Frequently Asked Questions
> Our service > Your account
> Misc
How do you determine what to trade and when to trade?
We use a proprietary system developed and refined over the years to find what we
believe to be the best Risk/Reward/Probability trades. To determine what to trade
we evaluate over 30 Broad-Based Indices and ETFs. To determine when to trade we
use current market, index, and industry data and trends.
When do you open new positions?
We continually scan the market for opportunities, but normally we open new positions
25 to 35 days from expiration… If we find the stars are properly aligned, we may
open positions with less than 20 days to expiration.
How many trades do you open each month?
Starting in October 2009 we open one trade per expiration cycle.
How long are you typically in each position?
We like to be in and out of our trades in the shortest amount of time possible to
reduce our exposure to the market. Depending on market conditions and our trading
parameters, we may be in trades as long as 40 days, or as short as 10… On average,
our trade duration is about 25 days.
Do you adjust your trades?
While in some instances or strategies adjusting trades can be beneficial, we believe
that if a trade is moving against us we should just cut our losses, close the trade,
and save our capital and commissions for another trade. That being said, under very
rare circumstances we have adjusted trades to limit losses.
How do you calculate your returns?
The calculation for ROI (Return On Investment) is straightforward: Reward
÷ Risk = Return… The trick is to properly define Reward and Risk. We define Reward
as the amount of credit (per contract) we retain from the trade after it is closed.
We define Risk as the amount we have invested (per contract) in the trade at open.
For example, one of our recent trades on the RUT; our Reward was 0.90 (the final
amount of credit we kept after we closed the trade), our Risk was 8.75 (a 10.00
spread between the short and long legs of our position minus the initial credit
of 1.25 we brought in opening the trade), thus our Return was 0.90 ÷ 8.75 = 10.3%.
We use the same formula for our monthly return calculation by adding up the total
Reward and Risk for the month.
Do you offer Auto Trading?
We believe it is in the best interest of our members to be in complete control of
their own trading accounts, so we don't offer auto trading services.
Back to top
What do you suggest as a minimum account size?
An age old question for which there is no single answer. While there is a theoretical
minimum at which point you would “break even” (taking into consideration commissions
and taxes), it’s not the same for every investor. The best we can do is offer a
general guideline of $500.00, with a more realistic minimum probably around $1000.00.
Use the following simple calculator to help determine account size;
How much money should I allocate per trade?
The amount depends on the individual trader and their account size, risk tolerance,
and other factors. A more aggressive investor might trade closer to %100 percent
of their account per position, while a more conservative investor might trade considerably
less. There are positive and negative implications to risk and reward when determining
allocation, which we discuss further in our articles section available to our subscribers.
Should I reinvest profits?
Much like the allocation question above, a more aggressive investor might reinvest
all profits seeking to increase reward at the cost of higher risk, while the more
conservative might prefer to book all profits and put them to use elsewhere.
Back to top>
Do you recommend any particular brokerage firm?
In our time trading, we have used nearly a dozen different brokers, each with their
own strengths and weaknesses. While we are now with a brokerage firm we believe
to be the best solution for our requirements, we prefer not to endorse any particular
one. Characteristics of a good broker include: Options Friendly (allows Iron
Condors and Credit Spreads, offers Multi-Leg (4 leg) orders, etc), Flat Rate Commissions
(or no more than $1.00 per contract), No "Per Contract Fees", No Minimums,
No "Hidden Fees", SIPC coverage, etc. While these characteristics are
only a few of the things to consider, they're a good place to start.
Back to top