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Kevin M. O'Brien's  Instablog

Kevin M. O'Brien
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Options trader full-time, author, owner of www.kevinmobrien.com, a subscription-based service. Born in Chicago. Follow many stocks in the tech, financial, and agricultural sectors. Trade daily with a 5 Technical Indicator Strategy I developed. Also trade debit spreads, strangles, and also hold... More
My company:
Kevin M. O'Brien
My book:
Breakthrough: A Consistent Daily Options Trading Strategy For Volatile Stocks
  • Weekly Meetings In San Diego, CA Or Chicago, IL 46 comments
    Sep 27, 2012 12:24 PM

    Along with meetings available in San Diego, CA, I will also be available for those who would like to meet in Chicago, IL. I will be living at both areas again and I understand it makes it easier for those who live on the East Coast or the Midwest to meet in Chicago instead.

    If you have any questions on the weekly meeting or anything else, please send me an e-mail and I will respond as soon as possible. Thanks.

    -Kevin

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Comments (47)
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  • For any who are interested - Kim Klaiman with Steady Options offers a great alternative to spending $ 6000 or more for Kevin Obriens school... According to his web page - the monthly cost is only about $ 100 per month- since he says one $ 1000 trade at 10% return pays for his monthly premium. His track record is quite impressive- and he seems to be very transparent.... here is his webpage;

     

    http://bit.ly/UTZ1At

     

    He invited me to contact him at this address to get more info on his advisory service (currently it is not open to new subscribers but evidently every few weeks spots open up):

     

    info@steadyoptions.com

     

    Here is his Seeking Alpha site:

     

    http://bit.ly/UTZ4fG

     

    In my opinion (for what it is worth ha ha) -- he is a great resource to share insight on Kevin's methods and the risks associated with them. As far as I am concerned, the feedback I received from him literally saved me $ 6000 by not signing up for his training curriculum. I can't thank him enough... although I must admit... I was quite naive in the first place for considering Kevin's program. Kim definitely opened my eyes.
    28 Sep 2012, 02:46 PM Reply Like
  • Author’s reply » Good luck with that. Know what you're getting into champ.
    29 Sep 2012, 07:28 AM Reply Like
  • Author’s reply » Please, do not compare me with anything to do with Steady Options, Kim Klaiman, AK1004, or whatever name he is using. Totally different approach. If someone thinks you can make money trading options with a method that involves selling options ahead of earnings based on increased IV then by all means, go ahead. I'm a realist. I like to be cash free every day on my trades... this is what my strategy is based on. Comparing apples to oranges...
    29 Sep 2012, 07:33 AM Reply Like
  • You have to understand that Kim Klaiman and Kevin have completely different approaches to options trading. Kevin's main thing is a day trading method as described in his early SA articles and his e-book. It's simply buying calls and puts based on indicators which trigger entry. Kim's approach is conservative and risk averse and involves buying strangles and straddles to take advantage of volatility around earnings, as well as some other non-directional plays.

     

    As for the approach itself, it's like comparing apples to oranges. What kind of trader do you want to be? How do you best manage risk, how long do you want to hold, how complex do you want your positions to be? The two offer completely different approaches.

     

    That said, I would agree with you that Kim is very transparent and helpful. He answers questions and engages in dialogue with readers, and always does his best to describe the parameters and mechanics of a trade.

     

    I wish I could say the same of Kevin, but there have been quite a few threads where he's offered details but not delivered, and become very insulting to those who criticize him. I'd like to see him simply respond to the criticisms and explain or defend his method, but the threads usually just degenerate into insults. Maybe his approach does work. He says he makes a living by it and I have no reason to doubt him. But he just does not do a very good job of providing civil discussion and discourse.

     

    Kim publishes every single trade, winners or losers. Kevin claims to have a 100% win rate for the year, but provides no evidence.
    28 Sep 2012, 10:54 PM Reply Like
  • Author’s reply » Please, do not compare me with anything to do with Steady Options, Kim Klaiman, AK1004, or whatever name he is using. Totally different approach. If someone thinks you can make money trading options with a method that involves selling options ahead of earnings based on increased IV then by all means, go ahead. I'm a realist. I like to be cash free every day on my trades... this is what my strategy is based on. Comparing apples to oranges.
    29 Sep 2012, 07:33 AM Reply Like
  • According to Kim - he presented me with many examples from prior posts/recommendations of yours that went awfully bad- and the risk was enormous. I get what Kim now is saying- your strategies are without regard for loss it appears... so yes - I agree "apples and oranges". I am still learning re: "selling" vs. "buying" options and all the different techniques involved- but I know enough now to know that it would be extremely irresponsible of me to spend $ 6000 for teachings from someone who appears to hold such little regard for risk.

