Jeff Bishop Total Alpha: These Indicators Will Help You Harvest Profits

Posted on April 2, 2020 by Brandon Buckley

I’ll start off by saying that I’m not a big fan of indicators. There are far too many of them, and folks rely on them way too often. There’s only a handful of them you can rely on during good and bad times.

For me, it has to be – moving averages.

Everyone from Wall-Street’s biggest honchos to the South Florida retiree drops these guys into their analysis.

However, only the successful ones know exactly how to deploy them for big money.

Here’s a great example from my Total Alpha Portfolio. I used a moving average crossover to score a nice $13,000 profit.

This is the same techniques I talk about in my upcoming masterclass

Most of you are probably familiar with moving averages.

However, I want to drop some insights that will give you a whole new perspective on the topic. Stuff that you can take and immediately apply it to your trading.

Study it, and it will not only make you better, but also more profitable.

Types of Moving Averages

Moving averages fall into two major categories: simple and exponential.

Yes, there are other categories such as adaptive. However, I’ve never found much use for them and don’t feel they’re worth discussion.

Simple moving averages take the average of a bunch of closing prices over a set period on whatever timeframe you’re using. For example, a 13-period moving average takes the average closing price for the last 13 periods on whatever chart you’re looking at – daily, 15-minute, 1-second, etc.

Exponential moving averages add a weighting to more recent prices than a simple moving average. The amount of weight increases the closer you get to the current price. This creates a much more responsive indicator compared to simple moving averages.

Institutional Moving Averages

Ever wonder what the big boys use on their charts? I’m going to tell you. When I talk about institutions, I’m speaking about funds, not floor traders. We’re talking large amounts of money that takes time to move in and out of trades.

That said, the big funds rely on two major simple moving averages – the 50-period moving average and the 200-period moving average. Big money tends to look at daily and weekly charts.

Ever heard of the death-cross or golden-cross? That’s when the 50-period moving average crosses below/above the 200-period moving average on the daily chart. When they haven’t touched in a while, it’s a signal that the longer-term trend has changed.

We recently saw this pop up on the SPY chart.

SPY Daily Chart

I guarantee you’ll start hearing about it on television if you haven’t already.

Now, should this matter to you? Heck no! Most funds underperform the market. Take advantage of their stupidity.

Incorporating Moving Averages

No matter which types of moving averages you choose, it’s essential to have a slow and a fast moving average. The fast one should look at a smaller number of periods (somewhere between 5-20) while the slower one should look at a larger number (around 30-60).

Fast-moving averages respond quicker to price changes than the slower ones. When you compare them to the slower moving averages, they indicate the trend is changing. The distance between the two tells you the strength or weakness of the current price action.

The Infamous Money Pattern

Throughout my career, I found one moving average pattern that worked time and again for me. I call this the ‘money pattern.’

The money pattern is pretty simple. First, I start with the hourly chart. Next, I plot the 13-period and 30-period simple moving averages. Then, I look for them to cross when they haven’t touched in a while.

Seems simple enough, right? It can take a little bit of practice. Let’s go back to the SHOP chart from earlier.

SHOP Hourly Chart

Shopify is an excellent example of the money pattern in action. As the market plunged, so did this stock. Over a couple of days, the stock started to build a base. Then, it launched higher, which brought the 13-period moving average above the 30-period moving average.

Once the stock pulled back into that convergence, I made my move. In order to cap my risk, I sold a put credit spread. That let me decide exactly how much I wanted to risk and my maximum total reward, creating a high probability trade.

Get the best tools and training around

The money pattern is just one of several tools in my arsenal that I readily deploy. In fact, I’ve created a Total Alpha Masterclass to help traders learn these very secrets…for free.

Since we’re all stuck at home, now is a perfect time to enhance your trading without spending a dime.

Click here to sign up for my free options masterclass.

Source: TotalAlphaTrading.com | Original Link

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Total Alpha Trading: Stop Trading Options 30 Days Out, Here’s Why

Posted on March 24, 2020 by Brandon Buckley

There is something different that’s happening to the options market right now. And if you’re not aware of it, it could end up costing you a lot of money.

