I am often asked how I trade in market conditions that are unpredictable and volatile, especially down markets? My answer is simple: I really do not care what the markets are doing in terms of direction when using the Daily Options Trading Strategy (DOTS). When I check pre-market news and the futures data, I actually prefer to see the markets open down. This is usually a good sign that there will be some early call option trades that are quick in and outs.
Some investors and traders tend to flee and sell their long call or stock positions when they see the markets moving the way they are lately. I see opportunities. THE DOTS strategy has a resiliency and rigor to it that is unique. Just by looking at the trade log on my website, http://kevinmobrien.com/?page_id=480, you will see that most of the trades made are call positions. This was also the case in 2008 and 2009, my best years ever trading the DOTS. It would seem that buying puts would have been the way to go then, but not using the DOTS. Even on a stock like Citigroup (C) and other financial related securities in 2008/2009, which were falling precipitously daily, the DOTS still provided plenty of call buying opportunities daily. The way the strategy is structured, with the Bollinger Bands and the bottom 4 indicators (the Relative Strength Index, the Intraday Momentum Index, the Money Flow Index, and the Full Stochastic Oscillator, with the settings and parameters I use for each) prove to be very adept at spotting true lows daily in a given security. In fact, put trades were very rare during that time, and they still are now.
The settings used for each indicator are crucial to the success of the strategy. When I began developing the strategy, I went through every setting possible with each indicator in tandem. What I use now is the way to best use this strategy and has held up so well after all these years, under every market condition. From trading after the post September 11th attacks, the mortgage crisis and the banks, Greece and the Eurozone problems, oil fluctuations, and now with the current volatility daily. The bottom line is that the strategy works.
This strategy keeps the emotion out of trades. This is a very important aspect of it. It also requires patience and discipline. My point of this post is to not stop trading because of how the current market landscape is or what it will be in the future.
Like any trading strategy, repetition only expedites and enhances the ability to spot great trading opportunities. This is especially true when understanding the Bollinger Bands when using the Daily Options Trading Strategy. The bottom four indicators (the RSI, IMI, MFI, and the FSO) are static, in that once their respective buy points are reached, there is nothing else to look for on them. The Bollinger Bands are the most important element of the strategy. They provide a trader with great insight into the future movement of the stock and the volatility. The Bollinger Bands also show when to avoid a a trade, which is extremely important. If anyone is interested in a PDF file of my book on Bollinger Bands for free, you can e-mail me at: firstname.lastname@example.org. . For day trading purposes using the DOTS, I prefer the settings as shown below:
One of the benefits of my subscription service is that I do all of the work for you ahead of each trade. Before each possible trade, I post the ticker symbol, the strike price, expiration, and my sell-to-close (STC) price ahead of each trade. I do all of the necessary “homework” before hand: checking any news that may be related to the stock, the daily highs and lows, the bid/ask prices, and the daily volume. My subscription service is not just an e-mail that tells you what to trade when it is far too late. This is real-time live trading, with me on Skype and Chatzy from 8:00 am EST until the markets close, and later. Along with the trades, I am always answering questions that any subscriber may have. I have a policy that if you are not happy with the service after one full week of trading, I will refund your subscription with no questions asked whatsoever.
If you have any questions about the daily strategy, the subscription, or any general questions about trading, please e-mail me anytime at: email@example.com.