BTCUSD Technical Analysis 2-12-21

Price has started to run toward the 161.8 fib extension. That's the next level of resistance.
 

Trading Strategy – Cash Secured Puts

After setting up my new trade strategy over the past couple of weeks I realized that buying the stocks is like buying a car.  Why own the car and deal with all the headache of getting it fixed and replacing parts when you can lease for a cheaper price and get a nicer car.  The correlation is similar to stocks versus options.  If you can trade options and get better leverage, i.e. make more money, why buy the stock that has inherent risks of losing value?

I started out trading options but never really appreciated the seller’s side of the option chain.  If you become the seller you net your premium and then wait for the trade to play out.  I always like getting my money up front.  In any deal if you can get paid first before the actual transaction you are headed in the right direction. 

The trades I am making now are selling cash secured puts.  This is probably the safest option trade.  The only potential loss you have is by being assigned the stocks at a low price at expiration.  But if you traded on a decent stock, why wouldn’t you want that stock at a discount? Other than this you are net positive because you got your money up front as the seller of the put option.

As with any trade you have to make a smart decision about where and when to sell and where and when buy.  But if you are good at technical analysis then you should be OK if you keep your trades farther out of the money.  The key is to check the support and resistance lines to make sure your strike price is beyond that and then you will more than likely be OK.

More info on cash secured puts:

Options Industry Council - Cash Secured Puts

Selling Cash Covered Put Options

Here are some great videos that explain credit spreads which are the other safe play that I may be getting into soon.

Credit Spread Option Trading Strategies part 1

Credit Spread Option Trading Strategies part 2

Market Update #2 7-18-12

I got in and out of my McDonald’s trade early this morning.  It went up from 0.39 to 0.45 and I was able to take profits.  In markets like this it’s best to scalp the upswing.  The playbook: buy on the dips and sell on the tips.  Just make sure you watch your moving averages, support and resistance lines.  That’s how I know when to get in and get out.  Once the price goes down to a main support level, I look to buy on upward strength.  When the price reaches a main resistance level, I sell on weakness.  That’s pretty much the plan. 

In fact as we speak, Walmart just came off a support level.  I may get in if it breaks through the $73 resistance again.  It broke through this morning and I saw it go up.  But as we know what goes up, must come down.  I don’t trust it right now yet because it only broke through that resistance level once and it tumbled back down underneath it.  The strength hasn’t been confirmed yet.