Optimal mechanics state that you want to sell options or spreads with expirations 30-45 days out. This maximizes your time decay and the probability of success.

Try that now, and you’re probably staring down at a winnowing portfolio.

Traders hate uncertainty. That’s why we see volatility higher in later-dated months than in the near-term under normal conditions.

If you think about it, that makes sense. We never know what the future holds from earnings to black swan events.

However, the market is gripped with so much fear and panic, everyone is racing to protect their portfolios right now.

In other words, the market is telling us that investors expect things to calm down in the future.

You actually see this happen around earnings all the time! Earnings are big unknown events. Traders don’t know what will happen, so they bid up option contracts expiring just after their release.

Traders use the terms contango and backwardation to express these two different phenomena.

It is incredibly rare for backwardation to exist in the VIX and overall volatility, but that’s the world we live in right now.

I want to explain what this means for you, why this happens, how it changes the risk structure, and some strategy adjustments along with examples to not just save yourself some coin, but make a few along the way.

Why Near-Term Options Are So Expensive

Take a look at a current option chain for the IWM:

IWM Implied Volatility

What you’re looking at is a list of all the expirations for the IWM going out of a couple years. Down the right side is the average implied volatility across all the options.

Here’s what’s unusual. See how the implied volatility gets lower as you go further out. That only changes around September.

So what’s causing this?

We’re seeing investors clamor for protection, buying up puts left and right on everything from the SPY to AAPL. They fear the current uncertainty but think it will clear itself up eventually.

That’s why short-dated options have higher implied volatility than longer-dated ones.. It signals investor panic.

However, this creates an excellent opportunity for Total Alpha Traders.

How time and risk changed

In the past few weeks, we’ve had 10% swings in the market in a single day! That’s extraordinary when you compare it to the 30% gain stocks made in all of 2019.

When you seek option expirations further out in time, you get paid more as a seller. However, instead of having natural declines in implied volatility working for you along with time decay, implied volatility works against you.

Think of it this way. Under normal conditions, options lose value over time both from time and volatility decay. As an option seller, you have both things working for you.

Right now, we have the exact opposite happening for volatility. You still get time decay working for you, but currently, volatility is working against you. That’s why going out further in time actually increases your risk in this environment.

This is how I’m playing the market

I’ll start by saying that the risk right now is to the downside. However, we can get face-melting rallies in the interim. So, I want to make sure that I create high probability situations for myself.

Right now, that means I’m selling credit spreads, strangles, and naked options far out-out-of-the money…but with shorter-dated expirations. Instead of 30-45 days out, I’m picking options with one to three-week expirations.

For some of the riskier options strategies like strangles and naked options, I’ll play it close to the vest, typically going out only a week or two. With implied volatility so high, I’m getting enough credit for these trades I don’t need to take on the extra risk.

Here’s an example from yesterday. I sold AAPL puts that expire April 3rd (10 days away) at the $185 strike price for $4.15 in my Total Alpha Account.

That’s a massive credit. I’m getting paid 2.24% of the strike price for just two weeks. Plus, the stock is over 15% away from that strike.

Two things could hurt this trade. First, if implied volatility continues to rise, that would make the options more expensive. That’s possible but not very likely. With IV at record levels, odds favor an IV contraction.

Second, and most apparent, if Apple trades below $185 by more than $4.15 at expiration, I lose on the trade. The amount I lose depends on how far below $185 the stock goes.

This inversion will pass

Nothing lasts forever (though it may feel like it). At some point, the market will find a bottom. Even during the Great Recession, inversions in volatility righted themselves out often within a month.

It could take the entire summer to work through what we’re seeing now. The key is to be prepared for when it turns. That starts with knowing how to read the charts and look for the signals.

One place to acquire these skills is with my upcoming masterclass. You can register for free to learn how I look at the life cycles of stocks and trade options in my personal portfolio.

