition using his enormously helpful journal and reporting tool, StockTickr. His progression moves forward based on results from each approach. Imagine a process that you can follow where no emotion is involved, the gut takes a vacation, and the hard evidence leads to refreshingly obvious conclusions. I think he's on to something great.

Early Conclusions from Dave's Automated Trading
  1. Automation is the natural evolution of a trader who develops a detailed trading plan and the discipline to follow it. The more loosely defined a trading plan is, the more indescretion and gut-making decisions there are. These decisions are based on what Dave calls, "a constantly moving target".
  2. Automation gets the flawed human behaviors out of the way while keeping the best parts. Hunched up shoulders, strained necks, blurry eyes all result from the stress at being on high alert throughout the trading session. This only reduces the chances of coming out a winner in any trade - and all it takes is one real bad one to ruin the day. Automation taps into our better selves because it uses our skills at planning and creative design. Behaviors we are much better at during moments away from the day's action. More information about the best behaviors a traders can develop are found reading Dr. Brett Steenbarger's essential TraderFeed.
  3. Automation allows for trading on your terms - based on your timing. Dave designs strategies that work only during certain times of the day - backtested as the best times to be trading. This approach to mining the market during key moments frees up time and means less work for better results.

I encourage you to read the articles in any order. His insights into automation may be what your own trading evolves into. It's good to have an idea where things may be headed.

Friday, June 06, 2008

Partners Know Powerful Tools When They See It

Hopefully you like Trade-Ideas. You, dear reader, are either a subscriber or you're in the research and investigation process - trying to decide if you should pull the trigger.

Let's help you with the due diligence and your decision. If you are already a subscriber, I've got some ways you can benefit too.

A Receipe for Staying Relevant to Customers

Individual traders, investors, and our other customers built Trade-Ideas and continues to fuel our growth.

As Trade-Ideas withstood the test of time and the market, larger partners began to understand the technological innovation we continually produce. That's the key of any company's success, really - how well does a company continue to innovate and mark the edge of what's possible. If you stand still - you stagnate. People and potential partners can smell innovation (like good cookin') a mile away.

They can also smell the garbage - if that's what your making too.

These Partners Already Made the Decision for You

Take a look at the current offers from these partners that offer Trade-Ideas and its different components. Things are always changing so the list and the what's being offered will be updated regularly. The offers themselves are small inticements when compared to how much Trade-Ideas stands to improve the way you trade and how you manage risk.

Existing customer? We're glad you're here. We want the best for you - if that means canceling your account and using a Broker that's offering our tools for less or free, you should try it. Otherwise stay and know that you are supporting our cause and continued operations - plus using TI PRO will almost always guarantee that you see and use new features first.