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Great Start Trading The New Year – Daily Options Trading Strategy (DOTS) – 1/4/16

Yesterday, we had 4 Daily Option Trading Strategy (DOTS) trades, all positions closed out. Each trade was a call position, showing that even in rough market conditions, the DOTS strategy does extremely well. 2008 and 2009 were some of my best years trading, providing plenty of call trades daily. The sell-to-close (STC) orders above the price paid per contract were increased on each trade more than the average, as the current market volatility will provide this. You can see my trade log for the times the trades were placed and the STC price for each trade.

2016 Market & Volatility Expectations – Daily Options Trading Strategy (DOTS)

I am expecting the markets to have a down year overall, with a lot of volatility daily. When using the Daily Options Trading Strategy (DOTS), I actually prefer this, as it tends to bring a lot more daily trades. I especially prefer when the markets open down, as there will always be more call buying opportunities, and the DOTS strategy does have more call trades than put trades on a percentage basis. This type of market volatility also brings increased sell-to-close (STC) orders. The DOTS strategy is unique in the sense that its performance is not based on how the markets overall are trading. It spots daily lows and highs extremely well. The key to the strategy is patience and not having a trigger-finger. However, when the 4 bottom indicator numbers and Bollinger Bands are all aligned for a trade, it must be made.

A few stocks on the DOTS list I like to move up this year are: FitBit (FIT), Twitter (TWTR, see a buyout possibility), and Alibaba (BABA).

For those unfamiliar with my subscription service, my daily Skype/Chatzy part of the subscription provides, in real-time, the DOTS trades I make. Before each trade, I provide the ticker symbol I am watching for a possible trade. This is when the Bollinger Bands start to expand and the indicator numbers are getting closer to a buy point. Once a trade is near, I once again provide the ticker symbol, the strike price, expiration date, my sell-to-close order (above the price paid per contract). Once an order is filled, the group chat and I provide what they paid per contract.

I also take questions all day from my subscribers via the mainchat or through personal Instant Messaging on Skype. It is very community-based.

The subscription also includes access to my Trading Forum, where I post my earnings trades, weekly trades, and long-term trades. These are great sources for added income.

All subscription plans come with a one week, money back guarantee if you are not happy with the service, no questions asked. If you have any questions, you can e-mail me at: kmob79@gmail.com.

Thanks, and Happy New Year.


Great Start to the Week, Notes, Info – 12/28/15

We have had two very good Daily Options Trading Strategy (DOTS) trades today. (NFLX) at 10:13 am EST, $0.35 sell to close order above price paid (paid $4.70, sold at $5.05), and (GOOGL) at 11:01 am EST, $1.00 sell to close order above price paid (groupchat paid an average of $14.70, sold at $15.70. GOOGL took off right after being placed.

Many of the DOTS trades trades actually go for a much higher sell to close price daily if held longer, but I am more interested in making a very nice profit fast, and move on to the next trade. In and out. For example, the GOOGL trade today netted a 6.8 % ROI, but could have been sold much higher if held even 20 minutes longer. But the goal of the strategy is to exit as fast as possible and to not be greedy.

Stocks like (TWTR) tend to average at least a 10% per DOTS trade. This is because on average, a TWTR call or put option is less than $2.00 per contract, and I use minimum $0.20 order above the price paid per contract. However, the higher priced stocks, like (NFLX),(GOOGL), (TSLA), (AMZN), (BIDU), etc, have higher sell to close orders, and tend to close out a lot faster than lower-priced stocks, but not always.

The STC prices I use are based on numerous factors:

– The stocks share price
– The volatility of the stock itself
– Option liquidity (daily)
– Time of day the trade is placed (i.e. I will use a higher STC earlier in the day and a lower STC after 1:00 pm EST)

You can see my daily trade log at: http://kevinmobrien.com/?page_id=480

My subscription-based service provides all of these trades in real-time, with the ticker symbol, strike price, my sell-to close orders used (before the trade is even placed), and when the trade is closed out.

