Written by A.J. Brown

Open Question Time!

Option Trading QuestionsHey Option Traders! So I’ve been thinking…

I hate to just post stuff arbitrarily and hope it’s something you want to read about. I’d rather be writing about the things you want to learn. With that in mind, I’m going to have an open question time. Here’s how it works…

Simply scroll down to the bottom of this post. You will see a box with the words "Leave a Comment" directly above it.

Click your mouse inside that box. Then type out your question.

The question you ask must be about option trading or covered call writing. Also, your question must be straightforward. One sentence that ends in a question mark would be ideal. In other words, I want your question to be succinct, and without all the reasons why you’re asking the question.

Please realize I cannot give personal advice regarding a specific situation or trade you may be facing. I can only provide education. I will provide that education based on the specific questions you ask.

Does all this make sense to you? If so, please scroll down right now and enter your question in the comment box. Click the "Submit Comment" button to send your question to me. I currently have "Comment Moderation" turned on, which means you won’t see your comment appear immediately. I’ll have to approve it before it shows up on this blog.

I guess that about does it. I look forward to hearing what questions you have!

Best regards always,

A.J. Brown

P.S. Depending on the number of questions I receive, I may post my answers all at once, or I may turn the questions and answers into individual posts. Since this is the first time I’ve done this, I’ll just have to wait and see. Thanks again for participating.

P.P.S.  Have you checked out my other most recent posts on this blog?  If not, you should now.  Click here to check out what I’ve been talking about. 

Categories: Education / Options

69 Responses to “Open Question Time!”

Pages: « 1 2 3 4 5 6 [7] Show All

  1. A.J. Brown @ 9:45 am:

    Hi Kathleen,

    I apologize for being vague when I said, “look for stocks that are setting up for predictable movements.” Let me hash it out a little better.

    Think about a best friend… a friend you’ve known since just about the beginning of time. You know this friend so well, you’ve been around this friend for so long, that you’ve seen how certain situations make your friend react.

    I can think of one of my friends and I know, when a certain topic of conversation comes up, that my friend will undergo a change in disposition. This happens every time without fail. In fact, my friend will even undergo physical change. Sweat will bead on my friends forehead. And, the corner of his mouth will start to spasm.

    In my situation, I know, for instance, when my friend and I are at a cocktail party with people that were not familiar with, that if someone unknowingly brings up this topic, that it’s a smart thing for me to jump in and change the topic quickly, right. That’s because what’s setting up is a predictable movement.

    Think of stocks as your friends. (That’s actually not that far a stretch because the price movement behavior of stock is driven completely by human emotions, yes or yes?) Instead of sweat on the forehead and a mouth that spasms, how about an oscillator indicator that goes opposite a trend followed by a confirmed reversal (both easily seen on a stock’s chart). Or, how about a buildup of price before a split, only to have a sell off right after.

    Does that help?

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  2. A.J. Brown @ 10:26 am:

    Wow Ken… I am going to have to cut you off soon. ;-)

    Ken, in the way I trade options, I do not let my options become near term, let alone go to expiration. The exponential time decay doesn’t do well with me trying to have an option that moves in lock step with the underlying stock.

    With respect to how far out in time before expiration I buy, that depends on the underlying stock setup. In some cases I go 2-3 months out, like for short term trends and stocks that are channeling. Others 5-6, like long term trends.

    Sorry, there is not one strategy that works in every situation.

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  3. A.J. Brown @ 10:36 am:

    Ken,

    I have found that it’s less about what investment strategy you master, and more about you just picking one, sitting down and mastering it.

    Spend less time trying to compare which one is better and more time just focusing on one. At the end of the day, I have found they all work well so long as you have the tools, knowledge and experience.

    Sorry I can’t offer you a better answer than that.

    I trade stocks options because that’s what learned first and never had to go on to other vehicles.  Trading stock options has liberated me to the point where now I am well on my way to attaining my dream lifestyle. (Once, my foundation for teaching inner city kids to trade stock options to keep them off the streets is self funded… I’ll be there.)

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  4. A.J. Brown @ 10:41 am:

    Last one Ken…

    The only component of my strategy that has changed since this time last year, is how I calculate my stop loss threshold on trend followers. In other words, my strategy has barely changed at all.

    My overall strategy is broad enough that it works no matter what. I just look for different setups and trade the appropriate options that leverage that setup.

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  5. A.J. Brown @ 10:44 am:

    Hey Kathleen,

    Your question was not denied. And, I’m not done with this thread. I just don’t get to answering blog comments as often as I would like.

    I appreciate you for checking out my blog now and for a long time to come. It’s because of you, and people like you, that I do this.

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  6. A.J. Brown @ 10:51 am:

    Hey Dario,

    Thanks for posting to my blog.

    And, thanks for the comment about me having great wisdom. Would it be out of the question for you to share that with my close friends and family? As much as I tell them I have great wisdom to share, they often just laugh. :-0

    I use the S&P500, DJIA and NASDAQ to establish my overall trading bias because these “big 3″ best represent my watch list. It’s very rare that, with my strategy, that I go against the trading bias. It’s like paddling a boat in while the tide is going out.

    Hope that helps.

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  7. A.J. Brown @ 11:01 am:

    Hey Theo,

    First off, just like I responded to Kathleen a couple above, I really wish I could answer blog comments more than my schedule allows right now. I do so love these interactions.

    The option selection process really does vary on the underlying stock setup. If the stock is setting up for a very transient and high amplitude movement, like a breakout, I am generally going to go closer in time (never near term) and deep in the money. If the stock is setting up for a long duration and very controlled swing, I am generally going to go farther out in time and more at-the-money.

    Yes, lately, the market has been giving us more transient motions… but, not on every underlying stock. There’s no blanket answer for one option selection strategy based on broad market conditions.

    For me, I have a few hard and fast rules. Don’t hold an option near term. And, don’t buy out-of-the money options. From there it depends on the underlying stock setup.

    And, I trade options. I don’t hold them till expiration.

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  8. A.J. Brown @ 11:04 am:

    Hi Dan,

    I don’t chase news headlines. You can always look back and say man I wish this and man I wish that… but while you are wishing and mouth watering about what could have been, I’m trading predictable stock movements that reliably put money in my wallet every month.

    I don’t go near term. I don’t go out-of-the-money. That’s just me.

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  9. Question Time Is Over @ 1:22 pm (Pingback)

    [...] you participated in the open question time, thank you! I really enjoyed hearing your questions and having the opportunity to respond. Counting [...]

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