I have gotten quite a bit of feedback regarding the need for a more short term approach to the trading portion of the blog and in answer to these requests I added the 3 Day Trader.
The 3 Day Trader looks to capitalize on the ever present, but sometimes elusive 3 day cycle in the equity markets. If you look to the right on the sidebar you will see the 3 Day Trader and the instructions thereof.
The maiden voyage of this new section was very successful with a clean double in our option in just 4 days. Currently the model is flat, but is leaning towards the Buy Puts side. The model will work best if you use at the money or just in the money options. I trade the Diamonds and the SPY options. They are very liquid and have very small bid ask spreads.
Keep in mind that index option trading is a very aggressive undertaking and only true risk capital should be allocated to these signals. We carry a flat 25% stop loss on all the option trades, which means if you get filled on your options at $3 you will put a stop loss in at $2.25 in order to limit your potential risk.
I will also try my best to give intra-day price levels to look for in order to complete the trades, but more than likely these will come near the end of the cycle.
It is going to be your responsibility to determine which options you are going to trade, which as I said before should be right at the money or 1 to 2 strikes in the money.
I will start with a $10,000 account and allocate no more than 10% of the account value on each trade. With the most recent trade that was just completed, our account balance is now $11,000.
Lets see what we can do with this baby!