Email – #15 -
**New Trade – SPY
No question about it, we are living through a period of both unprecedented market meddling and potentially some of the best buying opportunities in our lifetimes. The trick, when it comes to this type of trading, however, is having the markets remain in one place long enough to get settled. Usually that’s only a matter of days but lately the markets have been whipping around in hours.
That’s not too much of a problem but it does mean we have to be a little more attentive to how we handle the trade to maximize our returns.
Here’s our new trade
Buy 1 SPY June 09 88 Call (SZCFJ)
Buy 1 SPY June 09 69 Put (SWVRQ)
Sell 1 SPY April 09 86 Call (SZCDH)
Sell 1 SPY April 09 70 put (SZCPR)
Limit $3.50 debit
In plain English, as usual we’re selling two options and simultaneously buying two options to hedge our bets. Because of the volatility in recent weeks, I don’t anticipate leaving this trade on for any longer than I have to. In fact, if I see the opportunity to close it for a quick 20% gain, I will we do so. This means you should plan on exiting the position if you can sell it for your purchase price plus 20%…which in this case would be approximately $4.20. Similarly, our risk will be 25% to the downside so plan on an adjustment if we hit $2.62 or an exit.
This trade should use approximately $530 in margin depending on your broker’s requirements. The trade has approximately a 72% probability of profit. We’re going to set our initial adjustment points at 71.29 and 87.12.
Our goal with this trade is to capture excess volatility that’s being priced into April options right now while simultaneously hedging our bets using the June options. We don’t care about which way the market moves as much as we care that it stays relatively centered for a few days.
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See you on the call!
Best regards for great trading,
Keith
For first-time Time Traders…
If you’re new to Time Trader , we’ve got a couple of important messages.
First off, if you have questions, don’t hesitate to e-mail them to us at timetraderpro@moneymappress.com .
For other questions, you can call our exclusive customer service line at: 888.570.9830, and talk to Kevin Long and/or Marty Biancuzzo and his team.
Before you do, though, we encourage you to go to our Question & Answer column. Just go to www.moneymappress.com . Scroll down to Time Trader. Log on and peruse the information you’ll find there. If you don’t find your exact question, not to worry. Many of the questions we’ve received were very similar, and have the exact same answer. So please scroll through the list. There’s a good deal of excellent information there about using the Time Trader.
This gets us to the next important item… brokers.
Most brokers don’t understand or can’t do the double diagonal as Keith suggests. For the most part, the problems with brokers (online and full-service) is understandable. The double diagonal technique is a highly secretive method that few know about. Frankly, if “anyone” could do this, it wouldn’t be so successful. Moreover, most brokers are not options savvy and often won’t tell you that they don’t know what you’re talking about.
(Now, we have nothing against brokers, but frankly, their job is easier then just buy and sell stocks. Few have much (if any) expertise with options, especially with techniques used by the highest level of traders.)
So here’s what we’ve set up for anyone looking for a better experience and service from people who understand these strategies.
We’ve created a special arrangement with TradeMONSTER for anyone having trouble trading the double diagonal strategy.
TradeMONSTER is an online firm started by Jon and Pete Najarian, of CNBC fame, and two of the most well known options commentators anywhere.
Here’s what we like about TradeMonster: The folks there understand options – and you can help you trade the double diagonal. And you can enter them as one single trade, which is exactly the way Keith recommends it.
If you want more information, just go here: http://www.trademonster.com/timetrader . Or call: (877) 598-3190.
They have an extremely easy-to-use trading platform that is also sophisticated. Every stock and option price in their platform is real-time and streams tick-by-tick – unlike any other web-browser based broker.
They also don’t place customers into “trading levels” that limit the options strategies you can trade. If you’re allowed to trade options at all, you can do these trades so long as you have the cash to do so in your account.
If you decide to open an account, the folks there can help you make and execute these trades. And yet that’s not all…
Within a few weeks, if you decide to go this route, tradeMONSTER will have one-click trading to The Time Trader Pro trades. All you’ll need to do is open your Time Trader email and click on the link, log onto tradeMONSTER, and you’ll be able to see Keith’s recommended trade, pre-filled in a tradeMONSTER order ticket.
You’ll be able to change your quantity, confirm the order details, or make this with one click, if you decide to go that route. TradeMONSTER also allows you to paper trade these recommendations if you’d like.
Of course, we’re not saying you have to sign up for an account with TradeMONSTER. But finding a low-cost, sophisticated online broker who can execute the double diagonal is rare. And we have to disclose that TradeMonster does offer us a nominal fee if you open an account. But frankly, we would recommend them anyway.
Skip Shean, the VP of Marketing & Business Development at tradeMONSTER, assures us that they will support you in placing these trades, and that their customer service group is up to speed on the strategy and on the Time Trader Pro newsletter
Of course, if you’re looking for a more full-service firm, we’ve also listed these two brokers:
GunnAllen Financial Attn: George Walters
2295 S. Hiawassee Rd. Ste#304
Orlando, FL 32835
Toll free (800) 329-1984
Local (321) 293-0280
Fax(321) 293-0281
The Rutsen Meier Belmont (RMB) Group
Attn: Sue Rutsen, Senior Partner
141 West Jackson Blvd., Suite 1800A
Chicago, IL 60604
Ph: (800) 831-3114, (312) 528-3065
Fax: (312) 528-3445
For now, that’s it. Be sure to check the website for Questions and Answers. And don’t forget that the next conference call and trade is a week from this Thursday.
Here’s to profitable trading,
The Time Trader Research Staff
