Yes! I generally recommend that newer traders watch the service for a few weeks or longer paper trading based on the newsletter email alerts. By doing this, a novice trader can work out many of the issues or questions they might have regarding the trading platform they are using and the construction of various option trading strategies.
Options are quite different from stocks or futures, and for novice traders just starting out learning the strategies and how to set them up appropriately on the platform you are using is critical before any capital should be put at risk. When basic mistakes are removed through the use of paper-trading, it reduces the risk that a trader will make a mistake regarding trade execution.
This service provides 5-10 trade ideas on a monthly basis, thus if a subscriber paper-traded for an entire month there would still be plenty of time and recommendations to trade when they feel they are ready to go live and use real money. In the meantime, the subscriber would still have access to the various educational articles only available to subscribers as well as the morning and weekly reports. Additionally subscribers would also have access to the weekly video which will be full of educational pointers from technical analysis to proper option trade configuration. The service strives to have a rich mixture of educational feature while still providing quality trade ideas.
The OptionTradingSignals service is designed to provide hopeful option traders with the appropriate education to be able to pull profits out of the market consistently. Obviously some members will simply want trade our ideas and will not worry themselves with learning my methodology; other members will clearly want to learn the strategy and analysis I use before entering/closing trades.
My methodology is pretty simple and straightforward. I utilize basic technical analysis combined with market internals to create an edge. In many cases, key support, resistance levels, and pivots are identified to build trade ideas which utilize time decay. Members will learn quite quickly the methodology that I use to find quality setups. Within a few months, I would fully expect traders to be able to find quality risk reward setups utilizing basic option strategies to create profits based off their own market research and analysis. Daily chart analysis and weekly reports and videos will round out the service and allow traders to fully grasp the strategies that I will be using.
Note: For option traders to expedite the learning curve, quality option charting tools are a necessity to learn how option trades create profits. Most option specific brokers have tools built into their platforms. Online brokers like TradeMonster and ThinkorSwim have option charting tools which are free if you open a trading account with them.
We don’t assume any particular commission structure in our performance numbers, for several reasons: 1) There are many different commission rates out there, and we’re not going to arbitrarily pick one; 2) commissions have a much different impact on smaller accounts than they do on larger accounts, in most cases, so there’s no one correct way to assess the likely impact of commissions; 3) we’re in the business of publishing our strategy and tracking its performance, not providing portfolio management services; our members are mature and responsible traders who are capable of managing their own accounts, including assessing the impact of commissions.
We stress the importance of execution, too: novice traders often get preoccupied with up-front transaction costs, and ignore the less obvious but equally importance issue of execution. If your broker charges an extra $40 in commissions on your 10-lot trade, but gets a better price by 0.05, they’ve saved you $50, for a net $10 gain. As a rule of thumb, you’ll get what you pay for when it comes to execution, so be careful that you don’t nickel-and-dime yourself into a low-commission, poor-execution situation. It’s extremely important to get with an options-friendly broker if you aren’t already – Online brokers like TradeMonster and ThinkorSwim have option charting tools which are free if you open a trading account with them.
We can’t legally give any personalized advice about account size or what risk profile is appropriate for you. But we can say that an account with less than $5000 will face decreased percentage returns as commissions and slippage take a large portion of profits.
Option spreads are a great way to build capital because they have two built-in features that you can’t get by trading stocks alone: 1) leverage – every option contract is worth 100 shares of its underlying asset, which enables you to capture the price movement of an asset with a much smaller outlay of capital; 2) hedging – option spreads enable you to define your maximum upside and downside before you initiate a trade, so you know right from the start exactly how much you will win or lose on any trade. Defined-risk trades like these protect you from the infinite downside/upside risk that is inherent when you buy/sell stocks.
You’ve come to the right place. As our Strategy page explains, the goal with OTS isn’t to hit home runs with every trade ida – instead, our goal is to make a lot of base hits that will add up over time. This is the same motivation behind bonds and income funds: to reduce risk and achieve consistent, measured performance.
Options spreads can play a valuable role in any portfolio. Even if a small amount of capital is committed to our strategy, you can use options to smooth out returns and reduce the volatility inherent in investing. Let’s say that over a three-month period, the S&P 500 Index loses 3% of its value. If your investment portfolio is long the S&P (through the SPX, SPY, or an index fund), you’ll be fully exposed to that downside risk. But if you take that same portfolio and add our options spreads into the mix, you can still make money over that time period by profiting from the relatively range-bound nature of the index.