|
I did
my studying, training and actual trading simultaneously during my
learning process with Investools.
I remembered
my first few trades after the 2-day stock seminar were both excited and
frustrated. I made money in one trade and gave it back the other trade on
a 50/50 basis. I was naïve to think every thing should be “automatic.”
The green and red arrow system should make easy money for me. I later
realized I am not living in a perfect world; therefore, I should work for
the better result, not just waiting for it to happen.
I was
still basically a stock trader before I finished my advanced option
courses. The call and put give me great leverage. However, they are directional
investment vehicles. If the market moves in the direction against my
trade, time decay will eat me alive. That was one of the reasons I was
not trading long call and put a lot even after I finished my basic option
courses. I, however, sell covered calls against the stocks I own because
it is relatively safe and time is not totally against me. Before I
started my advanced option series, I basically bought stocks and sold
covered calls. I made a lot of “rookie” mistakes in my covered call
trading. After I bought the stock and sold covered call against it, the
stock sometimes dropped in value. I then aggressively sold the covered
call again either at-the-money (ATM) or in-the-money (ITM) to get more
premium and further reduced the net cost of my stock. However, if the
stock moved up before option expiration day, I helplessly watched my
stock being called out unprofitably. I later learned how to buy back the
call and sell next month call at a higher strike price to avoid
unprofitable trade. I also found a way to make quick money during the 2nd
or 3rd week of the month. I bought a volatile stock and
immediately sold ATM or ITM covered call depending on the premium. As
long as the premium of the call exceeds the intrinsic value, I make
money. Since the stock is already at or above the strike price, there is
a good chance I will be called out on the 3rd Friday. The key
here is to find volatile stock so there is still time value left even if
there is only a little more than one week before the option expires. It
takes time, practice and experience to do these tasks.
After I
finished my advanced option courses, I loved selling naked put and
playing diagonal bull call spread in addition to my covered call
strategy. Selling naked put is by far the most successful strategy I
trade. I prefer selling naked put to bull put credit spread because I
don’t mind to own the stock and I have enough capital to buy the stock if
it is put to me. Selling naked put, in my opinion, is another way to buy
stock at a discount price. If the stock closes above the strike price, I
keep the premium with 1% to 2% monthly income. If the stock closes below
the strike price and it is put to me, I consider buying it at a discount
because I wanted to buy it from the first place anyway. In my opinion,
selling naked put is relatively safe if we know the strategy well enough
and have capital to cover ourselves. I am known as “the naked put man” in
my master mind group which meets monthly to discuss our trades and to
learn from each others.
I
always trade with two golden rules in mind:
·
Rule #1:
Do not lose money.
·
Rule #2:
Never forget rule #1.
It
sounds silly at first but I realize it helps down the road. To enforce these
rules, we need time, patience and skill. I admit I am still working on
it. I made two bad trades last year not following those rules. I paid big
for my mistake and because of it, I remember my lesson well.
During
live seminars, some traders told me stock takes the steps up and takes
the elevator down due to …gravity. Well, I guess we all know the real
answer is panic selling is usually more intense than panic buying.
Sometimes we need to make joke just to lighten up our day. From their
comment, I began to include bearish strategies in my trading plan.
Time is
one of the most important factors in option trading. I try everything in
the book to make time to be my ally, or at least neutral, when I trade
option. To enter a bullish trade, I prefer selling naked put to buying
long call. By doing so, I make time to be my ally instead of being my
enemy. When I sell naked put, I make money if the stock goes sideway or
up and time is on my side. Selling naked put will limit my gain to the
premium I collect and my loss is, in theory, unlimited if the stock
continues to go down. In exchange, I make time to be my ally and I can
make money 2/3 of the time. If I buy long call, I can make money only if
the stock goes up and time is against me. Buying long call will limit my
loss to the premium I pay and my gain is, in theory, unlimited if the
stock continues to go up. In exchange, time is against me and I can make
money only 1/3 of the time. To enter a bearish trade, I prefer selling
short call or play bear call spread to buying long put. When I sell short
call or play bear call spread, I make money if the stock goes sideway or
down and time is on my side. If I buy long put, I can make money only if
the stock goes down and time is against me. It does not mean I never buy
long call and put. I occasionally buy long call and put when I see a good
chance to make quick money. At one time, I got in and out of the SPX in
one-hour time span and made quick money by buying long put and selling it
a bit later.
When I
first started trading, the questions of what, when and how to invest were
important to me in that order. I needed a fundamentally strong stock for
my bullish trade; I relied on the green and red arrow system to give me
the buy signal; and I sold the stock when I felt happy with the profit.
When I got deeper into my studying, I learned in details about trend,
volume, resistance, support and candlestick chart reading. The knowledge
I learned enables me to raise my trading to a higher level. The what,
when and how to invest questions are still important to me but the order
is now reversed. I now concentrate more on how to trade the option. I
currently have a set of stocks that I traded in the past. By trading them
regularly, I pretty much recognize their price patterns. As long as the
company does not go bankrupt in the near future, there is a good chance I
will make money trading it. Now, when I want to buy a stock, I do not buy
it right away. I sell naked put ATM or OTM. If the stock is put to me, I
buy it at a discount price and immediately sell the covered call against
it, usually at the same strike price. If the stock is not put to me, I
keep the premium and recognize the monthly income. When I want to sell a
stock, I do not sell it right way. I sell covered call ATM or OTM. If I
am called out, I make money selling the stock plus the premium from
selling the covered call. If I am not called out, the net cost of my
stock is reduced and I can sell the covered call again the following
month. That is what I mean by calling the combination of selling naked
put and covered call my monthly “money machine.” I realize that sales
equal incomes; therefore, I sell a lot and I buy only if I have to.
Emotion
is also a critical factor in my trading. When I first started, I let my
emotion trigger my decision. I was reacting to my emotion. I later
learned to observe my emotion and let the technical dictate my decision.
The price patterns and candlestick chart lend me big help in
accomplishing this task.
The
trading experiences I described above maybe confused to some readers but
they make perfect sense to those with option trading knowledge and
experience. Trading naked option is risky for beginners and hence, it is
not recommended.
请阅读潘家墉作品 * Xin mời đọc
một số tác phẩm cuả Dennis Phan.
|