     

    And please stop calling me "champ".. it is very rude.
    29 Sep 2012, 02:56 PM Reply Like
  • Well I don't have a lot of disposable money in the first place- so controlling risk makes perfect sense to me. As for holding periods I guess I am open to that if risk is under control. I love the idea that Kim puts all the trades out - good or bad - for everyone to see.

     

    Are you serious? Kevin claims 100% success? Well if he doesn't have the transparency - I'm not sure how anyone could take that seriously... right? I mean-- anyone can say anything on a message board- doesn't mean it's true. All the more while in my opinion to avoid his academy.
    29 Sep 2012, 02:59 PM Reply Like
  • Right, Kevin, I agree that it's apples to oranges. Two completely different approaches.
    But the way you respond to critics is also completely different. Kim responds in a factual manner, but there are so many threads where you get into flame wars with your critics. It's not helpful. I'd really like to see you provide reasoned and factual defense of your day-trading method and more trade examples. Even in this thread, you're avoiding discussion of the criticism raised: What about the high risk involved in this trade? Aside from the fact that you don't like Kim, is his allegation well-founded? If not, why not?
    29 Sep 2012, 09:32 AM Reply Like
  • Author’s reply » GL- There have been complete and downright lies mentioned, which is why I have ignored the posts from certain individuals. I don't have time to play games, so why bother. Regarding Kim, I have chosen to take the high road. I think most of the people who write erroneous comments (many of which aren't even on the topic of the article written) and expecting me to reply to that is ridiculous. Take Passion4... on the CF article, this person goes off into topics I have no idea what he is even talking about. So I'm expected to respond to that? Not gonna happen.

     

    I asked Passion to take a weekly challenge. He passed on it, even though initially he said he would. That's when I said what is the point here, it's wasting my time, and I don't have the time for it.

     

    I would like to say one thing to you. You contacted me last year via e-mail, and I even offered to call you by telephone on my dime and time, so I could help you out in any way I could. I have and still do this for literally hundreds of people over the last year, ever since I started to write on SA.
    29 Sep 2012, 03:22 PM Reply Like
  • Author’s reply » I will write an article on Kim Klaiman's/Steady Options trading approach and why it doesn't work as advertised. Many gray areas. I will not mention names in the article, just my opinion. It should be a good one.
    29 Sep 2012, 03:31 PM Reply Like
  • Are you saying Kim has been lying? Well by all means- please inform us all of the "complete and downright lies" you are referring to...?

     

    You simply can't just make a statement like that-- and expect anyone at all to believe you-- when you don't present any evidence to back up your case.

     

    I have an open mind- so please.... pray tell where Kim has misled me.
    29 Sep 2012, 07:07 PM Reply Like
  • Yes, you did respond to me and offer to call me, and I'm still open-minded about your system. What's troubling is that I've followed most of your SA posts and you've never been transparent about many of your trades, except in vague terms. When you are criticized, you don't respond to the criticism in a factual manner; it quickly becomes a flame war.

     

    I've known Kim before either of us even discovered SA and we've always collaborated on trading strategies. Trading volatility is in fact a low risk approach and it works for taking small bites out of the market. We were both inspired by Jeff Augen's books to pursue it. I'm finding that for now it doesn't match up well with my interests and my time allotment, but Kim has really taken off with it, and I can assure you that he is forthcoming and transparent in his trades.
    Nobody ever asked you to reveal your trading size or anything like that, but more specifics about time of entry and exit would be great. If you're following 9 stocks, it would be wonderful to have an end-of-day dialogue with readers saying THESE were the opportunities that presented themselves today. I know you have answered some of those questions early on, and at one point you promised to post every trade for a week, but you didn't.

     

    I read your exchange with Passion with an open mind. His approach does make a lot of sense to me, and he's referred me to resources and helped me improve my chart reading skills. I like the idea of day trading. You lose credibility when you simply dismiss another approach that is showing itself to work. He's also become dismissive of you, while I think it's possible that your indicators do line up well for you. There is more than one way to skin a cat, and there are many ways to trade. I look for openness and veracity, and the thing that makes it difficult to follow you is that you do get very defensive and foul when challenged. It might be simpler and kinder just to give some examples of how your trades line up and work.

