Trading the Probabilities, Part 2

In the first installment of Trading the Probabilities, I introduced the concept of standard deviation and how it can be used to determine the statistical chance of a stock price closing within a given range over a specified period of time. In this post, I will examine additional considerations for the probabilities trader along with the…

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Trading the Probabilities

Unlike stocks and commodities, which have a maximum probability of profit (POP) of 50%, options offer a big advantage in that the trade can be structured to permit a much higher probability of profit. Any underlying that exhibits random behavior around a mean (Brownian motion) will have a price distribution that closely resembles a bell…

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Weekend Portfolio Analysis (January 31, 2015)

Market Conditions The market was choppy the past five days with the SPX opening at 2050.42 and ending at 1994.99, down 55.43 or 2.7% for the week.  The SPX is in negative territory for the year, but so far has managed to hold above the resistance level at 1988. All of the other major indices ended the month in…

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Trading Mistakes

One of the goals of this blog is to provide a forum to share my trading successes and failures in hope that others can learn from my mistakes. Bram Stoker, the author of Dracula, said, “We learn from failure, not success!” As a trader, it is imperative that we are continually trying to improve our…

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Closing a Profitable Trade

One of the difficult things about trading is knowing when to close a trade. When a trade becomes profitable, it is often easy to become greedy and hold on to the position hoping that it will become even more profitable. In undefined-risk trades, I have learned the hard way that when you have a profit,…

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