If you have any questions about the strategy, subscription plan, or about stock options, you can e-mail me at: kmob79@gmail.com or info@kevinmobrien.com

Updated Daily Options Trading Strategy (DOTS) List – Current as of 12/28/15

Here is the new updated Daily Options Trading Strategy list as of 12/28/15:


Tier 2

Tier 3

Tier 4

Understanding the Correlation of Share Price and Strike Prices When Using Debit Spreads – Part 1: The Neutral Calendar Spread Strategy

One of the most important factors when trading debit spread strategies is the share price and strike prices, and what is available. A common mistake some option traders make when using debit spreads is not paying enough attention to these and how they can seriously impact the chance of profitability. To explain this, I’ll take a look at 3 different debit spread strategies in a Three Part series: The Neutral Calendar Spread, The Reverse Iron Condor, and the Strangle strategy. First up is the Neutral Calendar Spread….

The Neutral Calendar Spread: is a strategy that has 2 “legs”. There is a sell side and a buy side. I prefer to use this strategy with stocks/ETF’s that have weekly options, when available. The weekly option is the sell side. The monthly (or whichever you choose that is a further out expiration that the weekly) is the buy side. This is a strategy that takes advantage of time-decay and a lack of a large price movement. Let’s assume the security I want to trade has a share price at $50.00 at the time of trade placement. This is an ideal share price because there will be $50.00 strike price increments. So, if I was trading XYZ stock using a Neutral Calendar Spread, the trade would look like this:

Sell 10 December 2015 XYZ Calls
Buy 10 January 2016 XYZ Calls

But what if the share price is at $51.50, and I look at the options chain and realize that there are only $2.50 strike price increments? This is an problem, because the trade is no longer neutral and it puts you at an immediate disadvantage from the start.

Today, on my Trading Forum, we had 2 earnings-based Neutral Calendar Spread based-trades. There would have been 3, but this example will explain very well why I did not place it: The stock in question is General Mills (GIS), which reports earnings before the bell tomorrow morning: At the time of looking at the trade, the share price on (GIS) was at $58.80/share.

Entered Trade

Sell -25 GIS Dec15 57.5 Call

Buy 25 GIS Jan16 57.5 Call

I only had two choices as far as strike prices, to use either the $57.50 calls, or the $60.00 calls:

GIS Chain 121615

Knowing the share price, and the strike prices available, this would cause a major problem of neutrality regarding the trade itself, as this shows:

KMO Ex GIS 121615

As you can see from the Profit/Loss chart, the break-even points are uneven, clearly favoring the downside movement more than the upward movement by more than $2.00. That may not seem like a big deal, but it is. This can be the difference between profitability and a loss. The great thing about the Neutral calendar Spread strategy is that it does allow a good amount of price movement, just not excessive. My concern on the (GIS) trade would be if the stock moved up too much. I would be much less concerned about the downside movement. However, when you see a trade have a set-up like this (GIS) example, avoid it like I did today, even though it may initially seem like a good trade.

Overall today, 3 earnings trades, should have 2 tomorrow. (RHT) especially should be a good one.

If you have any questions about this strategy or specific stocks, you can e-mail me at kmob79@gmail.com or post a comment. I usually respond very quickly. Coming up next is the Reverse Iron Condor…

Keurig Green Mountain, Inc. (GMCR) Sold to Private Equity Firm

Keurig Green Mountain, Inc. (GMCR) has been bought out by a private equity firm for $13.9 billion. In October, I placed and posted a long-term trade on (GMCR), seeing it as extremely undervalued. I have posted a screenshot of that trade below, along with the news of the buyout…

GMCR 12715


3 Quick In-and-Out Daily Trades Today, Getting Plenty of Action 11/3/15

The three trades placed today were on LNKD puts at 10:24 am EST, position closed 13 minutes later; BABA calls at 10:44 am EST, position closed 11 minutes later; and AMZN calls at 10:46 am EST, position closed 35 minutes later.

