Successful trading requires the employment of an objective, high-probability, systematic strategy. Successful traders come in many different types and flavors.
As long as they have this objective systematic strategy and are consistently net profitable over time, I consider them successful.
What Is Your Approach to Options Trading?
Some options traders use pure option analytics (i.e., the “Greeks”) to make money. Some succeed, some don’t. They believe that picking stock direction is a “coin flip,” and that charts and technical analysis don’t work and have no merit whatsoever. Master Trader wholeheartedly disagrees.
Option call and put prices are calculated using computer models which primarily consider the price of the stock (relative to the option strike price), time to expiration, and volatility. Option prices make no prediction on market direction since they can’t read charts (so when a particular option “implies” an “expected move” of $xyz, it can be a move up or down).
Supply and demand — which can be read on the charts, obviously affect the prices also. With put options typically costing more because of a general view of wanting to buy protection in fear of market sell-offs.
Bearish XOM Option Trade: Pure Analytics Approach
A subscriber of ours sent us a “cherry bomb” newsletter from tastytrade.com (a very reputable organization) asking our opinion on its trade idea on 1/3/18 which stated:
“The rally in /CL, which has benefitted from dropping inventories and fist-shaking Iranian mullahs, has helped with XOM’s rally, too. But if you think that the energy rally may lose steam and XOM might fall and you’re willing to trade through earnings on Jan 30, the long put vertical that’s short the 82.5 put and long the 87.5 put in the Feb expiration with 44 DTE is a bearish strategy with a 58% prob of making 50% of its max profit before expiry.”
Why Master Trader Approach to Options Trading is Superior
At Master Trader, all of our trade recommendations start with an assessment of the chart on multiple time frames (MTF). When MTF are in alignment, we recommend Directional option trades because we want a big target.
In the other cases where we are just calling a short-term top or bottom, we recommend Income trades where we sell out-of-the-money options/spreads under support (and over resistance) with the maximum gain being the credit received.
These are high-probability, high ROI trades which are extremely easy for us to find, trade, manage, and generate monthly income. We enjoy over 85% success rates on these trades and adjust or cut losses short using our management strategies.
We teach and use much of the option analytics that tastytrade uses in our trading methodology. The foundational analytics are universal.
The most important difference in the Master Trader approach being that we use the charts to dictate our trade entry and management decisions.
For all of those options traders who don’t currently use charts in their trading, this video and lesson should be a great wake up call if you are wanting to substantially increase your financial results with little effort.
Bearish XOM Option Trade: Master Trader Technical Approach
Please see the video below describing our technical analysis of the above-suggested bear put debit spread on XOM:
Below is a weekly chart of XOM:
On 12/26/17, because of the bullish MTF (i.e., breakout on the daily, weekly, and monthly charts simultaneously), we recommended buying the stock as a bullish longer-term directional trade. We want a big target. When “momentum stalls,” the Master Trader approach is then to sell a call option against the stock (i.e., leg into a covered call for maximum profits) to lower the cost basis and generate positive time decay income. Please email us if you would like a copy of our Covered Call ebook showing you our approach to trading covered calls.
Into the close, a long-time subscriber of Master Trader sent me an e-mail thanking us for the bullish XOM trade and sharing his results on a 2-day option trade he learned from our classes:
“Took $5k + in two days on 50 contracts. Turned $300 into $5k. Thanks Gibby, you guys rock!” Mark P. (note that Mark is a full-time professional pilot and trades options part-time using the Master Trader methodology). Nice job Mark!
He even proudly sent me his order confirmation box to prove that our simple methodology works:
Note that because of our similar bullish analysis of the oil sector, Master Trader also recommend to its subscribers bullish option trades in all three major oil ETFs: XLE, XOP & OIH — all of which are nicely open and profitable trades.
To learn how to create Wealth and Generate Income using our simple Option Strategies, please see Master Trader Option Strategies Series for Investors and Active Traders. Our unique approach is guaranteed to increase your ability to trade options with confidence with superior reward-risk that doesn’t take a lot of time.
All the best,
Managing Director of Master Trader
Pristine’s Founder and Creator of the Pristine Method
Chief Options Strategist
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