Click here to learn register.

Source: TotalAlphaTrading.com | Original Link

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Jeff Bishop’s Total Alpha:These Are The Companies The Government Will Bail Out

Posted on March 22, 2020 by Brandon Buckley

Extraordinary times calls for extraordinary measures. Ask most congressmen about the bank bailout in 2008 and they’ll wrinkly their nose in disgust.

Ask them the same question about the airlines and they’ll readily say they need help…but it’s not a bailout.

Call it what you will, the government will not and cannot let certain industries go under for reasons from national security to financial stability.

That doesn’t mean you can’t find great pickups right here and now. I’ve already been dipping my toe into some of the gaming stocks in my Total Alpha Portfolio.

We need look no further than Boeing (BA) as the leader of this push. There is zero chance the U.S. government will allow its only commercial airline manufacturer, and one of two in the entire world to go under.

BA Weekly Chart

I like that the stock worked its way into the 200-week moving average. Typically, that’s a great support level to trade against.

However, Boeing isn’t the only company that looks good out there. Let me walk you through some other stocks I expect to get government assistance.

Delta (DAL), United (UAL) and American (AAL) Airlines

Transportation has become a backbone of our lives. We actually take for granted the current airline network that lets us travel home for Thanksgiving.

Back in the early days, airlines were heavily regulated entities. Ticket prices would be the equivalent of thousands of dollars today. It also became a classy affair where people dressed up to travel.

You may not realize it, but a huge portion of our economy is enabled by the passenger airline industry. Ever taken a flight for your company? You’re not the only one. Tens of thousands of people fly every year as consultants, salespeople, executives, and any number of roles that require frequent travel.

That’s why we can expect the government to step in to save the airlines. Some regional carriers have already closed up shop. I expect there will be more of those to come. Heck, I see potential consolidation in the airline industry.

You may be curious why I left out Southwest Airlines (LUV). Of the major airlines, they are much better capitalized than these three. I’m not sure they’ll need any funds to stay afloat.

If you don’t want to take single stock risk then the JETS airline ETF works well. It holds a basket of the major airlines and is an indicator for when things are likely to turn.

JETS Weekly Chart

Ford (F) & General Motors (GM) 

They bailed them out once, I bet they do it again. Trump needs to keep the midwest states in his corner for reelection. They were a key contributor to his 2016 win. Politically, he can’t afford to allow them to fail.

Economically, cars still create a foundation for our economy. The U.S. government isn’t going to let the only auto manufacturers to exist in the U.S. be foreign companies. It creates too much of a security risk and is a big reason they bailed them out over a decade ago.

Now, I’m not certain that they do more than loan them funds. There’s also talk of retooling their machinery to produce ventilators and medical equipment. Plus, with direct payments to citizens likely to hit most of their employees, it’s tough to say how much direct funding they’ll take.

Royal Carribean (RCL), Carnival Cruise Lines (CCL). & Norweigian Cruise Lines (NCLH)

They’ll probably be some other private companies as well that get added to this list. Cruise lines have been hurt in particular because of their close quarters. A major portion of their revenues come from the elderly soaking up their retirement.

Right now, all their ships are docked, which keeps their operating costs fairly low. However, like the airlines, there’s plenty of costs from just sitting idle. The worst is yet to come as demand will be much slower to recover here than most other places.

With the large amount of jobs this industry supports both directly and indirectly, I suspect they’ll get a similar deal as the airlines. However, I expect that all of them will need to take it to stay afloat.

Strings Attached

Be aware that not all of these gifts will be free. They’ll likely be loans like the Troubled Asset Relief Program (TARP) issued to the banks. Eventually, they had to pay those back.

We’re already seeing negotiations about whether they’ll restrict stock buybacks, executive pay, or other caveats.

The best way to play this is to use the charts as your guide. You can pick up some easy skills in my upcoming masterclass. I’ll give you the tools to start scoping out trades before you know it.

Click here to learn register.