The daily trades are picking up even more lately, but always a consistent number of trades happen weekly, regardless of market conditions. The daily strategy (DOTS) does require patience, but you really don’t need to be glued to a computer screen non-stop, as the Bollinger Bands provide great insight as to when a trade is looming. If you have any questions on the strategy, you camn leave a comment or e-mail me at: kmob79@gmail.com

Removing SanDisk (SNDK) From the Daily Options Trading Strategy – 10/22/15 – Adding Monster Beverage (MNST)

With Western Digital buying SanDisk (SNDK), I am removing the stock from the daily strategy. I am replacing SanDisk with Monster Beverage Corporation (MNST).

Here the new updated Daily Options Trading Strategy list as of 10/22/15:





Daily Options Trading Strategy (DOTS) – Updated List – 10/20/15





General Sell to Close Prices Using the Daily Options Trading Strategy Based on Share Price – (Repost) – Updated – 10/8/15

I am often asked how do I determine my sell-to-close prices when using the Daily Options Trading Strategy (DOTS), so I am posting it again with an update…

There are numerous factors I consider when choosing sell-to-close (STC) price when using the Daily Options Trading Strategy (DOTS). Among them are the following:

  • The share price for each security
  • The stocks volatility, daily highs and lows, and current market conditions
  • Width of Bollinger Bands
  • The time of day the trade is placed
  • The current bid/ask price
  • Leverage

Share Price and Sell-To-Close (STC) Prices Using the Daily Options Trading Strategy (DOTS)

$10.00 – $60.00 = $0.20 STC order above the price paid per contract

$61.00 – $80.00 = $0.30 STC order above the price paid per contract

$81.00 – $100.00 = $0.40 STC order above the price paid per contract

$101.00 – $120.00 + = $0.60 STC order above the price paid per contract

$150.00 – $200.00 + = $0.70 STC order above the price paid per contract

$250.00 – $400.00 = $0.80 STC order above the price paid per contract

$500.00 + = $1.00 minimum STC order above the price paid per contract

Example #1: Buy 100 (TWTR) November 2015 $30.00 call options at 2.00 per contract. The sell-to-close order would be $2.20.

Example #2: Buy 10 (GOOGL) November $665.00 put options at $10.00 per contract. The sell-to-close order would be $11.00

Note: these sell-to close (STC) order prices are not static, but a great guideline to use, especially for trader’s new to the strategy.

The share price is extremely important when choosing a STC price. For example, a stock such as Netflix (NFLX) will have a higher STC than Twitter (TWTR) based on share price. NFLX is currently around $99.00/share, while TWTR is $28.00/share. On average, the minimum STC I would have on NFLX is about $0.40. This means that if I paid $4.00 per contract, my STC would be at $4.40. For TWTR, the average STC would be between $0.20 – $0.30. If the price per contract is at $1.20, the STC would be between $1.40 – $1.50.

A stock like Google (GOOGL), however, would have a much higher STC. Since the current share price is around $630.00/share, the minimum STC would be about 0.70, but usually much higher, $1.00+. This is because of higher price per contract paid, it moves more in dollar increments, and has wider daily price swings.

A stock that has higher volatility also plays a role in choosing a STC that assures the trade will be exited as soon as possible. Some of the stocks on the DOTS list simply move a lot more than the others daily.  This is why I have the 3 Tiers with 27 total stocks. I will always prefer to trade stocks that are higher-priced and have larger daily swings. Tier 1 has that. This not to say that stocks on Tier 2 and Tier 3 are not great for trading, they are, but generally the Tier 1 stocks will take a lot sooner to exit than the Tier and Tier 3 stocks. On the same hand, stocks like TWTR, BABA, FB, BA, and CRM all have inexpensive contracts that allows traders to use that as leverage. For example, if it cost me $10.00 per contract to trade a GOOGL strike price, but only $2.00 to trade FB, then I would multiply the contract size on the FB trade five times that of GOOGL to basically have the same cost basis.

