TABLE OF CONTENTS
TABLE OF CONTENTS i
FORWARD vi
Chapter 1 Options Fundamentals: INDEX OPTIONS
FUTURE OPTIONS, TECH STOCKS & OPTIONS, & CURRENCIES 1
UNDERLYING MARKETS 2
A QUICK OVERVIEW OF THE STRATEGIES: 2
INDEX OPTIONS 3
STOCK OPTIONS 4
NEURAL NETWORK INDICATOR 4
FUTURES OPTIONS 5
CURRENCIES FOR TRADING 5
HOW DOES THE WWI TRIGGER WORK? 6
OPTIONS VOCABULARY 6
MARGINS FOR OPTIONS TRADING 10
OPTION CODES 10
CURRENCY VOCABULARY 12
SOME EXAMPLE CURRENCY COMPUTATIONS ARE: 12
OBJECTIVE OF OPTIONS AND CURRENCY TRADING 14
CAPITAL GROWTH MODELS 14
SUMMARY 15
CHAPTER 2 OVERALL STRATEGIES FOR OPTIONS TRADING using Realtime Tools
OPTIONS, CURRENCIES & STOCKS 19
WHEN DO YOU OPEN THESE POSITIONS? 19
WHEN DO YOU CLOSE THESE POSITIONS? 19
THE NAKED SPREAD STRATEGY 20
EXAMPLES OF NAKED CREDIT SPREADS 21
THE COVERED SPREAD STRATEGY 22
EXAMPLE OF A 2 SIDED COVERED CREDIT SPREAD 23
THE DEBIT SPREAD or LONG STRATEGY 24
CURRENCY TRADING 25
STOCK TRADING 25
SUMMARY 25
CHAPTER 3 Executing 2 Sigma Credit Covered Spreads 27
EXPONENTIAL MOVING AVERAGE ALGORITHMS 27
WELLS-WILDER INDICATOR (WWI) 28
EQUATION FOR 2 SIGMA 28
WWI COMPUTATIONS FOR OEX 29
OTHER MARKET SIGNAL INDICATORS 29
FOUR DAY MOVING AVERAGE DIFFERENCE = MAD4 30
DIFFERENCE BETWEEN 9 DA & 4 DA MOVING AVERAGES=MAD9-4 30
THE MOVING AVERAGE DIFFERENCE COMPARISON = MADC 30
THE STOCHASTICS %D-%K MARKET SIGNAL INDICATOR 31
COMPLEX MARKET SIGNAL INDICATORS 31
SUMMARY 32
CHAPTER 4 Filter Buy Stocks for Hsu & Zack Recommendations 33
USE OF THE CBOE Option Chains to find Put Covered Spreads 33
Evaluate Long Calls with adequate volume using CBOE 35
Use Trade King Tools: Spread Probability of being Safe 36
Paper Trades for Put Credit Spreads using CBOE data in Schiller Software 38
My Yahoo Real Time Charts for Stocks being evaluated 39
Paper Trades for Long Calls using CBOE data in Schiller Software 40
SUMMARY 41
CHAPTER 5 Using SelfAdapDTN4 software by Jon Schiller 43
How and where to Paste & Evaluate CBOE options Chains for Indices & Stocks 44
SelfAdapSpreads Sheet for setting up Paper trades for spreads being considered 45
SelfAdapSpreads Sheet for Long Calls & Straddles being considered 45
How to Enter DTN.IQ watchlist in SelfAdapDTN4 software 46
Surveillance of Open Positions during Trading Day using Realtime quotes 46
End of Day Update for next Trading Day 47
Update at Options Expiration 3rd Friday of Each Month 48
Getting Ready for Next Option Month on the Sunday or Monday after Expiration 48
Getting Ready for Next Option Trading Day: Detail new positions being considered 56
SUMMARY 56
CHAPTER 6 Opening New Positions using TradeKing Interactive Website 57
How to Open Call & Put Credit Covered Spread 58
How to Open Long Calls or Puts 59
How to Open Debit Straddles or Debit Strangles 61
How to Evaluate the Probability of a Spread ending Safe using Tools 61
How to Evaluate Open Positions using Summary 62
How to Modify or Cancel an Open Order 63
How to Print Orders Executed 63
SUMMARY 69
CHAPTER 7 Setting-up Watch List using DTN.IQ & Using Features 71
Establishing First Watch List with all Indices, Stocks, and Options 71
Modifying Watch List for New Stocks and Options being Considered
Sample Watch List for getting Started 75
Setting Up Realtime Charts and How to Use