Source: TotalAlphaTrading.com | Original Link

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Jeff Bishop’s Total Alpha: This Is Where The Markets Are Headed

Posted on March 19, 2020 by Brandon Buckley

I’ve got something exciting to share with you today. Every day I get traders from Total Alpha, Bullseye, and even just random folks coming up on the street asking me where the market is headed.

That’s when I decided to put together an interview with Raging Bull’s Elite chatroom commentator and frequent Fox Business guest, Hitha Herzog.

Click here to watch my interview

There’s a lot of fear and uncertainty out there in the markets. I won’t tell you I have all the answers. What I can give you is my insights from decades of trading about what we can expect going forward.

Even more than that, let me add a little color to some of the topics I covered in the video.

Not Taking Long-Term Stakes Yet

In order for me to want to jump into this market, I have to have some idea about where I think things might be headed. At the moment, my ability to forecast this virus isn’t any better than what you see on television.

What we’re seeing now is unprecedented in every sense of the word. There’s nothing to compare it to no matter how hard you try. At no other time did a global pandemic become this widespread with a market running on easy money.

This week we saw the Fed fire nearly every bullet they had, which wasn’t much. Now, it’s up to lawmakers to figure out the rest… and that’s a frightening thought.

Flattening the curve for new infections saves lives but drags out economic shutdowns. The longer this drags out, the more likely we are to see systemic problems arise. I’m talking about bankruptcies that spiral into another credit crunch.

At the end of the day, I need to see new cases start to decline. That’s when we can start to survey the damage and see where things lie. Trying to guess before then is a great way to blow up your account.

Trade Nimbly

Recently, I wrote about 5 things I’m doing in the market right now. I discussed how I’m reducing my position sizes and trading smaller. However, I wanted to expand on that with credit spreads.

If you aren’t familiar with them, credit spreads come in two varieties: call credit spreads and put credits spreads. Both work the same.

  • Sell an option that is out-of-the-money on a stock
  • Buy another option that is further out-of-the-money on that stock with the same expiration
  • You receive a credit for this trade, which is the maximum amount you can make
  • The most you can lose is the difference between the strikes less the amount you received up front.

Now, I can close these trades anytime before expiration for partial profit. In this market, that’s exactly what I’m doing. I don’t want to hold these trades for too long, hoping to get maximum profit. My goal here is to make singles until I’m confident things are ready to turn.

Think About Trading Ranges

The majority of the time, I work as a swing trader. This market doesn’t exactly mesh well with that approach. So, I’ve adjusted to what’s out there.

Right now I’m trading against ranges. When the markets pop to the upper end of a range, I get bearish. At the bottom, I’ll get bullish.

With the S&P 500 ETF the SPY, I have a channel that’s being created by trendlines. Let me show you what I mean.

SPY Hourly Chart

The orange lines connect the highs of the candlesticks and the lows of the candlesticks. This gives me a range where I can trade against. Mind you, these don’t have to be exact. Rather, they just need to be approximate to give me an idea of where to play.

Get Educated

I cannot stress enough the importance of learning all you can in times like these. It’s not enough to be a good trader, you need to be a great trader. Nothing prepares you for battle like information.

Just the other day, as I sat there thinking about a trade, I realized that I was overthinkng things. When I thought back to what I taught in the masterclass I knew the answer was obvious.

Sometimes, going over the basics helps us recenter and prepare for what’s ahead.

So, with most of us at home these days, take a moment and register for my free master class. Even if you know everything about options, it always helps to take a step back and review the basics.

Click here to learn register.

Source: TotalAlphaTrading.com | Original Link

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Jeff Bishop’s Total Alpha: 5 Things I’m Doing In This Market Right Now

Posted on March 10, 2020 by Brandon Buckley

I won’t mince words. Yesterday was a bloodbath that wiped out a lot of market cap and probably blew up a few funds along the way.

With over two decades of trading, I want to give you insight as to what I’m doing now. Hopefully, you take away valuable information that helps strengthen your hand.

