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December 17, 2019
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How Chuck Trades Stocks and Options

Join Avant-Garde Trading featuring professional trader Chuck Hughes for this complimentary trading webinar on: "How Chuck Trades Stocks and Options"

December 19th at 3:30PM CDT

In this educational webinar, Chuck Hughes will demonstrate how he trades stocks and options. Chuck will walk through his 3-step process to select stock and option trades:

1. Select a stock on a trend following "Buy" signal;

2. Select a stock trading in the Keltner Channel "Buy Zone";

3. Use a simple indicator to select an option strike price that only requires 1% up move in the stock for the option to start to profit.

ALL attendees will receive a FREE giveaway courtesy of Chuck!

Space is limited for this exclusive webinar so Reserve Your Spot Today!

December 19th at 3:30PM CDT

If you are unable to attend the live webinar, please make sure to register regardless so you can receive the replay.

Register For This FREE Webinar Today!
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TradeWins Author Team

 

 

Tomorrow, you could begin doubling your account every single month starting with one letter.

The letter will come from a 20-year trading professional named Ian Cooper. He says, “In 2017, following my trades you would be doubling even tripling your account some months. Let me show you how.”

He will show you exactly what to do... and he’ll give you the blueprint for just $1.

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Recognizing Sell Signals
by Wendy Kirkland

SFWB Very simply put, knowing when to sell is as important as knowing when to buy. You have both "entry" and "exit" strategies. After you have looked at what and when to buy, you need to examine when to sell an option. I recommend that you learn and apply the rules for selling, and then develop the discipline to put the rules into practice over the long term. Briefly, an effective exit strategy must satisfy one of these three key elements:
  1. The upside is not limited from further growth by selling the position.

  2. Loss is cut short.

  3. Profit is protected.

The 30-Day Rule

Plan to sell your option contract with 30 days left on your option. You do this to prevent the time value that is left. Each day a certain amount of value will drop off. That amount is multiplied during the last month until expiration. Because of the effect of time value erosion upon option premiums, particularly in the final weeks of the options life, you must be cognizant of this decay. So, no matter if your position is up or down, you should plan to close it – push the "close to sell" button. The only exception to this rule is if your position is 100% in-the-money so that there is not time value left to erode.

The 9-Day Rule

Once you're in a trade, if the premium doubles, put the following 9-day rule into effect: If after doubling your premium, a daily closing price falls below the 9-day EMA in your Call (long) position or above the 9-day EMA in a Put (short) trade, close the position by selling your option. This rule can also be applied in "choppy" markets.

The 7% Rule

If after purchasing an option the underlying equity drops 7%, then it's time to sell. A wise option investor cuts losses quickly. It's the only way to protect yourself against a much larger loss. If you allow a loss to reach 20%, it will take a 25% gain to break even. If you wait longer and it goes down 25%, it will take 33% to break even.

My rules are a 20-30% premium loss and a line in the sand of 50% if the position quickly drops through the 30% mark.

As I said before, develop strict discipline and follow your selling rules – and this process starts when you buy a position.

When you purchase an option contract, record it in your notebook and include the reasons you chose the stock in the first place. Then note the stock's current price and the price at which you would sell if it turned and never increased. For example, if the stock had a $50 price, then you would note a 7% sell price of $46.50 or an overall loss of $3.50. One day it might lose $.90 and you hold through that thinking it is a natural pullback. The next day the market is down and your stock drops another $1.05. If on the next subsequent days, with up and down movement your equity drops another $1.55 or more, push the sell button. In other words, you put the 7% rule in place when you buy – the rule is part of your thinking in making the transaction in the first place. You have planned ahead; you know the sell-mark and you follow the rules. There is a measure of comfort in this, as it takes out the emotions. Traders can pile on the stress and drive themselves crazy with the should-I, shouldn’t-I's. Don’t do that! Know the sell amount right from the get-go.

If after another few days the stock rights itself, you can purchase it again. The loss you experience will hurt, but you have lived to trade another day. Better to cut a loss short than hope it will recover and end up losing even more.

Small losses are cheap insurance; small losses are the only insurance you can buy on your options.
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