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Lessons Learned from Watching 3 Videos from John Carter of Simpler Options

TradingPub Admin | January 15, 2013

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From time to time, we like to share free education provided by other traders that we feel might be helpful to you.  Just as an FYI, we don't automatically forward this stuff to our patrons and say, watch and learn while hoping it turns out ok for you. We actually take the time to review it and make sure it has value for those of you that might be interested.  Here are a few things we picked up from the 3 Videos offered by John Carter of Simpler Options:

Video 1 Recap:

  • Trading different option strategies such as long calls/puts and trading spreads
  • It is important to have two different accounts.  One account can be used for income while the other account can be used for wealth building
  • Do not focus so much on the size of John's trades since he is trading a larger account, but get value out of learning how he deploys different strategies for different markets

Video 2 Recap:

  • Finding an exit point to a trade is just as important as finding a good entry
  • Using technical indicators to find buy/sell signals and also looking for liquid trading vehicles
  • A brief overview of Market Maker Calculations

Video 3 Recap:

  • Trading rules are extremely important to any type of trader
  • John's Overall account objectives dealing with account growth and risk management
  • Understanding that big trades (the elephants) happen infrequently so you need to be prepared for them but not expecting each and every trade to be one

One of our favorite parts is when John talks about treating losing positions like a mosquito on your arm... do not just sit there and let it suck your monetary and mental capital... smack it and move on!  We so often need a visual when we get into the options because we get so focused on the numbers that we forget that sometimes we need a world to understand that those numbers do mean actual money.

The third video is definitely the majority of the meat out of the three.  Here are a few other thoughts from the third video:

  1.  There should be no cowboy trading or gun slinging and hoping for the best.
  2. Never get yourself into a situation where you are feeling yourself praying to the trading gods. Getting into that situation is a choice
  3. Instead trade small size and limit profitability to make more money and have more fun trading.

As a beginner this is key to understand and not just get too much into the fun of the numbers and the money. Take this time to really learn and be safe with the smaller account size in the beginning.

  1. Trading smaller size gives you flexibility to turn a losing trade into a scratch trade. If you trade too big and hold big overnight, then you are at the mercy of the markets.
  2. The goal is to let the other prey animals ( i.e. trader) hurl themselves over the cliff, while you are sitting up in the tree eating apples. This means to BE PATIENT!
  3. Realize that most of the time, the best trade is no trade. Be Patient and wait for the levels to set up. Be flat while other traders are going through the pain, and get in when the pain becomes so great they dump their positions in disgust.
  4. Making 35 cents on a credit spread is better than losing $5 on a directional option that you purchased for $6.

Again some terms as a beginner you may need to know:

Credit Spread: An options strategy where a high premium option is sold and a low premium option is bought on the same underlying security.

Directional Option: A general term referring to the strategy used by investors that open positions, either long or short, on the belief that they are able to correctly predict the movement of price in a security.

  1. Make theta decay can be your friend, not your enemy.
  2. If you have a basic directional bias using multiple time frames and simple trend indicators like moving averages and combine that with implied volatility and one and two standard deviation moves, then it can make a world of difference in your trading.

10. Finally, do your best to keep a clear and clean mind.

We hope that you enjoyed this review of the videos.  If you feel like learning things along these lines would be valuable to you as a trader, be sure to check out the free video series at the link below!