"Take calculated risks. That is quite different from being rash."

Continuing with our options theme this week we have brought in, J.W. Jones, the primary analyst and moderator of OptionsTradingSignals.com. Today J.W is going to share with you his take on the recent silver market, and how volatility and options have presented him great opportunities in markets where traditional investors are running for the hills. Be sure to comment with your thoughts and visit J.W at Options Trading Signals.com.

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Take calculated risks. That is quite different from being rash.
– George S. Patton -

Last week silver was the focus of incredible price swings which left many licking their wounds and shaking their heads at the trading losses they had incurred. This sell off was likely triggered by the increase in margin requirements for futures contracts, but the stunning price decline extended to all vehicles like exchange traded funds use to trade the glimmering metal.

I recognized the potential opportunity early in the week, and began to look at various position structures using options on Tuesday morning. In order to understand the thinking behind this trade, it is necessary to understand the concept of implied volatility of an option contract. Implied volatility, together with time to expiration and price of the underlying security, form the three primal forces that rule the world of option pricing. This measure of volatility is best described as the collective opinion of traders as to the future volatility of the price of the underlying. Implied volatility is the variable which determines if options are priced cheap or overvalued. Continue reading ""Take calculated risks. That is quite different from being rash.""

Options Trading Success With MarketClub

Todays Trader’s Blog guest is Trader Travis, owner of Learn-Stock-Options-Trading.com. Like many of you, Travis spent a good bit of time looking for a trading system that fit his style and mindset that could supplement his income. During his search, Travis stumbled onto MarketClub, and has developed an interesting way to incorporate it into his trading style. We think you will really enjoy this article regarding his trading experiences. Be sure to comment with any questions for Travis, or add your own MarketClub tips and tricks in our comments section.
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I hope you've enjoyed the Learning Options series that MarketClub has provided for you.

Today I wanted to share my personal experiences with using MarketClub as an options trader. In my humble opinion, options trading success with MarketClub comes down to 3 primary things:

•    Trade in the same direction of the general market (Dow, Nasdaq, and S&P)
•    Only trade when the stock and the general market both have strong trends either up or down
•    Then sit back and allow the trade triangles to guide your entry and exit points

Seems rather simple and common sense, but you'd be surprised how many of us don't use common sense in trading. Now the Silver ETF seems to be its own market and seems to play by its own set of rules so here is an example of how a real trade played out… Continue reading "Options Trading Success With MarketClub"

I'M BACK!!!

Hello, Adam Hewison here for MarketClub. A lot has happened since I've been gone, but it's time to focus on what's happening right now! Here is a preview of what's ahead for your 1PM market update for Monday the 16th of May.

SP500 +65 and moving sideways. Up trend still intact. Market at the lower end of the Donchian Channel. Target remains at 1,4000.

Silver possible bullish divergence on the Williams %R indicator.Major resistance at $39.50.

Gold longer term trend still positive. Support at $1,462.50. Resistance at $1,526.

Crude Oil neutral with a + 65 reading. Long term indicator remains positive. Possible bullish divergence on the Williams %R indicator.

The Dollar Index is trapped in a trading range with the longer term outlook remaining negative. Major resistance at 77.50.

The Thomson Reuters/Jefferies CRB Commodity Index, is negative with a 60% reading. Near-term resistance at 348.50. Support at 333.50.

Join me at 1PM ET for your LIVE market update!

All the best,

Adam Hewison
President of INO.com
Co-founder of MarketClub

Are you the smartest? Prove it!

If you have been following our blog, then you are no stranger to our prediction challenge. If you missed it, you are in big trouble!! Okay, well not really, but we HIGHLY recommend that you get caught up HERE!

Emails have been pouring in with a wide range of predictions for the DJI and DX. It is fun to catch a glimpse of everyone's view of the market. If you have not yet emailed Jennifer@ino.com with your predictions, do so ASAP...remember, the challenge ends June 1st! Yes, QE2 runs through the end of June, but what fun would it be if we allowed you to guess up to the day before judgment?

Don't miss your chance to win the title of The Smartest Man/Woman of the Universe...Email Jennifer@ino.com now!

Good Luck,
The MarketClub Team

Traders Toolbox: Learning Options Part 4 of 4

In real estate, they say that the three most important things are location, location, and location. In options, the three most important things are volatility, volatility, and volatility. Often neglected by option rookies, volatility is the cornerstone of an option professional's trading strategy.

In its simplest form, expressed as the annualized percentage of the standard deviation, volatility measures how far a contract can be expected to swing from a mean price. A contract trading at 50 would have a volatility of 10% if it traded between 45 and 55 over a given period of time.

Historical volatility is just that: the volatility calculated (using closing prices) over a given period – 20 days, 20 weeks, one year, etc. Implied volatility is the volatility using current market prices. For example, using four primary option pricing inputs – futures price, settlement price, time until expiration and volatility – would result in a theoretical price.

By plugging in the current option price in place of the theoretical price and working backward, it would be possible to determine the volatility the current market is implying. (It is not mathematically possible to work backward and solve for implied volatility using an equation like the Black-Scholes model, but an approximation can be derived.)

Options on quick-moving, highly volatility contracts will demand a higher premium because of the increased possibility of such options being in-the-money. For example, an out-of-the-money option on a slow, non-volatile contract will have a lower premium than a comparable option on a volatile contact because there is a greater chance the volatile contract will shirt in price enough to put the currently out-of-the-money option in-the-money.

Astute options traders look at volatility figures to evaluate the potential of a trade, buying or selling options when volatility is exceptionally high or low. If a market is trading at historically low volatility levels, options premiums could be expected to rise as market volatility increases, presenting a buy opportunity. The revers is true for high volatility situations.

We hope that this short lesson series was helpful, and that you learned a little more about trading options!

Best,
The MarketClub Team