Setting Up Realtime Option Chains and How to Use 78
SUMMARY 79
CHAPTER 8 Using Underlying Stock as Margin for Stock Credit Spreads 81
Benefits of Buying Stock for Hsu & Zack Buy Stocks 81 Buying & Holding Stocks As Long Term Equity Investment 82
Amount of Stock Value applicable to Credit Spread Margin 83
SUMMARY 83
CHAPTER 9 Survey Of Market Signal Indicators 85
DESCRIPTION OF EACH MARKET SIGNAL INDICATOR: 85
Moving Average Difference Market Indicators 86
The 4 Day Moving Average Difference = Mad4 86
Difference Between 9 Day & 4 Day Moving Averages = Mad9-4 86
Moving Average Difference Comparison = MADC 86
Stochastics %D-%K (SPECIAL MOVG AVG INDIC) DIFFERENCE 87
Bollinger Band Indicator 88
Wells-Wilder Indicator (WWI) Market Indicator 89
Chinese Candlestick Charts 89
Neural Networks a new Concept for Predicting Market Movements 89
SUMMARY OF MARKET SIGNAL INDICATORS SURVEY 90
CHAPTER 10 SOME TIPS TO ENHANCE TRADING PROFITS 91
USE VOLATILITY to INCREASE COV CREDIT SPREAD PREMIUMS 91
WHEN TO OPEN THE TRIGGERED DEBIT SPREAD 92
CORRECTIVE ACTION FOR 2 SIGMA COVERED CREDIT SPREADS 93
WHAT TO DO WHEN A SHORT PUT or CALL IS THREATENED? 94
CORRECTIVE ACTION for CR SPREADS IF WWI IS BETWEEN 80 & 20 94
SUMMARY 95
CHAPTER 11 GLOBAL GROWTH MODEL 97
OEX and STOCK OPTIONS 4 YEAR GROWTH MODEL 97
COMMODITY FUTURE OPTIONS GROWTH MODELS 98
CURRENCY GROWTH MODELS 98
GLOBAL CAPITAL GROWTH MODEL 98
SUMMARY 99
CHAPTER 12 SELF ADAPTIVE TRADING SOFTWARE 101
SELF ADAPTIVE INDEX & STOCK OPTIONS SOFTWARE: SelfAdapStkOpDTN4 101
COMMON FORMAT FOR THE 11 EXCEL SPREAD SHEETS 103
Capital Growth Model Spread sheet 105
CAPITAL GROWTH CHART: OEX & sTOCK OPTIONS $ PROFIT 106
HOW TO USE THE COMMON FORMAT SPREAD SHEETS 106
TARGETS OF
SUMMARY of SelfAdapStkOp Software 108
FUTURE OPTIONS SOFTWARE: SelAdaptFutOp.xls 108
COMMON FORMAT FOR THE 11 EXCEL SPREAD SHEETS 109
HOW TO USE THE COMMON FORMAT SPREAD SHEETS 111
TARGETS OF
TRADING RESULTS FOR 10 FUTURE OPTIONS – WWI TRIGGERED 112
SUMMARY of SelAdaptFutOp.xls 113
SELF ADAPTIVE CURRENCY TRADING SOFTWARE: SelfAdapCur.xls 113
COMMON FORMAT FOR THE 4 CURRENCY EXCEL SPREAD SHEETS 114
HOW TO USE THE COMMON FORMAT SPREAD SHEETS 115
TARGETS OF
SUMMARY of SelfAdapCur.xls Software 116
SELF ADAPTIVE STOCK TRADING SOFTWARE: SelfAdapStockTrading 116
COMMON FORMAT FOR THE EXCEL STOCK SPREAD SHEETS 117
RESULTS of STOCK STRATEGY 1: WWI TRIGGERED BUYING / SELLING 118
RESULTS of STOCK STRATEGY 2: BUY 200 SHARES & HOLD FOR 1 YR. 118
HOW DO THE TWO STRATEGIES COMPARE SIDE BY SIDE? 119
HOW TO USE THE COMMON FORMAT SPREAD SHEETS 119
HOW TO START WITH STRATEGY 2 – THE MOST PROFITABLE WAY 119
TARGETS OF
SUMMARY 120
APPENDICES 121
APPENDIX A. WEBSITES TO AID OPTIONS & CURRENCY TRADING 121
APPENDIX B. SOME WEBSITE BROKERS 123
APPENDIX C. ANSWERS TO TEST QUESTIONS 123
APPENDIX D. COMPARISON OF MARKET INDICATORS AS TRIGGERS 124
WWI vs STOCHASTICS %K-%D
WWI vs MAD9-4
WWI vs MAD4
WWI vs MADC
WWI vs BOLLINGER BAND
SUMMARY OF MARKET INDICATORS
APPENDIX E. DAILY & MONTHLY TASKS 125
UPDATE MARKET VALUES IN SPREADS SHEETS DAILY
SCAN SPREAD SHEETS DAILY FOR WWI TRIGGERS
OPEN NEW COVERED CREDIT SPREADS MONTHLY
APPENDIX F. CAPITAL SHIFTS THEORY for BIG MARKET MOVEMENTS 126
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