  • GOOGL 10 contracts X $10.00/contract = $10,000.00 cost to place trade. $1.00 STC above price paid/contract = $11,000.00 (minus commission costs).
  • FB 50 contracts X $2.00/contract = $10,000.00 cost to place trade. $0.20 STC above price paid/contract = $11,000.00 (minus commission costs).

The minor downside is that FB will take a bit longer to exit than GOOGL would, but this is not always the case. Just understand that after years of trading my strategy, this is generally true of the lower priced stocks. I actually find TWTR to be more volatile than FB, and those contracts are even lower-priced than FB.

The time the trade is placed is also very important. If it is very early in the day, I will use a higher sell-to-close price than I would if there were only two hours left in the trading day. If early, I can always adjust the STC price and lower it, as there is still plenty of time left. If I place a trade at 2:00 p.m. EST, my STC would be more conservative. This is due to lower volume, possible pinning (happens often late Friday’s). If there is an early GOOGL trade at 9:50 am am EST, I would use a STC starting at $1.50 above price paid per contract. Then, depending on the price movement, would adjust and lower accordingly from there (increases happen, as well).

The Bollinger Bands play a very important role in determining my STC price. This is often gained from experience trading the strategy and repetition. If I see a GOOGL chart, where the bands are extremely wide, and all of the bottom 4 indicators are showing extremely oversold for a call buy, I will not hesitate starting with a much higher STC than I usually would. PCLN has this happen often. The one main issue with a stock like PCLN is the bid/ask prices, which I will get into later. A couple of years ago I had a PCLN call trade that had a $5.00 STC order above price paid per contract that cost $18.00 initially. If I see an APPL chart, and there is a $4.00 + difference from high to low daily when the time to place a trade is available, I would set a STC higher than usual. On TWTR or GPRO, for example, if I see a $2.00 difference from the high to low, this would also be a situation where an increase STC price is appropriate. One thing I look at also is the top Bollinger Band high and the Bottom Bollinger Band low, not necessarily the price action, but the Bands themselves. This is a great indicator of where the stock can move to.

Bid/ask prices are also very important and play an important role in my STC prices. As I mentioned, PCLN could probably be traded at least 3 times per day if only the bid/ask prices were reasonable. Especially the last few months, I am seeing a bid/ask difference on the strike prices that are sometimes $3.00 + apart. This is impossible to trade. Occasionally, I will see PCLN strikes that are about $1.20 apart. I will trade this, but would have initially been a $2.00 + STC price above the price paid per contract, I would automatically know to place the STC at $1.00, maybe slightly more. This is because since these trades are round-trip trades, getting in and out of the trade will cut profits simply due to the wide bid/ask prices. If PCLN should ever have a stock split (hope it’s soon), it would probably take over as the #1 DOTS stock to trade. GMCR, even as a lower-priced DOTS stock, has had this issue with the bid/ask prices being too wide. Currently at $58.50/share, the $56.00 strike price call options are trading at $2.24 – $2.76. This is too wide. If my pre-determined STC price would be at $0.30 above price paid per contract, it would be extremely difficult to exit this trade without needing double the price move of the share price. A more reasonable bid/ask would be $2.25 – $2.35 or $2.20 – $2.40 even.

There are trading opportunities where I will buy a lot more calls or puts than usual. In situations like this, since you are more leveraged, the STC can be lowered. I will do this especially if it is later in the trading day. 100 contracts will require a lot less of a price move to exit the trade than 50 contracts would. If I have 100 contracts on TWTR at $1.20 per contract and my initial STC price was at $0.30, I would have no problem lowering that to $0.20 if I wanted to close the trade out as soon as possible. If a STC on GOOGL was initially set at $1.00, lowering that to $0.70- $0.80 is perfectly fine.

My subscription service on Skype and Chatzy for these DOTS trades does provide all of these real-time STC orders, but I wanted to give everyone a good gauge on how to determine what STC orders are appropriate under each circumstance.

If you have any questions about determining a STC price, you can leave a comment here or e-mail me at kmob79@gmail.com.


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