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QQQQ Options Trading

Achieve superior returns with confidence! Trade QQQ options with us. Our unique, volume-based market timing strategy for the NASDAQ 100 really delivers�

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Our Trading Strategy.


In the following, we would like to outline our options trading strategy. As a valued subscriber who follows our signals, our strategy obviously influences your trading to a certain extent. In formulating our strategy, we have embodied a set of trading rules, the most important of which you will find below. This summary should give you a clearer picture in regards to:

  • The types of signals you can expect from our trading system;
     

  • The frequency with which we might issue them;
     

  • The maximum length of time we may remain in a position.

We have drafted our trading rules with the following objectives in mind:

  1. Firstly, to avoid wherever possible the risk of total loss. Remember: if an option expires worthless – which happens frequently – losing your entire premium is a very real possibility;
     

  2. Secondly, to reduce substantially the risk of a significant drop of an option's contract price due to the erosion of its time value (a stark reminder that options are decaying assets).

Here are three key rules we apply to our trading signals:

  1. The trading signals we issue are always for options with expiration dates at least 3 months into the future. With 3 or more months left to expiry, the erosion of an option's time value (time decay) has not yet affected its price to a significant degree, and it still remains liquid (See examples below);
     

  2. The trading signals we issue always apply to in-the-money options. In-the-money options are less affected than out-of-the-money options by short-term volatility of the underlying security;
     

  3. Our trading signals are always issued for around-the money strikes in order to ensure high liquidity.
     

  4. Finally, here is a key rule we adhere to in regards the closing of a position:

    Whatever the status of a current signal, we always close a trade and go to cash if we have been in the position for more than 30 days. For instance, assume we initiated a trade 23 days ago. We now have a maximum of 7 days remaining until the trade must be closed.

    True, this is a very restrictive rule. The reason we implement it is the overriding impact the time decay factor starts to exert on an option (with expiry in 3 months) after the first 30 days. If after 30 days you are still in a losing options position, your chances of making a profit on that position become very remote. It would be much better to take an early (i.e., relatively small) loss and then look for a new, potentially more profitable trade.

    The only exception we apply to this rule is – if after 30 days in a trade– we are in a winning position and the market is moving in our favor.

Now, here are two examples of how these rules may be applied to actual trading situations:

Example 1:

It is July 14 and the next options expiration day is set for July 16. The QQQQ are currently trading at $35.80. According to our rules, the trading signals we could issue today are "Buy Calls with a $35 strike price and expiry in September", or "Buy Puts with a strike price of $36 and an expiration date in September". That is the most risky signal we could issue given the current market situation. Of course, we could also issue the signal "Buy Calls with a $34 strike and expiry in October". On the other hand, our rules would prevent us from issuing the signal "Buy Calls with a $36 strike and expiration in August". This would be too risky and thus contrary to our strategy.

Example 2:

Today is July 19 and the QQQQ are currently trading at $35.80. The previous options expiration day was last Friday, the next expiration is set for August 20. According to our rules, the only signals we could issue today would be: (1) "Buy Calls with a strike price of $35 and an expiration date in October"; or (2) “Buy Puts with a $36 strike and expiry in October".

Options trading is a very risky business. Our trading rules were put in place in recognition of this fact. The above rules serve to protect invested capital by limiting the amount of risk while still maintaining a high level of profit potential.

When we publish a new signal, we always state a number of “alternative options” that you could trade in respect to that signal. Among them, you will find trades of a more risky nature (i.e., trades that may not necessarily abide by the rules discussed earlier), as well as more conservative trades. For a given signal, you thus have the opportunity to select among a number of options - pick the one that best suits your level of risk tolerance. While higher risk options are cheaper (but offer more profit potential), conservative (lower risk) options are more expensive (but less volatile, and consequently associated with a reduced profit potential). Click here to read more about this topic.

Here is a cardinal trading rule: never allocate all of your trading capital to options. In all of your trades, invest only a predetermined and fixed amount of your trading capital in options. This is a key strategy to help you protect your profits and limit losses. Click here to read more about it.

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The Information on the Site is provided for information purposes only. The Information is not intended to be and does not constitute financial advice or any other advice. The trading of stocks, futures, commodities, index futures or any other securities has potential rewards, and it also has potential risks involved. Trading may not be suitable for all users of this Website. Past performance is not necessarily an indication of future performance. You absolutely must make your own decisions before acting on any information obtained from this Website.

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