| What are the 2 meanings / uses of the word Spread? | 1) The difference between the Bid & The Ask (the market maker get the spread)
2) The difference between 2 Strike prices being traded at the same time during a Credit Spread |
| What is the difference between ITM & OTM strike price? | The ITM strike price has BOTH an Intrinsic and Extrinsic value BUT the OTM strike price has only an Extrinsic value and no Intrinsic value |
| What is a Floor? | The price where a security comes down and then reverses back up at least 2 times in the same area |
| What is a Ceiling? | The price where a security comes up and then reverses back down at least 2 times in the same area |
| What is the name for a security that is moving horizontally between a floor and a ceiling? | Channel |
| What is a Resistance? | The higher price area in a TREND where the stock comes up and then reverses down |
| What is a Support? | The lower price area in a TREND where the stock comes down and then reverses back up |
| How many points of contact do we need to draw trends lines and Fibonacci lines? | 3 points for trend lines
2 points for Fib |
| Before entering any trades, what are the 3 things MUST you do? | 1) Prepare, decide and write down my Exit Number (no emotion)
2) Prepare and decide how much profit I expect to make
3) Prepare and decide how much I am willing to lose? |
| How many % loss are you looking at when you do a Credit Spread if it goes wrong? | About 30% of the Risk Capital |
| What is the 2 main difference between a Winning Trader and a Losing Trader? | 1) Winning Trader knows as how manage the losses
2) Winning Trader keeps the losses small (and losing trader does not) |
| What is one of the most fundamental rules of Trading? | Cut your losses short |
| what should I do if I cannot watch the marker during the day? | I set up and use Emergency conditional exit order |
| How can I get more experience in Option trading? | By using Paper money and doing a lot of back testing |
| How many days left in a RUT trade to start considering to exit a trade for a profit? | 7 days or less |
| IF POTM is below 70%, you exit at the Mark and the order does not get filled. What should you do? | Offer a higher premium until the order does fill |
| What are the 2 Rules of the RUT trade? | 1) shutdown if POTM is below 70%
2) Close the trade if the RUT is below 3% of the Short Strike on Thursday (on Monday to thursday) |
| What are the 2 things can you do to "protect" yourself from a RUT trade going bad? | 1) set an alarm in case you miss the trend going down
2) set up an automated emergency Exit order |
| Which strike price do we choose to set up an emergency Exit order? | The Strike price just before (higher than) our strike price (i.e. strike price 1485, we take 1490) |
| What are the 2 kinds of emergency order? | 1) "Stop loss" order based on the PREMIUM (not recommended)
2) "Conditional" order based in the Security PRICE |
| Why we do not recommend to use Stop Loss Orders for emergency exit? | Because it uses Premium (as opposed to security price) and Premium tend to spike prematurely |
| What are the regular ticket fees from your brokers? | Usually between $4.95 to $9.95 |
| What would be an ideal broker charge? | Ideal broker charges below $1 for commission (contract fees) and no ticket fees |
| What is the difference between a Cash Secured, Standard Margin Account & Portfolio Margin Account? | Cash Secured is 100% backed up by my cash
Started Margin account you put 50% of the cash and the other 50% is loaned by the broker
Portfolio Margin account you put 15% of the cash and the other 85% is loaned by the broker |
