Using QQQ signals to trade QQQ options.
Our QQQ trading signals were designed to satisfy
the demands of QQQ traders. These are generally
traders who wish to make no more than 15 to 30 conservative trades
per year (or an average of roughly 2-3 trades a month). Our QQQ
signals easily satisfy this requirement.
We remind you that options trading is highly
risky. Should you decide to trade options based on our QQQ signals,
we recommend that you observe a few simple rules:
-
A "Long" signal can be used to purchase
call options. When we issue a "Long" signal, we expect the
market move higher. Accordingly, if you follow our signals, you could buy QQQ
shares or QQQ call options (calls);
-
A "Short" signal can be used to buy put
options. When we issue a "Short" signal, we anticipate that
the market will decline. In such a situation, if you follow our
signals, you may
sell short QQQ shares or by purchasing QQQ put options
(puts);
-
A "Cash" signal indicates that we are
closing out any open positions;
-
Purchase options with at least 3 months
left to expiration. Because our signals were developed for
mid-term trading applications, we might remain in a position
anywhere from one to 7 weeks. Purchasing options that expire
within the current month or during the following month could
therefore be very risky. Due to the rapid decay of their time
value, options that are close to expiry can expire worthless,
even before a signal is closed;
-
Choose the right options strikes. For
call options, we recommend selecting the highest strike price
that is in the money at the time a trade is initiated.
Conversely, for the put options, choose the lowest strike price
that is in the money when the trade is opened;
-
After a winning options trade, reinvest
only the original trade principal, never the principal plus the
profit! For instance, if you allocated $1000 to options
trading and assuming a previous trade resulted in a $500 profit,
we strongly advise against reinvesting the full $1500 into your
next options trade. Instead, commit only the original $1000. In
this way, should you experience a (total) loss due to an option
expiring worthless, you would still have the $500 (i.e., your
profit from the previous trade);
-
Invest only a small portion of your assets
into options - an amount that will fit your personal trading needs and risk
tolerance. In our opinion, that amount should make up about 10% of your total
portfolio value; it should never exceed 30%.
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