The Trading Strategy Working in the Markets Now

The market's day-to-day movement has been erratic for a while now and it doesn't look like it will change at the moment.

Erratic price action signals that "big money" – institutions are uncertain.

Master Traders read price action to tell when big money is bullish, bearish, overly so, or unsure of what to think.

After all the technical analysis studies you may apply, you will eventually conclude that "price patterns display others' beliefs created with money."

Continuous uptrends with shallow retracements signal confidence that prices will continue to move higher, and buyers "create new higher support levels."

Deep retracements to a prior low within an uptrend (HHs and HLs) signal lower confidence in the trend. But where buyers want to enter where stops are tight.

Trends that violate support then reverse higher and back down signal uncertainty. Neither buyers nor sellers are in control over the other.

In other words, neither supply nor demand can overwhelm the other.

At this time, the intermediate market trend is down, but prices have become short-term extended lower on the weekly and daily time frames.

Sellers are not confident prices will go lower and are unwilling to sell aggressively.

Buyers are fearful the downtrend will continue and unwilling to buy aggressively.

Trading becomes a stand-off, and price action is erratic.

Directional trades can be difficult, if not impossible, to make money. Unless intra-day, of course. And even intra-day, at times, price action can become stagnate.  

However, this indecision is ideal for trading options credit spreads.

A Short Explanation of What is a Credit Spread. 

Sell higher-priced options and use part of the proceeds to buy a lower-priced one. The difference, you can keep if prices say above or below a defined price.

There are different expiration dates for the prices that you believe will stay above or below.

The shorter the time to expire, the lesser the premium. The longer the time expiration, the higher the premium. Time has value.  

While the options expire on a specified date, we don't have to hold the options until that date. At times, the prices may move more rapidly away from the strike sold, which will collapse the options price, so close the trade for significant gain.

We cannot be sure there will always be a premium to sell, so we have to look.

However, higher violate stocks like Tesla (TSLA) tend to have more premiums.

Options can be complicated but using chart patterns makes the analysis simple.

Above is the Tesla (TSLA) chart and a theoretical example of a credit spread.

TSLA is in a trading range and gapped up from the prior low. It's moving sideways, so non-directional at this time in the time frame shown.

We believe that TSLA will continue to trade above the low area in the short term.

Short-term is relative to your view, but the shorter the time to expiration, the greater probability our view is right. There is always a risk, of course and we always manage trades with a stop-loss.

In the example, we are considering the time to expiration of two days.

If we used two weeks to expiration, the premium could be ten times more, but the risks of being wrong are greater also. Common sense!

The Weekly Options Trader letter scans for credit spreads that expire in ten days or less. Some trades may be one or two days—others maybe five or ten.

We do the scanning, explain the pattern and trade to you and either email them or text them. And we update intra-day through text messages in real-time.

Dan sends video updates on weekends and when new trades are opened.

The trades are excellent for creating weekly income. The education is priceless.

This month the weekly options letter is offered at a ridiculously inexpensive $33/week billed annually. 

Get started by clicking here.

Master Trader and You Building Your Financial Future Together!

Happy trading! If you have any questions or comments, please e-mail Greg Capra at Greg@mastertrader.com or Dan Gibby at Dan@mastertrader.com