The journey to profitable trading is a challenging one. I’ve created this site to share some of the more useful ideas and techniques I’ve found — and to share some of my mistakes — to help others on their path.
For unique analysis tools to assist with term structure analysis, be sure to check out tools.thetradersjourney.com
Here are few notes on some of the biggest, and most common problems that prevent traders from ever becoming profitable. I’ve had most of these problems myself at some point, and I always have to be on my guard against some of them. Do any of these hit close to home for you? You view losing money in a trade as a painful experience and/or failure and you go into denial when a position starts...
No, and for many reasons. Here are a few: First, and most importantly, “open interest” does not measure the number of options that customers (i.e. non market-makers) are long options. Open interest will rise even if customers are mostly selling options. Options open interest is simply a count of all open options positions, with one party long and one party short. Market makers will...
In 2016, I read a new story that I thought would make a great trade idea. It seems that Lumber Liquidators had been publicly smeared by the mainstream program 60 Minutes. They claimed that Lumber Liquidators had distributed “cancer-causing” (!) floor materials. The stock was trading around $14, down from a high of around $120 two years prior. The State of California was setting its...
Let’s look at a recent winning trade I had. This trade was based on my interpretation of the CFTC’s Commitments of Traders report, the current futures curve and the historical futures curve surface available at tools.thetradersjourney.com. The Setup Based on the historical shape of the lean hogs futures curve, it seemed that the spread between the front months and back months was...
There is a gap immediately above the current price, and then a gap 200 points below. For the /ES, gaps tend to be very strong magnets that don’t generally get ignored. My experience leads me to believe both these gaps will be filled before the market gets too far from either gap.
Which way will it go? Just like with magnets, proximity usually increases the strength of the “pull”
These gaps represent areas where there were no prints during regular trading hours for the S&P 500 E-mini futures contract using hourly bars. Currently, there are gaps above and below the market. To me, this indicates greater actual volatility is likely in store over the coming months, as this market tends to fill its gaps. Note how many gaps were filled, almost to the tick in...
I keep hearing from people that “DITM options are the same as stock”. While this statement is true with respect to the two parameters of “extrinsic value” and “delta”, DITM options have an incredibly different risk profile than stock and can be extremely useful tools. In this post, I’ll demonstrate this. Or rather, I’ll show you...
All, I wanted to post an example of how I like to trade futures options. I like to be long gamma, near expiration, where a relatively small move in the underlying instrument translates to big moves in the options price. Note that here I closed out the positions where there was nothing but time premium left. Returns for each trade were 400% win, 1,000% win and a 100% loss (with a...