No two options traders are exactly alike, but most of us share a lot in common. Obviously, we all want to succeed in options trading. What does that mean? The simple answer: make money! However, we all have our own ideas of what it means to be a successful options investor. For one person, success might simply mean adding options to a portfolio to hedge risk. Another investor might define success as generating income from writing calls against shares. A third investor might measure success by allocating a small percentage of her portfolio to speculative call buying.
While we all approach the market in different ways, investing in options is a six step process for most of us:
1) Setting Long-Term Goals
2) Developing a trading plan
3) Finding Trades
4) Analyzing
5) Executing
6) Monitoring and Adjusting
All six steps will be covered in future installments of Options 101. Today, let’s look at finding trades (which will also serve as a shameless plug for our Premium service).
I received an email today from a reader. He offered some nice words about the web site and asked me, how I could miss the rally in Century Aluminum (CENX)! Don’t I compare notes with OptionMonster?? Apparently, our friends at Monster were all over CENX like a cheap suit before the stock rallied 31 percent to $6.93 per share today. Scratching my head, I wondered: how DID I miss that big mover? I checked my notes.
As it turns out, my last comment on Century Aluminum was posted on March 27 when the stock was at $2.46, or 181.7 percent below current levels. The post was submitted for premium subscribers, where we suggested investors might look at the June 2.5 – 5 call spread for 70 cents. With the stock near $7.00, the spread is now at $2.00, or almost 3X the initial cost.
While not all of the trades highlighted in our Premium section work as well as the CENX spread, many do, and these ideas are designed to help fill steps 3 (Finding Trades) and 4 (Analyzing Trades) in the process of using options as part of an investment portfolio. We highlight new trades and strategies daily. These ideas are not likely to be found anywhere else and are not based on casual market observations, but based on research and a combined 35 years options industry experience.
In sum, adding options to a portfolio is a process and finding trades is an important step along the way. It’s not always easy and often time consuming. That’s where WhatsTrading.com and WhatsTrading Premium help. New ideas are offered daily and, like with CENX, often before the other options advisories “catch on.”
