With the markets swinging as much as 1,000 points in a single day, quite a few readers are wondering whether or not it’s a good time to trade.

Gerard asks: “What should one do during this wild market? Sit back and wait for the market to calm down before we do any option trades?”

Wayne asks a similar question: “How can I make money on options in this volatile market, and do you give some symbols from time to time?”

Right now the market has been horizontally channeling (although in the last two days we have broken down through the channel’s horizontal support.) Horizontally channeling is much different than a converging channel.

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It’s a big week here in the U.S. America has elected a new President, and a new direction for the nation has been set.

Now that the election is behind us, the markets are letting off steam as all the pent-up fears and expectations are being released. Traders and investors are even now adjusting their strategies based on the outcome of the election.

The real reason for this post, however, is not to make predictions or talk about the new President. Rather, the reason for this post is to find out what’s on your mind.

You see, for the past year, this blog has been trucking along at a steady pace. And I’ve been writing pretty much whatever has been on my mind. But then I thought, “Why not find out what YOU want me to write about?”

So here’s what I want to know from you:

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The more I study the markets, the more I wonder what kind of shenanigans are going on behind the scenes.

Here’s an example:

Before Labor Day, analysts were saying that Fannie Mae and Freddie Mac were rock solid. They were also promoting the idea that the financial underpinnings of the world economy were stable and sound.

Unfortunately, investors believed the analysts. They started buying up stocks based on analysts’ opinions, which ultimately raised the price of these stocks.

Looking back, we can see that investor confidence was unfounded; it was based on opinions and not facts.

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Has the market reached a bottom yet or not? It seems that’s the question on most people’s minds. It’s a question bugging me for sure.  I’m just interested, of course.  Whatever lemons market throws at me, I can make lemonade out of.  That’s the beauty of being an option trader with a tool chest of various strategies that can profit whether the market is going up, down, horizontal or is just a choppy mess.

Back to my curiosity.  It seems we were in a consolidation pattern; a converging channel.  This could be a bottom.  A consolidation, of course, is a chart pattern that tells us investors are uncertain and therefore simply sitting back on their hands in a wait and see mode.  Out of any consolidation we could see a breakout up… or a breakout down. It really depends.  We may have seen a breakout down yesterday, but I’m not too sure.

Here are some edited thoughts I shared with Trading Trainer members earlier this week. I’ve thrown in a couple charts to make it easier for you to see what I’m talking about.

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As we mentioned a week ago, the market has been extremely volatile. And extreme volatility exposes open positions to increased risk.

The catch?

If you open and close too many positions in a single week, you will be tagged as a pattern day trader, and forced to comply with a set of complex and onerous rules.

To reduce our exposure, increase our probability of making a profitable trade, and avoid being flagged as a pattern day trader, we’ve been using out-of-the-money near-term vertical debit spreads. What this means is that we’ve been leaving our positions open overnight instead of closing them intraday.

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Last week, most major indexes experienced their worst week in history. The fear was almost palpable as people worried about banks, the economy… and even their retirement funds.

Naturally, after yesterday’s record up day, the average guy on the street is hoping for the best. With all the big down days, people want to believe the markets will now get better.

So, today, the question everybody wants to know is, Have we found a bottom yet? Has the market turned the corner? Well, let’s take an in-depth look at last Friday (10/10/08) and Monday’s (10/13/08) trading day to see what we can learn…

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Russell Brunson is an online entrepreneur. He’s not even 30 yet, but he’s got an amazing online business.

What’s more, Russell has been a mentor of mine, and has been responsible for much of Trading Trainer’s online growth the last couple years.  The touch he has with online businesses, in my experience, is golden.

The reason I’m writing you today is Russell has just launched a brand new FREE contest for anybody who wants to market a business online. It’s called the $100 Million Challenge because Russell’s goal is to help the contestants earn an extra $100 million combined.  When I heard Russell was doing this, I knew I needed to blog about it.

Now, you may wonder, “Why would A.J. share something like this on an option trading blog?”

Well, I decided to share this with you because I owe a lot of my success to Russell… and I thought there may be a few of my readers who could benefit from marketing their businesses better online.  This contest is a great motivator.

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I’ve got a very important and time-sensitive update for you today. That is, the Orlando Intensive has been moved from November 2008 to March 2009.

Why?

Because I’m an idiot. Basically, we scheduled the November Intensive early in 2008 and forgot to check the dates to see if there were any scheduling conflicts.

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The market has been wildly volatile lately. We’ve witnessed swings as large as 800 points in a single direction.

What’s more, the market is down more than 2,000 points since September 2, 2008.

Given these huge price movements, it has become more risky than normal to leave option positions open overnight… and especially risky to leave positions open over the weekend (have you seen the huge gap downs the last few Monday mornings?).

But here’s the thing. If you close positions too often, you could get tagged as a “pattern day trader.”

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Many traders saw stars on Monday, September 29. As the market plummeted, they took huge losses.

And it’s no wonder. The DOW dropped 777 points in a single day — the largest single point drop in history.

If I were a traditional “buy and hold” investor, I would be absolutely terrified to look at my retirement account right now.

Fortunately, I’m not a traditional investor; I’m an option trader. So while the market was reeling, I was seeing “lucky sevens.” So were many other Trading Trainer members…

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