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During
the weekend right after I finished my 2-day stock seminar with
Investools, I was in front of my computer familiarized myself with its
software. I was busy searching for stocks and analyzing them. To my
surprise, I saw a lot of reds in my existing portfolio with mostly blue
chip and well known dot com stocks. With the pre-built search system, I
found some stocks passing phase 1 and 2 of Investools software. I decided
to make a sweeping change of my portfolio.
On the
following Monday, I woke up early and was in front of my computer before
6:30 A.M. to begin my new trading method I had learned from the seminar.
I first did a “clean house” of the stocks I thought were “good” stocks in
my portfolio. I used to be a mainly “buy and hold” type of investor. It
worked well in the 90’s but after the market crashed in 2000, I realized
I needed to change my style. I used to be reluctant when selling my
stocks because I didn’t know what to buy next. I had learned from the
seminar to get in and out of the market to maximize my profit. I did
exactly what I had learned. However, things were not going so well for me
as I expected. Back then, all I knew was the green & red arrows. I
relied heavily on the system in my stock trading. I had some good trades
and bad trades using the system. In some cases, I entered the trade right
after all three green arrows appeared and experienced a severe setback
several days later. I then realized that I maybe missing some pieces of
the puzzle. Maybe Mr. Bruce Dinger was right when he told me I made a
terrible mistake by not signing up for further education. In March of
2005, I signed up for the advanced programs with Investools and my
studying process of option trading began.
When I
received the studying materials from Investools, I had a very weird
feeling. I felt I was looking at a treasure box with legal money printing
manuals and instructional DVDs inside. I used my coaching sessions evenly
for stock, basic and advanced option courses. Mr. Scott Thompson was my
coach for all three subjects. I was comfortable with his coaching style
and I chose to stick with him throughout the sessions. I took advantage
of my full time trading status to pick my sessions on weekday during
market hours to avoid busy schedule and to discuss live examples from the
market as well. We had ½ hour coaching session weekly so I had one week
to do my homework and to prepare for whatever questions I might have for
the coach. My coach encouraged me to use the hot line service to cover
any topic we did not have enough time to discuss during the session. From
the hot line service, I learned how to use the Interactive Chart which
was a great tool to pin point the stock price fluctuation on daily,
weekly, monthly and yearly basis. I was thrilled with what I achieved
from reading the chart. I learned how to draw the trend lines and
channels from the chart as well. The Interactive Chart was also a great
tool for Candlestick Chart
reading which will be discussed later in this series. The Interactive
Chart later changed its name to Prophet Chart when Investools
upgraded its website last year.
From my
coaching sessions, I was able to learn in details the subjects covered in
live seminars. Being a math major student in college, I was particularly
interested in advanced option series. Among the strategies of basic and
advanced option, I like covered call, diagonal bull call spread and
selling naked put the most, all bullish strategies. When I first started,
I was not very comfortable playing bearish strategies due to human nature
tends to get away from down trending stocks. However, I later changed my
perspective. I will talk more about that in my next article.
The
spread trade series caught my attention when I first learned it. I liked
the strategies because they are designed for consistent return. It is not
too risky with limited gain and loss. My first lesson of the spread trade
series began with bull put credit spread. The math was not that bad but
the concept was a bit confused at first. I skimmed through the other
spread trades and realized they were just the variations of each other. I
knew if I spent my time studying the first spread trade carefully, the
others should be followed through easily. With that idea in mind, I spent
a lot of time studying the bull put credit spread. I read the lesson
three times and working diligently on the numbers of the examples. I
summarized the main points of the strategy to help me organize my
thoughts. I was ready for my first coaching session of the spread trade
series. The session went through smoothly. As expected, I had no problem
understanding the other spread trade strategies such as bear call credit
spread; bull call debit spread and bear put debit spread. We also
discussed diagonal bull call spread, LEAPS, straddles, strangles and
index option trading. I did not like butterfly spread so I asked my coach
to skip it. Instead, we used the session to talk more about the details
of covered call; diagonal bull call spread and selling naked put which
are all covered call related strategies, in my opinion. I had fun
learning those concepts. Now the terms “buy to open”, “sell to close”,
“sell to open” and “buy to close” won’t confuse me any more.
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