Six Deadliest Mistakes Credit Spread Traders Make

I read the report from Jeff Ziegler, “The Six Deadliest Mistakes Traders Make”

It is a simple one page report that summarizes very well what I have been following and telling traders here on this blog for the last couple of years. It is the fundamentals of trading. Things such as having a trading plan and using money management and not trading using your emotions. It is a good review and on one page so you can pin it up close to your computer or where ever you do your trading so you can visualize it and be sure you are following it. Check it out at Jeff’s website - Jeffrey Ziegler

Go to the website and either wait for the pop up or half way down the page you can subscribe to the report. Be sure to get it now.

credit spread trading, jeff ziegler, mistakes traders make

Mistake on explanation of DNDN trade

OK I apologize for a stupid newbie mistake that might have confuse some of you and I am sorry.

When I wrote this -

2.) DNDN announcement comes and is negative and the stock tumbles way past your $15 sold option. Try and hold on for the volatility to drop and buy the spread back for less than you sold it still a profitable trade. One caution here is that you may be put the stock but you can turn around and put the stock to someone else with your bought 12.50 put causing a loss. Most likely not to happen as everyone is buying and selling the options right now at high premiums.

I made an error, if the stock tumbled way past $15 (like it did) the intrinsic value of the spread would be $2.50 so you would be at a full loss of the trade, just due to intrinsic value. Sorry I was not thinking about it as I wrote it, then I forgot about it. When I looked at the trade at the time of the gap down I was like oh well it lost, no big deal because it was a low capital trade. Well I looked on my posting just today and realized what I had written and all I can say is sorry for the newbie mistake.

Credit Spreads are a pure directional trade, with high volatility you can make low capital trades like the DNDN trade so you can be a bit more risky and take a little more profit but realize that that close to the money will cause a total loss if you are wrong on the direction.

credit spreads, DNDN, newbie mistake

An apology

Well I have to apologize to my subscribers for the little bit of spam that has been coming from my feed lately.

It seems that the company that runs my feed had a little piece of background program that I did not know about was turned on - so consequently you received my personal links that I use.

It is a cool program however I was linking to other interests of mine and not realizing that it was being sent out to all of you. I have corrected the problem and apologize for the extra email you have received.

If you are interested in doing similar links you can try out the program called del.icio.us - you can even help me out by adding this website to your links in del.icio.us. In any case I apologize for the off topic information.

Now back to our regularly scheduled program - exit strategies.

No Tags

Market Uncertainty?

The markets are not uncertain. I am. The markets are showing bull trend especially the DOW it is currently in a bull trend channel and does not appear to be slowing. I have been waiting for the other shoe to drop and I expected it from Bernanke last week. When the opposite occurred and I was wrong it makes a trader think. So right now I have no plays I am going to sit back and watch the markets for the next day or two and redevelop a plan.

This is the best thing a trader can do - when you are uncertain about the market or a play, then stay out of the market you can lose big if you don’t. There is no rule that says you have to be in the market. It is always better to stay out when you are uncertain.

No Tags

Next Page »