A Trip To The CBOE
Good cloudy Chicago morning people of the Evil Speculator nebulous of the cosmos. In the world of finance, New York City is a city of huge funds, the kinds that have billions under management. They are the Queen Mary’s of the trading world. Slow, and they make major waves when they move.
That pic is of the Chicago Board of Trade, which merged with the CME in 2007. It’s the hub of the South Loop financial district. There are 100s of trading firms within 5 block radius, the Chicago Fed, big banks and the CBOE.
Chicago is a city of smaller more active trading firms. It’s hard not to be out in the city at night and not catch two traders chatting. It’s in the water here. But today, this is where many of you need to step inside.
The Chicago Board of Options Exchange. Ohh and both Think or Swim and Tasty Trade HQ are right here in Chicago too.
Reading the comments the past few days about a paint-by-numbers trade I posted for the subs, I’m really scratching my head…
Why anyone, who isn’t a professional and doesn’t have a trade desk staffed 24/5, would use futures to trade volatility is mind boggling to me. You guys have no idea how much risk you’re taking on. And how little upside there is in the trade. Which is why I used a long dated put to setup the trade.
The trade is over, time to take it off the table for a scratch or slight profit. The IVTS has crashed back down to the filtered value at .96.
One of the comment involved going short the VX futures and buying VX 40 calls. What’s your 1R on that trade? What happens when the VIX goes out at 35 at expiration and you have to roll or close at -$14k/contract? Given enough time, it will happen.
Going back to trader 101, you need to understand the concept of risk. The R multiple. Or you’re violating the golden rule of trading:
Any trader, taking too much risk, given enough time will get their account leveled by the market.
Just about always with no exceptions. For this reason, you need to understand the basics of options.
Introducing The Options 101 Class
As such, you’re in luck. Mole and I have been working on a project together for over 2 years now that is finally kicking off this week. Part of that project is a training on the basics of options and why everyone outside of professional firms should be trading them: the deck is stacked in your favor.
In this training, I cover some of the core fundamentals that once you understand the basics of options from a probability perspective, if you can get your head trash out of the way, will change the game for you. Successful trading comes down to this:
- Knowing the probability of success on a trade
- Knowing the risk to reward ratio
- Maximizing #1 and #2 through the correct trade type
Options have this baked right into them by default. Especially if you’re using Think Or Swim or Tasty Trade, which are professional grade platforms available for free to the at home player.
In the options Foundations Training, I cover some key things in depth on options:
- Why just about everyone, who isn’t a professional (and still most of them too), should be trading options. Not stocks, futures or currencies.
- The basics of the 1R concept, risk. And a refresher of the Golden Rule of Trading.
- How the expected move works. If you do decide to trade stocks (which I don’t recommend for you), the expected move is your guide post. If you have no idea what that is, I break it down in paint-by-numbers simplicity. The expected move is the tell tale that gives an indication of how much something might move. For beginning and new traders, this will change the game for you.
- How to put options volatility at your back. Volatility is mean reverting. If it’s high, it’s going to crash back down to earth. And if it’s low, it’s likely to rise. This needs to be considered on all options trades. To make this more difficult to understand, Think Or Swim and Tasty Trade use different methods of measuring volatility: IV percentile. They mean something different on each platform. To resolve this, you get access to the custom IV Z-Score indicator I coded up in Think Or Swim. It makes it super simple.
- The simple way to look at time decay. Part of the three step formula of trading, knowing which time frame to use for a trade is critical. I cover the basics of time decay in paint-by-numbers simplicity without lots of geek speak.
- Options jargon. Ever felt like a dumb dumb because you read something on the internet with some options jargon you didn’t understand? I break it down in the options jargon for dummies section of the course.
- The IVTS tutorial. I go into detail on how it works, why it’s magical and why it’s the guide post to all of my trading. Most of my trading in the modern day revolves around volatility, it’s my core area of expertise. The IVTS is the Rosetta Stone and understanding how it effects futures contracts is not optional.
- Access to the custom IVTS filter Mole and I developed. The problem with the IVTS is that it whips around a lot. This means getting whipped in-and-out of trades a lot. Unless there is an effective way that keeps the essence of the IVTS alive with neutering it’s effectiveness. Mole has coded it up here and made it available as part of this course.
The free version of the IVTS is available here:
For the long time readers of Evil Speculator, you get lifetime access to the course along with lifetime access to the subscriber only version of the IVTS tool for only $97. Yes, that’s right – for less than the price of one losing trade, you can level up your trading game forever. Once you have knowledge, nobody can never take it away from you. It’s yours to keep, forever.
Here’s episode 1 to whet your appetite:
For a limited time you can get it right here at Evil Speculator at a YUGE discount:
This one-time offer stands until Monday 2/3/20 at midnight. Then it’s gone, forever. Like in disappear and never to be seen again. Mole and I will be shifting our focus to our new training academy and this training is an integral part of the academy.
It’s why student loan debt never goes away. You can’t take back an education from someone.
For less than you’re probably going to torch today on losing trades, you can level up your trading game forever.
Until next Monday at midnight, then it’s gone for good.
You know what to do: