Generate consistent income with a smart weekly options strategy Profiting From Weekly Options is a clear, practical guide to earning consistent income from trading options. Rather than confuse readers with complex math formulas, this book concentrates on the process of consistently profiting from weekly option serials by utilizing a series of simple trades. Backed by the author's thirty years of experience as a professional option trader and market maker, these ideas and techniques allow active individual traders and investors to generate regular income while mitigating risk. Readers will learn the fundamental mechanisms that drive weekly options, the market forces that affect them, and the analysis techniques that help them manage trades. Weekly options are structured like conventional monthly options, but they expire each week. Interest has surged since their inception three years ago, and currently accounts for up to thirty percent of total option volume, traded on all major indices as well as high volume stocks and ETFs.
This book is a guide to using weekly options efficiently and effectively as income-generating investments, with practical guidance and expert advice on strategy and implementation. * Discover the cycles and market dynamics at work * Learn essential fundamental and technical analysis techniques * Understand the option trading lexicon and lifecycle * Gain confidence in managing trades and mitigating risk Weekly options can be integrated with any existing options strategy, but they are particularly conducive to credit spread strategies and short-term trades based on technical patterns. For investors looking for an easy-in/easy-out method of generating consistent income, Profiting From Weekly Options provides the wisdom of experience with practical, actionable advice.
ROBERT J. SEIFERT is an independent options trader with over 38 years in the securities industry. He has published articles in Barron's and the Wall Street Journal describing his unique and highly regarded trading model.
Foreword xiii Todd Bubba Horwitz Preface xv Acknowledgments xvii CHAPTER 1 Market Psychology: The Mind-Set of a Trader 1 The Herd Mentality: Bubbles 2 The South Sea Bubble 1711 1721: Trade, War, and Government Collusion 2 The Cotton Panic of 1837: Land, Commodities, and Government 4 The Panic of 1893: Railroads Have No Upper Limit 6 September 11, 2001: Price Can Never Go Up Again 7 The Commodity Bubble of 2008: Price Can Never Go Down Again 8 Bitcoin 2009 to Present: Crypto-Currency Meets Greed 10 Lessons to Be Learned 11 Chapter 1 Quiz 12 CHAPTER 2 ModernMarkets 15 Equity Markets 15 Liquidity 16 Flow of Funds 17 Futures Markets: Origins 18 Calculating Future Contract Values 18 Tick Size 19 Margin 20 Stock Index Futures 20 Index Futures versus Stock 21 Forex: Currencies 22 Options 22 Summary 23 Chapter 2 Quiz 23 CHAPTER 3 Technical versus Fundamental Price Analysis 27 Summary 29 Chapter 3 Quiz 29 CHAPTER 4 Phases of the Market 31 Congestion 31 Breakout to the Trend 33 Blowoff 35 Summary 37 Chapter 4 Quiz 37 CHAPTER 5 The Relationship of Time and Price 41 Summary 47 Chapter 5 Quiz 48 CHAPTER 6 Introduction to Options 51 Basic Option Glossary 51 Working Option Vocabulary 56 Summary 58 Chapter 6 Quiz 58 CHAPTER 7 The OptionModel 63 Games of Chance 63 Air in the Balloon 66 Summary 67 Chapter 7 Quiz 67 CHAPTER 8 The Option Chain 71 Summary 80 Chapter 8 Quiz 80 CHAPTER 9 Option Trading Strategies 83 Why Selling Naked Options Is Always Wrong! 83 Suitable Option Trades 85 The Credit Spread 91 Summary 99 Chapter 9 Quiz 100 CHAPTER 10 Why Trade Weekly Options? 105 Buying a Call or a Put Outright 110 Summary 112 Chapter 10 Quiz 113 CHAPTER 11 Midterm Review 115 Psychology 116 Liquidity 116 Market Pricing 116 Phases of the Market 117 Relationship of Time and Price 117 Option Vocabulary 117 Summary 118 Test for Chapters 1 10 119 CHAPTER 12 Standard Deviation The Mathematics of the Price Cycle 127 Summary 131 Chapter 12 Quiz 131 CHAPTER 13 Trading in a Congestion Phase of theMarket 133 Trade One: Buying an Outright Option 136 Trade Two: Credit Spreads 139 Trade Three: Risk Reversals 143 Trade Four: Backspread (1 x 2 for Even) 146 Summary 150 Chapter 13 Quiz 151 CHAPTER 14 Trading in a Trending Phase of the Market 155 Trade One: Buying an Outright Option 156 Trade Two: Credit Spreads 160 Trade Three: Risk Reversals 163 Trade Four: Backspread (1 x 2 for Even) 165 Summary 167 Chapter 14 Quiz 168 CHAPTER 15 Trading in the Blowoff Phase of the Market 173 Trade One: Buying an Outright Option 175 Trade Two: Credit Spreads 177 Trade Three: Risk Reversals 180 Trade Four: Backspread (1 x 2 for Even) 182 Summary 183 Chapter 15 Quiz 183 CHAPTER 16 Selecting a Portfolio to Trade 187 Liquidity 188 Volatility 190 Diversification by Product 190 Diversification by Dollar Risk 191 Summary 192 Chapter 16 Quiz 193 CHAPTER 17 Managing Your Equity 197 Risk of Ruin 197 Risk Capital 198 Volatility 199 Win Rate 199 Starting Capital 200 Summary 200 Chapter 17 Quiz 201 CHAPTER 18 Organizing Trades and FAQs 203 Step One: Observing Your Portfolio 203 Step Two: Observing the Major Trend and Making a Trade 204 Step Three: The Amount of Equity Needed to Trade Each Strategy 204 Frequently Asked Questions 205 Summary 207 Final Exam: 100 Questions 207 Appendix I: Answers to the Chapter Quizzes 222 Appendix II: Days until Expiration Straddle Values 235 Glossary of Option Terms 237 About the Author 247 Index 249