     

    There was one trade you said you made (in the long CF thread), then Passion checked the boards and claimed no such trade was made. It would have been helpful to see a factual response to that. If you are both honest and forthcoming, then it must be a misunderstanding. What is the misunderstanding?

     

    I've heard from jwcrowell and that week in San Diego sounds like a comedy of errors. Everybody makes mistakes, and while he was flabbergasted, it doesn't sound like he's angry. He tells me he's had some success with your system, and when he's failed it was due to his own habits. In spite of the SD experience, he's still open to the idea of training with you.

     

    I did read your book. I do put up two minute charts with 12/2 Bollingers and watch them while I am watching my other time frames. If support and resistance levels, candlesticks and chart patterns are working for me, I'm not sure if I want to put in the time and effort to make the jump to your system. But if I were convinced that it works as well as you say it does, then it's worth considering. I know you don't feel compelled to prove anything to anybody - and you really don't have to. But there are open-minded readers like me who would much rather see trade samples and logs than the feisty gnarly responses you give to critics.

     

    I know Kim pretty well and I understand his trading approach well. He is the real deal and I really doubt that you'll be successful at punching holes into his strategies. But if you do point out some weaknesses, I'm sure you'll get reasoned and factual responses. You might even improve his trading. Wouldn't that be great?

     

    We both followed some of your early earnings trades enthusiastically. But we didn't do well with them, and it just reminded us to stick to our trading plan and not take undue risks by holding through earnings. That GOOG loss of yours would be a big deal to most people. The fact that you can sustain a 100% loss and that it's an acceptable part of your overall strategy might be OK for you, but it's not what most people are looking for, and it does negatively affect your credibility when you make claims like it's a sure thing.

     

    Good luck with everything.
    29 Sep 2012, 09:21 PM Reply Like
  • Author’s reply » First of all... let me clear one thing up: I never say all of my trades are guaranteed winners. That's not how I work, nor how I say things, even though Kim Klaiman has been running with that for months. In my next article, I think it would only be fair to show some of Kim Klaiman's/SteadyOptions e-mails to me (at the end), and leave it up to the reader to decide, along with so much evidence that proves a point. I wish you well in your trading adventures.
    29 Sep 2012, 10:08 PM Reply Like
  • Didn't you tell me a while ago that you erased all my emails?

     

    To the point:
    1. Didn't you say here http://bit.ly/QOcaW9 "What I will guarantee is that by January 31, 2012 this portfolio account will be at 40k or more." - that's a 100% gain in one month. Those are your words, not mine. Where is this portfolio now?

     

    2. Didn't you say here http://bit.ly/SrNfez "the trade recommendation I am writing about will work like a charm."? Do you want me to show some of the emails of your readers telling me that they lost TENS OF THOUSANDS of dollars following your advice? Yes, everyone is responsible for his own trading. But instead of "will work like a charm" how about "This trade has a high probability of success based on historical data - however, please be aware that if the stock doesn't move enough, the trade can lose up to 100%"? Ironically, I think it was not a bad trade, despite the catastrophic loss. A simple disclosure of the risks would make it a completely different story.

     

    Completely ignoring the risks is what makes your advice so dangerous for novice traders.

     

    Looking forward to your article and hope to have a civilized discussion on it, although I doubt you even know what it means. I'm sure the final result will be the opposite of what you hope to achieve and just bring me more subscribers.
    29 Sep 2012, 10:36 PM Reply Like
  • Something is not right here... I think one of my messages I posted earlier is missing... : - / ???

     

    Whatever... I can't figure Seeking Alpha out sometime ugh.

     

    Anyway- for any who are interested -- there is a poster with the name "jwcrowell" who contacted me via private email regarding his experience with Kevin. He was scheduled for his 1 week class the 2nd week in July-- and flew a very large distance to attend... it turns out Kevin never showed up the whole week... and despite repeated attempts to get in touch with Kevin- he never responded-- yet evidently that same week Kevin was posting here on Alpha like usual. I don't know about anyone else- but to me this behavior is unexcusable! How can one feel comfortable spending $ 6000 when the owner/educator doesn't even show up?

     

    I must say I find it very suspicious that the missing post had this information within it... does it appear to anyone else other than me that perhaps Kevin is trying to cover up the incident?

     

    This is all I know- I suggest if anyone needs further clarification or to verify this situation to get in touch with "jwcrowell" on SA.

     

    It will be interesting to see if this post disappears also.

     

    P.S. Is there anyone reading these blogs that knows what I'm referring to..? Did anyone see my post that is now missing?

     

    It seems to me this is beneficial information for anyone considering paying $ 6000 in tuition.
    29 Sep 2012, 02:50 PM Reply Like
  • Author’s reply » First of all, before you say something, know the details. Would you meet someone who kept asking your bank number over the phone who wasn't in the United States, let alone anywhere? I would hope not. I cannot say anything else regarding this, and it is definitely none of your concern legally.
    29 Sep 2012, 03:26 PM Reply Like
  • Tech, the author of the Instablog has the ability to delete comments. Unlike articles where he has to ask SA editors to do and has to prove that the comment is abusive, it is not required in Instablog - a comment can be just deleted.
    29 Sep 2012, 06:45 PM Reply Like
  • Excuse me????

     

    I know the details-- he was offering to wire you the tuition!!! Hello??? What is so unusual about that? Wiring funds requires routing and account numbers... you were never under any financial risk whatsoever. Thank goodness he never did-- the smartest thing he could've ever done was to back off on that generous offer to pay you in advance of the reserved date. He even offered to give you his credit card # to secure a hotel!

     

    The fact that you completely ignored him is unbelievable... you left that poor guy hanging for a week in a city he had no other reason to be in other than for your school. Disgusting.
    29 Sep 2012, 06:58 PM Reply Like
  • Thanks... that explains that. No other explanation than he deleted the info-- he must've felt it was incriminating information against his cause.

     

    Thank you again Kim-- you are a financial lifesaver!

     

    It really seems quite unorthodox in and of itself for someone... a single individual... to be promoting a "training program" for thousands of dollars... come to think of it... and to somehow think the price is justified... when it has been obviously been brought to much better light on how risky Kevin's strategies are! Who in their right mind would spend any money whatsoever for that type of advice??? Just the concept of it seems rather shady the more I think about it. I don't know what I was thinking.. really. Chalk it up to still being wet under the ears I guess ha!
    29 Sep 2012, 07:01 PM Reply Like
  • Author’s reply » I will write an article on Kim Klaiman's/Steady Options trading approach and why it doesn't work as advertised. Many gray areas. I will not mention names in the article, just my opinion. It should be a good one...
    29 Sep 2012, 03:33 PM Reply Like
  • My approach produced cumulative non-compounded return of 862.9% in 2012 based on 188 trades (143% ROI). Winning ratio was 65% with average winner 11.9% and average loser -8.2%. I don't think anything you will write can change those statistics.

     

    I cannot talk for other people, but all my comments on your articles have always been professional and not personal (which cannot be said about your comments). You never responded to any of them - instead, you chose to attack me personally. But like you said, what else is new. You never responded well to any kind of criticism, no matter from whom it comes.
    29 Sep 2012, 06:53 PM Reply Like
  • Kim-- it sounds like you are going to have a field day with this article haha! I can't wait to see you shred it apart. Seems to appear that Kevin is taking things personally here.... kinda what you said I guess glworden.
    29 Sep 2012, 07:04 PM Reply Like
  • Kim-- do you by chance have any links where you engaged Kevin in these discussions...where he failed to respond? I would like to review specifically what you are referring to...and I think it would help others new to complex options strategies such as myself as well. Sometimes the best way to learn is by hearing criticism from those such as yourself that have much more experience than moi!
    29 Sep 2012, 07:40 PM Reply Like
  • Author’s reply » I wish hum luck in answering them.
    29 Sep 2012, 07:48 PM Reply Like
  • Author’s reply » Get ready Klaiman.
    29 Sep 2012, 07:48 PM Reply Like
  • Author’s reply » Is that so? Ok.
    29 Sep 2012, 07:53 PM Reply Like
  • Tech, here are some examples:

     

    http://bit.ly/QOcaW9 - this is where he started the 20k portoflio and guaranteed in one of the comments "that by January 31, 2012 this portfolio account will be at 40k or more." One of the trades lost 60%+, and he just stopped tracking the portfolio.

