Trading Apple Algos Using Weekly Options

25 Pages·2013·2.45 MB·English

Trading Apple Algos Using Weekly Options
Wednesday, September 25, 13
Using Options with Signals
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Trade Signals provide a definitive edge
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Options allow us to taylor our risk
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Time decay adds juice to this edge
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Primary Strategy
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During times of volatility we are net buyers of options
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During times of neutrality we are net sellers of options
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During unpredictable events we play both sides
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Daily Success Formula
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Morning briefing
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review news, upcoming events
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Review open positions
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assess sentiment and volatility
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develop strategy for the day
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Stage high probability trades, react to signals
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Manage existing trades
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Formula Continued
Every trade we do the following...
1. Determine how long in the trade
2. Determine the target
3. Calculate the Risk vs Reward and breakeven
4. Protect against blowouts
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Weeklies are Volatility Focused
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Theta - rate of decline in value with passage of time.
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Works against Longs
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Works for Shorts
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Gamma - rate of decay
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increases exponentially as expiration approaches
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Premium Is At The Money
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ATM options have the highest Theta and the most premium
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Generally it is best to be Long Gamma and Short Theta
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When the market is volatile, you want to be a Buyer
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When the market is consolidating, you want to be a seller
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We Prefer to Profit 52X vs 12X
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Weeklies exist for 7-8 days, listed on Thursday, expire on Friday
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Well suited for high flier stocks like Apple
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Especially during periods of volatility...
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Things like earnings, product announcements, competitor SNAFUs,
analyst dribble; which basically covers every day of the week!
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Systems Supercharged by Options
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Active traders and swing traders can use systems with weeklies
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Statistical studies have uncovered weekly selling strategies
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Weekly roll-overs produce income and grow core positions
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Disadvantages to Weeklies
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Short time-2-live and rapid time decay, limits ability to repair or adjust
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Lower volumes/open interest, might limit strikes, resulting in wider
spreads
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Apple is not so prone to this
Wednesday, September 25, 13