Notes from Dr. Borkosky

3. Theoretically, an underlying can only drop to zero-dollars, meaning the risk is limited.

You bear responsibility for your own investment research and decisions, and should seek the advice of a qualified securities professional before making any investment. This is often the best way to begin researching a market that you wish to trade – by exposing very general, underlying tendencies in the market’s behaviour a trader can then make an informed decision about the best approach to take, in order to extract profits from it. We will find these strategies in lower, more accessible to reach levels. How much money do I need to start trading? In modern markets that trade around the clock, this problem vanishes, as one can always leave a stop in the market to be activated at any time of day or night. A Medium-Term High is defined as any short-term high with lower short-term highs on either side of it. They are typically very easy to implement, and the risk is both, defined and minimized. This is a great bonus, especially for smaller portfolios, because now you can do more with less. After 3 years of trading as a student my portfolio has net more than $230k...For year 2019, in less than 6 months I’ve net more than 140k. I’d made $6,900 in 42 trading days. One thing that should be obvious from this chart is that the Key Levels indicator is able to ensure that where a market is clearly trending, entries are only initiated in the direction of the trend. Options have a defined life-span so losses can add up quickly if you are not careful. A cash-secured put simply means that the trader has the cash on hand to buy the shares at the given strike to satisfy the exercise of the put.

If you recall, we acknowledged that some markets undergo significant trends, but on a very intermittent basis.

In fast-moving markets the indicator efficiently picks out the key levels that you need to be aware of to rationalise the chaos, eliminate market ‘noise,’ and expose the underlying structure of price action.

London When you move to this level, you must have an account with margin.

If you took a long position at the breakout your stop could be placed at the level marked 2, and then trailed up to successively higher key levels until you were stopped out for a profit at point 7. Most of your options strategies are going to fall into these two categories so working to Option Level 3 is a priority for most traders. Brokerages have put safeguards in place to protect you from yourself.These safeguards can be frustrating if you are an experienced options trader who wants to get started trading right away.

The reason these are reserved for Level 2 is that you can lose money on the option positions.

A cash-secured put is another options strategy where it is hard to lose money on the option trade. You can think of it as a loan from your brokerage.

Markets that have a high ‘Trend Factor’ (calculated in the final column) should be those that exhibit a strong tendency to trend on a highly consistent basis.

The test below shows the result of flattening all positions on Friday’s close, and then re-establishing them on the subsequent open, once again using a one day holding period: It can be seen that this reduces overall profitability, and also increases the maximum drawdown.

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I now have full autonomy. It will then be possible to know whether stops or targets were hit first. The indicator’s algorithms identify key levels at which the market has made significant reversals. Here, one quarter of the position was exited after each of 5 days, 10 days, 15 days, and 20 days. Margin, if used carelessly, allows you to lose more money than what your account can afford. These are plotted as horizontal lines on the chart, remaining in place until a new key level is formed.

You would make money on the increase in the underlying plus the credit for which you sold the call option. A cash-secured put involves selling an out-of-the-money put option with the goal of being assigned on the option and buying the underlying shares.

What is far more important to us, though, is that the strategy was profitable for all holding periods, suggesting that regardless of whether or not we were to have chosen the optimal holding period the strategy would still have turned a profit. If you didn’t get into the Option Level you desired, you need to spend some time learning about options.

Brokerages do, however, all follow a similar classification system.

NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFIT OR LOSSES SIMILAR TO THOSE SHOWN. Both of these strategies, covered calls, and cash-secured puts, are set up, so it’s difficult to lose money on the option position.

Sure, it’s easy enough to do. Thanks to this community, it now feels like I've been given the keys to absolute freedom. Brokerages will provide new traders with a form where they can detail their options trading knowledge and experience.

To get an idea of which markets might be receptive to a breakout strategy, we can undertake a data-mining exercise. Because such price levels are watched by many participants, a potential benefit of this approach is greater liquidity in the areas where we wish to establish a position. It can be used as a trend indicator, a breakout strategy, a system for stop-loss placement, …

Trading breakouts of support and resistance in certain markets can, however, still be a very lucrative approach – the crucial requirement is to establish which instruments exhibit trending behaviours and are best to trade. Options allow you to overleverage your portfolio, and if you are wrong about your prediction, you can quickly lose. When the nearest key level support is too far away on the chart you’re trading from, rather than pass on the trade, use a lower timeframe chart to locate a key level that offers a better risk to reward ratio. When you upgrade to Option Level 2, you are now permitted to purchase options.

Stocks are more likely to run higher and to do it unexpectedly.

Option levels are there for you to protect your account. Price action at these all important boundaries depends on their unique characteristics and specific locations. These key levels can be expected to act as substantial support and resistance zones. Brokers limit access to option buying to level 2 to ensure that the trader fully understands the concepts involved in options trading, such as the decay of value and the actual mechanics of exercising an option. TOP ends up dropping to $35 by expiration. There was no limit on the number of attempts at entry permitted at any single Key Level – sometimes a profitable breakout would occur after numerous previous attempts at entry were stopped out – this is a key element of breakout trading, and is manifest in the relatively low percentage win rate in the report.

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