     

    http://bit.ly/SrNhmA - this where he said "One of the many drawbacks of a credit spread is that it will tie up so much capital." A complete nonsense and lack of understanding. Like I mentioned, what determines the risk/reward and the capital tied up is the strikes and not the credit or the debit. You can do the same trade with same strikes for a credit or a debit with same P/L graph - http://bit.ly/QOcaWc

     

    http://bit.ly/SrNfez - this is where he presented the GOOG trade and promised that "the trade recommendation I am writing about will work like a charm." The trade lost 100%. He did not disclose any of the risks. Look at his comments to some of the commenters.

     

    http://bit.ly/QOcdRQ - I asked him about the risks of the trade, he completely ignored the question.

     

    At some point, I just gave up. But look at any of his articles and check how he responds to ANY critical comment. You can check the GOOG article for example.
    29 Sep 2012, 08:20 PM Reply Like
  • Why not mention names? Kim has put himself out there as a proponent of a particular trading style. If you publish your take on it, it would be helpful for everyone to know exactly what you are talking about.
    I really doubt that you're going to knock it out of the water because it is a statistically sound approach, although some of the parameters do change with market conditions. Some of the examples in Augen's book don't work any more due to the advent of weekly options. And there's always the risk that if an approach gets too successful and too popular, market makers are going to find a way to screw it up.
    29 Sep 2012, 09:30 PM Reply Like
  • Author’s reply » I take nothing personally. One of the first rules of life. However, I will provide an article about Kim Klaiman's approach. I can personally guarantee this article will be a big hit. And rightfully so. Promise it's out by Thursday. It's going to be a long one.
    29 Sep 2012, 07:47 PM Reply Like
  • Where is this article?
    26 Oct 2012, 12:06 AM Reply Like
  • Tech and others, here is the simple truth.

     

    Anyone can charge whatever he wants for his services. It's a free country. If people are ready to pay, why shouldn't he charge 6k?

     

    There are many good educational programs. Take Sheridan mentoring for example. For 6.5k, you get LIFETIME membership, 13 full courses, hundreds of hours of live weekly sessions and one-on-one mentoring from one of the leading industry experts, tens of thousands of videos, private forums etc. To pay the same amount to an anonymous trader with no proven track record or any transparency for 5 days of training? For me, it's insane - but that's just me.
    29 Sep 2012, 08:30 PM Reply Like
  • Author’s reply » Dan???
    29 Sep 2012, 10:10 PM Reply Like
  • Author’s reply » Waiting on your response Kim?
    30 Sep 2012, 01:21 AM Reply Like
  • Response to what?
    30 Sep 2012, 01:26 AM Reply Like
  • Kim... you had privately emailed me a few weeks ago to check out Sheridan... I love his program- unfortunately I don't have those kind of dollars right now... but if I did and was willing to spend that type of moolah-- Sheridan would be the way to go beyond a shadow of a doubt-- very professional site-- structured-- established track record- the value is just night and day compared to the whole Kevin scenario.

     

    It seems to me Kevin is waiting for a response to you on this subject-- see how he said "Dan???" in his post above... following your comment about Sheridan? I took this to mean he is asking "Dan... as in DAN SHERIDAN?" kinda thing. I am sensing however that once you confirm there is going to be some kind of disparaging rant on how he can destroy everything he is as well ha
    30 Sep 2012, 11:53 AM Reply Like
  • Well, it wasn't clear to me what does "Dan???" mean, but yes, it's Dan Sheridan mentoring program.
    30 Sep 2012, 01:52 PM Reply Like
  • Yes I agree 100% with you. Any who disagree I would consider insane haha!
    29 Sep 2012, 08:40 PM Reply Like
  • I'm an experienced trader and mostly write naked options with a lot of cushion and short time exposure, on the long side I do diagonal spreads. I read Kevin's,book ,found it to be very interesting ,and am now reading all this negativity about him .Would love to hear privately from anyone who attended his course ,I just want to learn if this guy is legitimate or just a fraud, as his book sounded very legitimate and his tone in the book is totally opposite from the comments about him here as well as his shallow responses
    please respond to Mike at mlace123@yahoo.com
    1 Oct 2012, 12:47 AM Reply Like
  • Author’s reply » Mlace- take what is said with a grain of salt. You can e-mail me at anytime and I am more than glad to give you a call at your convenience, and provide references.
    1 Oct 2012, 01:14 PM Reply Like
  • Author’s reply » What's the over/under that SteadyOptions, PassionFruit, and Tech Trader are all from Canada? Hint Hint. Never realized he was so desperate for subscribers, then again, I do have the e-mails...
    1 Oct 2012, 01:08 PM Reply Like
  • So now you are implying that we are the same person? I guess there is an easy way to check - ask SA to check IP addresses.

