ETFs, Level II and Options Strategies!

Site Administrator | December 2, 2011

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We were joined this week by three outstanding guests on Trader Talk.  Fausto Pugliese of, John Nyaradi of and Frank Stanley of took the time to stop by the pub and share some solid education with our patrons.  We unfortunately had an issue with the recording but are working with the software engineers to see if it can be resolved.  In the meantime, we have posted a recap on some of the nuggets of wisdom that they shared.

How long did it take you to find a trading method that worked consistently for you:

All three speakers believed that it was important to spend time learning about trading as opposed to just jumping in there and firing off trades from the get go.   A few other things they said was that trading was not an easy thing to pick up but something that took time and effort.  Just like anything else in life that is worthwhile, trading does not come easily but it can be very rewarding.  Whether it takes 6 months or 6 years, the important thing is to stay focused, manage risk and make sure to learn from every trade.

What Markets other than U.S. Stocks are you watching:

Fausto primarily trades US Stocks and because the liquidity is so deep in the US many other traders from other countries trade them as well.  As an intraday stock trader, his main focus is the US Market.  Frank and John are both swing type traders and because of that they have to focus a bit more on the overall global market picture.  The most important foreign market at this time in their opinion is the European Markets (German Dax, FTSE, Cac-40, Spanish Market and Italy) and most likely will be until Europe gets the credit crisis somewhat controlled or contained.

What are some good stocks to watch for trading opportunities:

A few of the different stocks mentioned were PEIX, AMR, SPY, GLD, and TBT.

To John:  What leveraged ETFs do you trade most frequently and what is it that appeals to you?

John focuses primarily on trading ETFs which allows him to gain exposure to an overall market sector as opposed to trading several different stocks to gain exposure to that sector.  Whether looking to gain exposure to energy, bonds, equities, utilities, or currencies, there are ETFs proving that opportunity and in many cases leveraged ETFs that can be extremely good short term trading tools.

To Fausto:  Why is it so important to understand Level II:

Fausto primarily trades based on looking for strong movers in the market and then focuses in on specific times to buy or sell those stocks.  The level II screen allows him to see supply and demand for the securities as well as note areas where strong buying is stepping into the market.  Two examples he gave were opportunities he saw in CIti (C) during the financial crisis where a large buyer stepped in on the bid but could not get filled (this was a sign that selling had slowed down and offered a low risk/high reward buying opportunity.  Another example took place recently with AMR as a large buyer stepped in on the bid at .20 and sellers stopped filling this order.  This led to a shartp short term rise in the stock which provided a great opportunity for daytraders like Fausto watching the Level II.

To Frank:  What adjustment strategies are available for option traders after a sharp move in the market:

There are many opportunities available for options traders and one of his favorite include turning a credit into a debit spread.  This strategy is implemented by covering the short side of a credit spread and then reselling another strike which in effect turns a bearish credit position into a bullish debit position (basically adjusting the position to fit in line with the current market trend).  In addition to the leverage provided by options trading, one of the major advantages to trading options is the flexibility and adjustment opportunities that they provide.

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Risk Disclaimer: Past performance is not indicative of future results. Futures trading involves substantial financial risk. Views of guest commentators do not represent those of  Article intended for educational purposes only and not meant in anyway as a soliciation to buy or sell certain securities.  Please consult your personal financial advisor before using this information for your own trading purposes.