9/16/2013 Morning Blog

Markets are off to the races this morning on the Larry Summers news, not so sure it is going to hold that peak though. Tuesday and Wednesday we have the Fed meeting which should spark some fireworks. Our 7 Core Plays we put out Friday at the close should all do very well for a stellar 5 months in a row with no losses. I do want to comment on some of the survey data we did recently

First: I noticed we have very seasoned traders on our site with 10 or more years trading experience (55% of respondents)

Second: When it comes to option trading specifically that seasoned trading experience dwindles to 1-5 years (41% of respondents)

Third: This is the biggest one (47% of respondents) say they traded 1-5 contracts, now what does that all tell me

The information above tells me we have a large group of folks that have bought and sold stock, been in IRA’s and traded occasionally. At some point since the financial meltdown they have decided to try and trade options for a living maybe from job loss or just the freedom. What the third point tells me is those that are trying to make a living trading options are in a futile fight trading only 1-5 contracts and here is why.

If you buy 3 contract of the SPY at 1.00 and it goes up 50% (great by my standard) you have $300 in the trade sell for $450, commission in and out, you end up with like $125, if it only goes up 25% (respectable to me) you end up with $75 minus commissions so you end up with $50. Nobody can make a living like that that so you are always shooting for the higher percent instead of investing more and taking the base hits in the 25% range.

Have a great day today, should be very profitable.