     

    Paranoia is a serious decease, but it's treatable. You just need a good shrink.

     

    BTW, there is an organized campaign against me on Investimonials - http://bit.ly/P72HgM and http://bit.ly/R8bCLd. You have nothing to do with it, right? You wouldn't go that low, would you Kevin?

     

    Yes, I'm desperate for subscribers. This is why I closed the service to new members.
    1 Oct 2012, 06:12 PM Reply Like
  • Author’s reply » Article in the works... I guarantee you will love it.
    1 Oct 2012, 01:13 PM Reply Like
  • Thursday came and went. Where is the article, Kevin? "All hat and no cattle" as they say in Texas.
    5 Oct 2012, 04:12 PM Reply Like
  • And we are surprised? Each person's track record speaks loud and clear. Mr. Klaiman is transparent with his trade activities while Kevin only appears when he claims to have hit a home run, but with no supporting data. Therefore, Kevin is correct: The two cannot be compared. Only one of them is legit. Good luck to anyone who STILL wants to take his course.
    6 Oct 2012, 03:02 PM Reply Like
  • Hello Kevin,

     

    Thank you for providing us your Reverse Iron Condor strategies on GLD, etc. I trade these weekly because of you. I appreciate it. I also bought your Kindle book and found it informative.

     

    Regards, Marc
    2 Oct 2012, 04:26 PM Reply Like
  • Author’s reply » Over the past few months, there have been some comments made in my articles about using weekly options, instead of monthly options (as I strongly recommend using), and I feel it is a good time to address this issue in full.

     

    First, I would like to start out with my take on this: One of my firm beliefs with trading stock options is that you should always give yourself enough time with a trade just in case an unforeseeable event occurs. When I developed this strategy, it was right after the September 11, 2001 attacks on the World Trade Center. I remember thinking how bad it must feel for traders who had short-term trades going with bullish positions. The lack of time would make it difficult for them to recover their losses.

     

    Along with this, I also felt the need to wait to make any trades until after 10:30 a.m. EST. Not trading in the first hour takes away a lot of the unknowns in the market as far as direction. It also takes away a lot of the so-called "speed trades" or trades that are made solely by computers. These tend to happen right after the market opens or soon after 10:00 a.m EST. There was a great CNBC special a few months back that I highly recommend if you have not seen it already. It basically goes into what I am mentioning now. Just as I do not like trading within the first hour of the markets opening, I follow these same rules for the last hour of trading.

     

    I want to get back to the issue of the weekly options with my strategy. Personally, I like weekly options for trades like the neutral calendar spread and the reverse iron condor, even the long put butterfly spread. However, I refuse to use them for my daily strategy and here are a few examples why:

     

    If anyone claims that they can predict an unforeseen market event, catastrophe, or any other thing that can rattle the markets, they should not be in the trading business. It can happen at any time. The lack of time-value, if using weekly options with this strategy, will come back one day to really make you reconsider if using weekly options is the smart move. Often, the monthly options (next month forward, meaning instead of using an October Week 2, you would use a November expiration) are more expensive than the monthly ones, but not enough so that it should alter your choice in trading the monthly or weeklies.

     

    This goes to an issue that I consider being a bit greedy, when choosing weekly options instead of having a full month. Often, for just a little more money, you can have a full month of time-value, take away the worry of any unknown factors coming into play, and still have the delta high with the same strike prices. This is important. While it is tempting to go the cheaper route and pick up more contracts (basically, that would be the only point in choosing a weekly option), I highly recommend not doing so. Think about how many times over the last 4-5 years Ben Bernanke has rattled the markets, just by saying a few words. It is not a good feeling to be on the wrong end of that trade when so little time is left with your options. That is the definition of risky.

     

    I have received hundreds of e-mails over the past year regarding weekly options and by some of the people who use them. While they generally do well with them for a period of time, I almost always hear about the horror stories that ensued at a later date, and for exactly the same reasons I mentioned above. I am not suggesting that weekly options will not work at all. What I am saying that sooner or later you will get burned on them. I am writing this for everyone who is debating whether or not to use the weekly options instead of the standard monthly options that I make very clear is the correct way to trade with my strategy.

