ATM Calendar Spreads, Are You Aware of the Hidden Gotchas?

Today we have a special guest blogger, A.J. Brown of Trading Trainer.  A.J. Brown is widely recognized as "The World's Most Disciplined Option Trader."  He has been actively trading options for more than 10 years, and has published daily insights for his Trading Trainer members every single night, 5 days a week, since 2002.  Today A.J. will share some of his insights on calendar spreads. Be sure to comment with your thoughts and check out what A.J. is doing with Covered Calls these days at Trading Trainer.
Over the years of being both an options trader and trainer, I have seen different option strategies that come into and out of vogue.  It seems almost cyclical, like fashion.

For me, every option strategy has its time and place to be traded.  I look at each option strategy as a tool for an application.  Rather than trying to apply a single tool to every situation, I prefer to assess the situation and pick the right tool. Continue reading "ATM Calendar Spreads, Are You Aware of the Hidden Gotchas?"

Momentum, Reversals, and Bar Patterns

Last week AJ Brown from gave us a great article to 'chew on' covering OTM near-term vertical debit spreads. The response was pretty good, but I think we'll get him an even greater number of comments with this article on momentum, reversals, and bar patterns. Please enjoy the article and if you haven't done so yet, I recommend you check out AJ's training videos as you'll learn a TON!


Every day’s bar tells us something about what to expect the next trading day. In other words, today’s bar affects tomorrow’s bar. So how do we know what that effect will be?

Not every bar will give you clear insight into where the market is headed. But there are certain bar patterns that are more informative than others. Allow me to share a few of these bar patterns with you.
You can often determine if the next trading day is going to be an up day or a down day by looking for a “key reversal up” or a “key reversal down.”
Continue reading "Momentum, Reversals, and Bar Patterns"

OTM Near-Term Vertical Debit Spreads

If you can understand the title you're approved to continue reading this article by AJ Brown from AJ is really one of the only guys I know who can make something like OTM Near-Term Vertical Debit Spreads an easy topic to understand and execute! Read the below article and also be sure and get AJ's Options Trading Courses as I made him promise to give it to Trader's Blog readers for free! He told me he was impressed with Trader's Blog readers and really wants you to ask him some tough questions...don't let him down!


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.

A vertical debit spread is like a cheap insurance policy to protect you in case a stock gaps up or down.
Here’s how it works…
Continue reading "OTM Near-Term Vertical Debit Spreads"

Obey These 3 Option Trading Rules

I've decided to invite AJ Brown, from, as he was a great guest blogger and hit a very hot topic...options! You can read his last article on OTM, ITM, or ATM, which was a great success. I asked him back today because options are getting much more play in this economy and he has 3 great rules for trading options that he would like to share with you today. Comments are welcome and expected, and just as before, he will be responding to ALL comments!


The most difficult part of trading options (or anything else) is controlling your emotions so you can make smart trades.

There's always this tug-of-war. On the one hand you have logic and common sense. On the other, you have fear and greed. Problem is, fear and greed are too often the winners! (I know; I've been there.)

With that in mind, here are three option trading rules I suggest you obey to eliminate emotional decisions.

Rule #1: Be an End-of-Day Trader

Do some people make money day trading? Absolutely. But for most people I advise against it. Here's why...

Watching the market real-time can send your emotions soaring and diving like a roller coaster on a rickety track. Sure, it's thrilling. Sure, you'll experience something like a gambler's high. But it ain't going to do your trading account any favors.

Continue reading "Obey These 3 Option Trading Rules"

Which options to pre-select: OTM, ITM, or ATM?

Today I'd like everyone to welcome AJ Brown from He's an options expert and his article below is a very valuable one that everyone should read! Please don't be shy and post your thoughts and opinions which options YOU prefer!


When trading options using short to medium term strategies, we're not looking to hold positions for a year, six months, or even three months. The idea is to enter and exit our trades within three to 40 days. Returns of 5% to 150% per trade are common with short to medium term strategies.

When I surveyed participants about putting together a short to medium term option trad-ing strategy, the number one question I received was which options to preselect: out-of-the-money (OTM), in-the-money (ITM), or at-the-money (ATM).

Continue reading "Which options to pre-select: OTM, ITM, or ATM?"