Let me throw you some of the highlights:

  • Oil dropped over 30% at one point
  • Bond futures had one of their largest two day runs ever!
  • Stock futures were halted overnight
  • Upon the open stocks were halted for 15 minutes

No one escaped the carnage, not even me. My first move was to cut my risk down immediately – although it took awhile for my options to price.

That’s why right now, I want to do the following: Define my risk. cut excess risk early, selectively sell premium, set smaller position sizes, and keep a balanced portfolio.

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Define Risk

These last few weeks remind me of why I prefer trading options. Options help me define my risk, letting me set the maximum losses in many cases.

Yes, days like yesterday can wipe them all out. But, I’ll live to fight another day and have some firepower. If I had held stock, that might not have been the case.

Plenty of people talk about how ‘risky’ options are. That can certainly be true. They’re leveraged products that move around a lot. However, that isn’t the way I trade.

I like to use defined risk strategies like Iron Condors, Credit Spreads, and limit long calls and puts to limit exactly how much I can lose. When I buy options, I pay a premium for this right. I use these strategies extensively in my Total Alpha portfolio exactly because I want to be around another day.

This is a good example of an Iron Condor I put on today in Total Alpha

Trading is about making a lot of small trades often. Some trades don’t work out. That’s ok. I want to make sure that no one of them obliterates my account. Instead, I play the long-game, letting the averages work out over time.

Cut Excess Risk Early

In my years of trading, when I want to take a loss, I do it early. The longer I wait, the more I lose. That’s why I spent a lot of time today cutting off positions that were likely going to never make me money.

My focus was to mitigate my losses. Especially with selling option credit spreads, taking your lumps early prevents you from taking a maximum loss on the trade. Of course, the markets can swing bag the other direction, and we’ll certainly see big rallies. But we could also see a few more drops before that happens.

I start by viewing my entire portfolio, then assessing which trades hold the most risk. This can mean cutting trades that are just too large for my taste. It’s not worth it to wallow in what could have been. Once I make the decisions, I stick with it and wipe the slate clean.

Selectively Sell Premium

There is a lot of illiquidity in the options market today. Spreads are extremely wide and favor the market makers.

I don’t plan to take many trades, but I see today as a wonderful opportunity to sell some volatility.

There is too much fear and pessimism at the moment.

Looking across the sectors, I want to find trades with high probabilities of success that rely more on volatility contraction rather than the directional premise. Volatility will contract at some point. I have much better odds betting on that than guessing where the stock might go.

An excellent example of one I took today in my Total Alpha portfolio was in Apple. The stock showed a lot more strength than the regular market. With Implied Volatility so high, I decided to sell a cash covered put against this stock.

This is an amazing credit for this stock and expiration!

Set Smaller Positions

Volatile markets don’t require a lot of capital to make good money. When the Dow swings around thousands of points daily, I don’t need massive position sizes. Instead, I’d rather let the increased volatility work in my favor.

Part of trading is knowing when you have an edge. Right now, my edge is selling premium. It either pays more for similar trades a month ago, or I get an increased win-rate.

Keep A Balanced Portfolio

With implied volatility so rich, selling premium means I can play both sides of the market. This is what’s known as ‘Delta Neutral.’ Iron condors are delta neutral plays because you sell a put credit spread and a call credit spread. These positions offset one another.

There are a few ways to keep a balanced portfolio. The first is to create neutral trades like an iron condor. You then manage the delta by adding or subtracting other positions around it as needed.

Second, you can use positions in other stocks to balance out the delta. That means using a put credit spread in a stock like Google to offset a call credit spread in a stock like Facebook.

Lastly, you can hedge your positions. This involves things like covered calls or buying stock or futures to offset your option positions.

Work With Someone Who’s Been There Before

This isn’t my first rodeo and hopefully, not my last. I know it can be intimidating out there. That’s precisely why I created Total Alpha. This service educates you and lets you see exactly how I’m trading this market through a live stream of my portfolio.

Click here to learn more.

Source: TotalAlphaTrading.com | Original Link

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