CheapIV.com

Services

admin on 05 4, 2010

Every person should keep a journal of their trades.  Each trade idea we try to provide the information below so you can understand the trade.

• How you found the trade
• Stock Analysis
• Targets
• Stops
• Options Analysis
• Option Strategy
• Profit of Option strategy at targets and stops
• Potential Future events in stock that could affect strategy
• Entry, Exits, Adjustments, Morphs
• Profit, Loss
• Lessons learned

My Portfolio Philosophy:

I believe in a multiple strategy portfolio.  When one strategy is working then others will do “ok”.  The best example of this is when the market moves drastically in one direction.  The directional strategies will work well when compared to the premium collection strategies.  All of my services are built off of common sense trading concepts.  I believe in technical analysis.  This is using the stock price history to analysis potential movement.  At the core, I use technical analysis to find target and stop levels.

Other core trading concepts that everyone should follow:

Buy low Sell high or sell high and buy low

This is key to everyone’s trading but never taken to the fullest extent as an option trader.  When following this mantra a trader must look at the stock price but also look at where the implied volatility levels are as well.

Targets and Stops

Have these set before you enter a trade.  This are critical in knowing what your risk is in a position.  If you don’t know your risk then you should not enter the trade.

Comfortable Trading

Trade Strategies that you understand you know are comfortable with risks and reward.

Trade on a time frame where you can devote the time needed for that strategy.  Don’t start day trading if you can only be there for 30 minutes of the day.

Start Small

There are significant financial risk when investing and trading so it is crucial to understand the risk associated with every trade that you enter.

Diversification

The classic line of don’t put all of your eggs in one basket.  Always have multiple stocks in multiple strategies. These strategies can be broken down into many subsets of risk.  Directional vs non-directional, time frame, debit vs credit and volatility.  All should be diversified so your risk is spread across each spectrum.

Trade Management

Just like diversification, it is wise to not risk more than some small % of your portfolio on any one trade.  You can use expected probability to increase this percentage, but you maximum percentage should still be a small percent of your entire portfolio.

Attitude

If you are not having fun doing what you are doing, then don’t do it.  If it causes more stress, then don’t do it.  Find a strategy that you are comfortable with the risk, so that you can sleep at night and come back to your investing with a positive attitude.

My services are built around these core concepts.  We will be rolling out several services that will focus on specific strategies, but each will act as it’s own mini portfolio.  You as the trader will have to determine what percentage of your risk capital that you think will be appropriate for your market outlook  and your existing portfolio.  For example if you think there is a large move coming in the market then you will not want to risk a lot of capital in premium collection strategies and vice versa.

CheapIV – Swing Credit Trader

The goal of this service is to build a base of position that have low risk and use the time decay of options in our favor.  This service utilizes iron condors, iron butterflies and diagonals to capture credit premiums.  This strategies should be apart of everyone’s portfolio.  Our time frame is different then most premium collections services.  The majority of the time we do not want to place our trade in the front month.  Most traders realize that the option premium decays the fastest in the front month. When selling premium this is the quickest way to realize a profit from the option decay.  This is also the quickest way for a stock to move against your position.  Front month options provide a faster rate of decay, but they also provide less time for the stock to ebb and flow.  If you take a step back and look at the movement within a stock, in order to hit maximum profit that stock will be at a specific point at expiration.  We find that timing this movement is one of the most difficult things to do.  So we don’t do it.

We use the ebb and flow of the stock to our advantage.  We place the premium collection  strategies to our advantage as well.  We also use options with 30-90 days to expiration.  This gives us plenty of time for the stock to move.  This is high win ratio service.  We try to hit singles not home runs.

To find out more about this service and see examples click here!