     

    There is one trader who e-mailed me a while back. He bought some Apple (AAPL) contracts using the strategy, and used weekly options. This is something i really want to get across here. Anyway, I went back and looked at his trade. It wasn't a good trade to begin with. The numbers were off on the Intraday Momentum Index and the Full Stochastic Oscillator, by a good amount. Having weekly options, instead of the monthly options, really put him in a bad spot. Since it was a trade that should not have been made from the start, he now had about a day and a half to right the ship, so to speak. I recommended to him that he close the position, as Apple was in a downward swing. He at least has in-the-money options that still has their intrinsic value. But guess what happened? He closed his position for a decent loss. The next week, and keep in mind the trade he made was not an ideal trade, Apple recovered heavily on Monday. The problem was, with the weekly options, he never got to see that gain.

     

    Every trader is going to make mistakes at some point. One of the benefits of options is that you have a choice as to how much time you want to have with them. Please do not underestimate the importance of time-value using options.

     

    I would also like to address a few users who have commented on my articles and InstaBlogs, which have gone beyond bizarre. First, I will immediately respond to attacks, misinformation, lies, and comments that I feel are hurting traders who are using this strategy. I will never endorse weekly options with my strategy, and I will make clear the pitfalls of using them. Nobody knows this strategy better than I do, and for anyone who suggests using weekly options is a better alternative than the monthly options is seriously steering you in the wrong direction. See, I actually care how people are doing using my strategy. This is why I try to the best of my ability to respond to the many e-mails I receive daily and the comments on my articles when I can.

     

    One of the subjects that has come up from time to time is risk when using this strategy. It baffles me how one particular user has posted hundreds of comments on my articles promoting weekly options, yet says his method is less risky? Now, if I am buying the same strike price with more time-value, and theirs having less time-value, which makes more sense. Again, my opinion on this goes back to greed. He wants more contracts, I prefer more time simply as a safety-net in case of the unforeseen.

     

    I am not a big believer in stop-losses. On a long position (months out) this can be very useful. However, on trades where you are expecting to enter and exit the same day, stop losses can be very problematic. For example, let's assume you have entered a trade using Google (GOOG) with the daily strategy, and assuming you bought call options. Every so often, a stock will move down a bit from where you bought it. With a stock such as Google, Apple, Salesforce.com (CRM), CF Industries (CF), etc., we are dealing with volatile stocks that move a lot in a matter of minutes, even by the tick. If you have a stop-loss when placing the trade, there is that possibility, maybe because of market conditions alone (nothing to do with the stock performance itself), that you will be taken out of the position without even giving it a fair chance to eventually do what you expected it would do the entire time. a 0.75 - $1.00 price move for these stocks is nothing for them. They often happen in minutes. Please keep this in mind. While stop losses can be beneficial on longer-term trades, please understand the possibility that you will be taken out of your position too soon.

     

    There are times when you will have a choice to make in deciding whether or not you want to hold onto a trade overnight. I generally do not like to do this, but one very good way of avoiding this is to not make any trades once 2:00 pm. EST approaches. Stocks tend to trade narrowly later in the day. The volatility is just not there. I prefer to have an opportunity in the 10:30 a.m EST range to 1:30 p.m. EST. This is usually where the best trades will appear.

     

    In the event where a decision has to be made where a trade just hasn't gone as planned, this is ultimately up to the person. It is hard for me to say or gauge what someone's tolerance is for a loss, nor their own capital. When I meet with clients in San Diego, I go over this with them. From afar, I cannot tell someone to cut a trade loose or to hold it without knowing their own situation. I will say this, however: whenever I have had to hold trades overnight over the years, I usually wind p doing even better than planned. But I like to be all cash everyday, another day of trading. Now, if you are down only a minimal amount before the market closes, I recommend closing the position. Tomorrow is a new day. What is difficult for many new option traders to stomach is how bad a trade can look because of the leverage options have. For example, if you own 10 contracts, a slight $0.50 move down on your call option position is a loss of $500.00 on paper. This scares many new trades off, as they cannot handle the large price swings. With options, just remember that everything is bloated. It is never as good as it looks or as bad as it seems. Having a month of time-value or more on your options will alleviate many of your worries.

     

    If you have any questions or comments, please send me an e-mail or send a comment. I will try to respond as soon as possible. Thanks.
    9 Oct 2012, 02:14 PM Reply Like
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