Trading Stock Options
If you're looking to get a handle on your trading without sacrificing all of your free time, consider subscribing to a service provided by Dr. William O. Moellmer & Dr. Theron G. Miller of American Option Trader LLC. We will recommend approximately 10-30 options each month [depending on market conditions] along with their underlying stock symbols. We will also suggest when you may want to close your position.
When you subscribe to American Option Traders' daily email service, you will receive simple and understandable suggestions for trading specific stock options. The picks will be received in the evening for possible trading tomorrow at the open. You evaluate all recommended entry and exit picks this evening and then place your order first thing in the morning, if
appropriate, according to your own trading criteria. Here is an example of a typical email.
Start of Example
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| Greetings from American Option Trader LLC | ||||||||
| These computer generated picks & exits do NOT include an analysis of news and closeness to earnings report dates. | ||||||||
| Always check charts and do your own research and analysis before entering or exiting any position! | ||||||||
| (1) We go approximately 6 weeks before the expiration date when opening a position. | ||||||||
| (2) We try to get as near to a delta of 50% as possible when opening a position. | ||||||||
| (3)We may exit a position if today's close is below yesterday's low (calls). | ||||||||
| Possible Opportunities for Stock and Option Trading for Next Day's Trading | ||||||||
| Updated on: | Monday | 31-Mar-08 | 4:00 PM | Mountain Time | ||||
| Next Trading Day/Date: | Tuesday | 01-Apr-08 | ||||||
| Note: *Approx. Profit calculated on close price after the day's close. | ||||||||
| Stock Symbol | AOT Strategy | Stock Action | Call Option Action | Put Option Action | Option Chain | *Approx. Profit [1 Contract] | Date Closed | |
| Note: Emails use popups. | ||||||||
| AVB | LONG | Sell | CLOSE Position | http://finance.yahoo.com/q/op?s=AVB | $32.00 | 3/31/08 | ||
| APOL | LONG | Buy | OPEN Position | http://finance.yahoo.com/q/op?s=APOL | 3/31/08 | |||
| CNX | LONG | Sell | CLOSE Position | http://finance.yahoo.com/q/op?s=CNX | $124.80 | 3/31/08 | ||
| MTB | SHORT | Buy to Cover | CLOSE Position | http://finance.yahoo.com/q/op?s=MTB | $304.00 | 3/31/08 | ||
| FE | SHORT | Sell Short | OPEN Position | http://finance.yahoo.com/q/op?s=FE | 3/31/08 | |||
| FO | SHORT | Sell Short | OPEN Position | http://finance.yahoo.com/q/op?s=FO | 3/31/08 | |||
| CI | LONG | Sell | CLOSE Position | http://finance.yahoo.com/q/op?s=CI | -$62.72 | 3/31/08 | ||
William O. Moellmer, Ph.D.
william.moellmer@gmail.com
http://AmericanOptionTrader.com
End of Example--------------------------------------------------------
As to the question "Will I make any money?" you be the judge. Here is a summary of our backtesting results for trading activity for the month of April 2009. January thru March were essentially break-even months for the calls, but winning months for the puts. Not surprising, since the market was in a skid. Now with the market changing, we are seeing the calls being more successful with more losses in the puts, as expected.
These results assume the trades were executed @ the opening bell following the pick from the previous day after the close. See detailed Historical Results for other historical results.
| BACKTESTING RESULTS FOR : | 04/01/09 | Thru | 04/30/09 | Historical - Calculated on Tomorrow's Open | ||||||||||||||||||
| Strategy & Other Information: | Number of Hits that Closed During this Period | % of Total | Total $ Option Profit | % Winners | Number of Positive Trades | Number of Negative Trades | Average $ Profit Per Positive Trade: | Average $ (Loss) Per Negative Trade: | Average $ Profit Per Trade: | Average % Net Option Gain | ||||||||||||
| Closed Normal Option Calls [Long] | 12 | 80.0% | 1,214.08 | 91.7% | 11 | 1 | $115.61 | -$57.60 | $101.17 | 27.0% | ||||||||||||
| Closed Normal Option Puts [Short] | 3 | 20.0% | (731.91) | 0.0% | 0 | 3 | $0.00 | -$243.97 | -$243.97 | -65.2% | ||||||||||||
| Contracts Purchased this Period: | 15 | Backtesting Theoretical Assumptions: | ||||||||||||||||||||
| Contracts Closed this Period: | 15 | Total Contracts per Trade: 1 (100 Option Shares) | ||||||||||||||||||||
| Total Closed Option Profit: | $482.17 | Positions opened (purchased) and closed (sold) at the Open value of the day indicated. Hit was previous day. | ||||||||||||||||||||
| Cost per Contract: * | $ 374.17 | Includes all options closed this time period (Including purchases from previous month). | ||||||||||||||||||||
| $ Profit per Contract: | $32.14 | Option Delta = 0.64 (Based upon the DOW 30, March 14, 2008, One Step into the Money) | ||||||||||||||||||||
| % Gain per Contract: | 8.6% | * Estimated Option Cost = Entry Stock Price * 0.064 + 1.0813 [R2 = 0.53] | ||||||||||||||||||||
| Annualized Gain: | 189.0% | (Based upon the DOW 30, March 14, 2008, One Step into the Money) | ||||||||||||||||||||
| Total Number of Positive Trades: | 11 | Catastrophic Stop Loss: $500 | ||||||||||||||||||||
| Percent Positive Trades: | 73.3% | |||||||||||||||||||||
| Est. Average $ Profit Per Pos. Contract: | $115.61 | |||||||||||||||||||||
| Total Number of Negative Trades: | 4 | Percent Positive Trades: | 73.3% | |||||||||||||||||||
| Percent Negative Trades: | 26.7% | Contracts Closed: | 15 | |||||||||||||||||||
| Est. Average $ (Loss) Per Neg. Contract: | ($197.38) | $ Profit per Contract: | $32.14 | |||||||||||||||||||
| Approx. Closed Trades per Month: | 15.5 | Total Profit this Period: | $482.17 | |||||||||||||||||||
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No long term contracts.
Our proprietary algorithms were developed by two Ph.D.s. who love statistics and love to trade stock options.
Cheers!!
The team at: American Option Trader LLC