I attended a free all day class hosted by OptionsANIMAL, IBD and Trade Monster this weekend. Presentations were made by Jon and Emilu from OptionsANIMAL and Tim from IBD. It was an excellent refresher for me and reminder of what I should be doing to improve my returns while keeping risk under control.
Jon started by giving us an overview and how institutions made the markets and how we can track what they are doing with some of the tools in OptionsANIMAL.
See a YouTube review by Emilu on Combining Options with IBD. She has completed her learning through taking an array of classes with OptionsANIMAL and learned new strategies that she had not necessarily used in the past.
The Cost of signing up for the OptionsANIMAL Foundations Course was $300. That also gave you a year’s subscription to IBD and if you opened an account at Trade Monster, then the $300 was reimbursed. Essentially this was a “free” deal to learn and get on board trading. Good deal? I would say yes; but I did not sign up. Don’t mean to sound negative because I think there was a lot offered and it would be right for many people. I have just got a lot more cautious about writing a check to anybody who wants my money, and mostly I was not keen on signing up for another brokerage account – I have too many as it is and had not heard of Trade Monster before. See a review of Trade Monster at the link below. Later I looked up OptionsANIMAL and found their classes are offered with various packages from $1500 - $10,000. Quite pricey. It did not help that I also got a call from a sales person from OptionsANIMAL who was very pushy and how would I best describe his tone - condescending? cocky? rude? I had to hang up on himas I did not want to lose my evening. Still, I think Emilu represents the good side of the company, the sales person represented the dark side...
Looking up the review, I was not impressed. $300 up front is hardly a good reason to sign up for a brokerage account and their options trading prices were too high. TOS (Thinkorswim) would be much better for options based strategy brokerage account – it would be a lot cheaper and also more credible as it is now owned by TD Ameritrade.
What did I learn from the day?
Firstly, I think what Jon and Emilu presented was very good. In order to trade well you have to spend time learning. And it will cost you, one way or other. Is OptionsANIMAL the best way to go? I don’t really know but certainly worth a detailed look for those interested. Using Covered Calls in an upward sloping market is certainly a good strategy and Jon also presented the shortcomings of the strategy, something many presenters don’t do. I have done covered calls and each time I found I brought in some money without a huge hit on my stock, as it has always been in upward sloping markets. In some cases I got called away, which gets you the most return. In others the stock stayed sideways and I kept the commission.
First refresher point for me – continue to do covered calls.
How much return can we expect? My conservative read would be 15-25% per year.
Next strategy presented was selling and buying vertical spreads with options. I like that as well, except I don’t do enough of them. I need to expand using that as a tool. There was a book recommended on Spreads, “Spread Trading” by Greg Jensen. I will get that book – might try to see if it is available on my Nook that my son bought me for Christmas last year.
Second refresher point for me – do more selling of vertical spreads and read the book by Greg Jensen.
Emilu and Jon also presented trade adjustments to make losing trades turn into winners. They were mainly results and not the how and whys. I suppose you have to take the course through OptionsANIMAL to find out. I felt quite a bit of that was selling and I was not that impressed. Still, they hooked me enough for me to check it out in the future. Never assume you know too much, I say. There are always tools to learn and incorporate into one’s methodology. Emilu started with a trade on a vertical spread that went bad. Think she had a bull put spread and the stock went South on her immediately. She purchased two high priced puts that salvaged her position. Not sure what the ratio of the long spreads were against the long puts; but let me leave it as – perhaps I need to see what they teach in trade adjustments before mouthing off a strong opinion against the strategy. the notion of trade adjustments is good and I will investigate it.
Third point – investigate doing the Trading adjustments course by OptionsANIMAL
Tim presented IBD and he was passionate and slightly long winded; but very good anyway. IBD’s philosophy of buying strong stocks that are reaching highs, and selling them as they go higher is a good strategy. Also coupled with buy strong stocks, in strong industry sectors, when the market pulse on upwards, is a good strategy. I think my own trading systems are sufficient to tell me market direction. I think IBD’s system is more sensitive and correspondingly gets whip sawed more than mine. Emilu has been using IBD for 20 years and combining the options strategies we mentioned above, is able to reduce her risk and still capture a decent reward. It is a good combination. I plan to spend time 1/week at the library looking at the IBD newspaper. Agreed that their software access for subscribers to Leaderboard is the best way to go; but I find $699 a steep price to pay for one year. Still, it is easy to lose many times that by going with weak stocks. Tim did a great job answering the question from someone in the audience who asked why Nokia that was a weak rated stock on Leaderboard was climbing up so fast. Tim put Nokia in the same category as stocks like RIMM and went through the three Leaderboard criteria he considers key – Stock Composite rating (85 or higher), Industry Group (50 or better – top 50%) and ROE greater than 17% (Yes, Tim demands that he wants 17% or more ROE). Nokia grossly failed those. I liked what Tim said – he was right on the money.
Fourth leaning point – Visit the library 1/week and read the IBD. Develop a selection of strong stocks in strong industry sectors. Trade them long using vertical spreads if they are optionable and at decent volumes, when the overall market is long.
All in all, a good day of learning, refresher and exposure to some solid trading tools.
Very interesting synopsis Rahul. I hope someday i can incorporate covered calls into my trading. I think selling spreads with confidence to adjust when needed is another great adjunct...i will be interested to see if you pursue credit spreads. I think your fourth learning point would be a great strategy to give your portfolio strength over the long run...although i think picking those stocks at the right time may be harder than it sounds for some strange reason?? Maybe i am wrong though...if the homework is done the increase in return to your portfoilio just follows?? I hope so :)
ReplyDeleteGreat comment. I am pursuing selling credit spreads based on signals from my eod QQQ trading system that I blogged about earlier. The QQQ buy-sell option spread is tight. Just started and will stay at a very low investment level till I can get my brain to be one with my trading rules. Wish it was a simple up or dn arrow but instead it is a combination of conditions, so I expect it will take time. The signals seem to fire one every 2-3 weeks or so.
ReplyDeleteAs far as selecting strong stocks - I think IBD does well with that but finding the right timing to enter is tricky as you suggest. I prefer to buy on dips, whereas IBD suggests buying when the high is exceeded. Also I need to follow the IBD discipline of stopping the long trades when the market pulse changes from up to sideways or down.