Downloaded a book from the spider & quot; Jeske – A Complete Swing Trading Option Strategy", which translates to `` Complete Swing Options Trading Strategy ''.
Basically, nothing new, but it is systematized, especially when there is a mess of various ideas in my head. I.e, not bad for ordering them. If we omit theory and water, then the whole book can be described with a few lines.
Conditions for entering a long position in US stocks
1. Moving average for the SP-500 index with a period 10 above the moving average with a period 30. (check the condition that the trend is up)
2. WilliamsR indicator (or you can use any stochastic) with a period 3 more -20 (check the condition that the market is correcting)
If both conditions are met, then we start looking for stocks to trade.
1) Moving average with a period 10 should be above the moving average with a period 30 (check the condition that stock go up)
2) The close of the stock must be above the moving average with a period 30, but below the moving average with a period 10 (check the condition that the stock is being adjusted)
3) ADX with period 10 should be higher 20 (check the condition that the stock is moving, but does not stand still)
Additional terms:
4) The promotion is worth more than 40 Dollars. (so that option strikes are cut with a smaller interval)
5) There are options for the stock (since we will trade stock options)
6) Stock price is above the moving average with a period 200 (checking the long-term trend, but the author does not insist on this condition, i.e, optional).
After scanning, we get a list of shares.
And then the manual work begins.
1. The author advises to find the nearest support on the stock charts., as it will increase the likelihood of a stock rebound after a correction. That is, trade only stocks, who have reached a level of support and, maybe, even show signs of bouncing off her.
2. It's also a good idea to split stocks by sector and check which sectors are the strongest at the moment and give preference to stocks from those sectors and avoid stocks from weak sectors..
3. Do not trade shares, if in the process of holding a position a quarterly report is expected, because the reaction to it can be unpredictable.
Next, the most interesting thing begins, since we do not trade the stocks themselves., and their options with expiration no more than a month. The author offers two options
1) Buying stakes. Buy deep in money, since there is less time value and more delta. I don't really like this option, because if you buy deep in the money, then it is almost no different from stocks.
2) Trade spreads. For example, long put with lower strike and short put with higher strike. In this case, even if the price stays in place or goes a little lower, we still make a profit. Maximum loss and profit is known in advance. And you don't need to set stops as in the case of stocks. — take off their feet and walk in our direction, but already without us.
Well, no more risking in one deal 1% from capital. That is, many different positions for different shares can be opened at the same time., but in each of them risk no more 1% from capital.
Unfortunately, the author does not write when to exit the position, therefore, everyone decides for himself this moment :)
I tend to hold options until expiration, or if the maximum possible profit on the spread has already been almost reached, then you can fix it before expiration.
If anyone wants to trade also short, then, accordingly, all conditions are turned upside down. I, personally, not a fan of this business.
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Well in general, basically, nothing new. Ordinary strategy, used by many traders, buying stocks with a trend, on corrections. But I wonder how it will be if you replace stocks with options.
