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    « The Trading Week: Apr. 25 - Apr. 29 | Main | Free Webinar: A Powerful Day Trading Strategy »

    April 25, 2011

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    Hello:

    I read the first chapter in Michael Jardines book and did the set up "Bollanger Bands set to 2.23 and 20 and a SMA of 13 days with a three day setback. The MA never gets close to either BB? I have looked at - at least 150 charts?

    Would you please forward the question to him. Thanks,

    biologic@dc.rr.com

    Michael

    My question has to do with exiting or adjusting credit spreads. Is there a good guideline to use (Delta, probability, price, etc.) to determine when to exit or adjust a credit spread? I do them on the various indexes, so I don't suffer the same volatility that comes with individual stocks. Thanks!!

    Rick
    incajoe@prodigy.net

    I would like to day trade the emini s&p 500. What programs, website, or books would you advise ?

    What is your recommended resource for strategies that utilize moving averages to sell to avoid major market downturns? Craig

    I've already purchased Dale Wheatley's 4-DVD Seminar and like the trading strategy a lot. Whether true or not, I've heard that those attending his seminar in person receive a large manual concerning his system. If there is one, is it available? The few pages of his "Patterns of Power" you make available are OK, but copies of the charts Dale uses would be extremely helpful to
    print up and study. Please send me an e-mail as I do not do Facebook, Twitter, etc. Many Thanks!

    Hi Rick,

    To answer your question, each trader must determine there own risk tolerance/pain threshold but my rule of thumb is to begin the adjustment process once the collected premium has doubled in value. Unfortunately, trading is an art and not a science so rules such as this should be taken into account on a case by case basis. For instance, if the options under fire are considerably out of the money but have exploded in value due to an excessive spike in volatility, it might do more harm than good to adjust the position. Also, if the double out price is reached just as the futures is testing significant support or resistance, it might not make sense to make a move. Another lesson that traders often learn the hard ways is selling options in the direction of the trend might work for a certain period of time, but when the tide turns it can be difficult to keep adjustments up with market price. For example, strangle traders in gold likely adjusted their calls and puts higher to keep up with the rally only to feel even more pain when the market reversed.

    Credit spreads offer traders peace of mind, but can often complicate adjustments, or even entry and exit. I presented to a TradersLibrary.com audience on the topic of option spreads and adjusting them, (http://www.invest-store.com/carleygarner/item.php?9778168). If you are a reader, we cover the topic of option spreads in my book "Commodity Options" (http://www.invest-store.com/carleygarner/item.php?9778168). You might also be interested in a webinar we once hosted on the benefits and drawbacks of a credit spread strategy (http://www.decarleytrading.com/index.php?option=com_content&view=article&id=204:option-credit-spreads-a-to-z&catid=81:archived-futures-trading-webinars&Itemid=129).

    I hope this helps, good luck in the markets!

    Carley Garner

    **There is substantial risk of loss in trading futures and options!

    To answer Craig's question, we have Jea Yu of UndergroundTrader.com:

    Craig,

    I use stochastics in addition to the moving averages and trail stops are triggered when the moving averages breakdown along with stochastics reversals. All this information is in my new book "Trading Full Circle". I like to sell into the breakouts at upper bollinger band levels.

    In choppy markets, you might even considering beta hedging your positions. To beta hedge, take the beta for your stock multiply times stock price and shares to derive the notional value dollar amount. The hedge would be to short the SPY with that dolalr amount.

    Best Regards, Jea Yu

    @Joseph -- Jea Yu trades both the e-minis and S&P 500 and has a new swing trading DVD coming out soon called Swing Trade Secrets. Stay tuned to this blog for more on that. For now, you might want to check out his book "Trading Full Circle," or his DVD "Short-Term Profit Hunter." His website is www.undergroundtrader.com.

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