Get the ETrade experts' inside track on playing the markets For retail traders, knowing which possible strategies to employ when has always been a challenge. That is, until now. For the first time, popular ETrade educators Rick Swope and Shawn Howell introduce their two-dimensional scoring system for determining how bullish/bearish a trade setup looks by reading charts. In Trading by Numbers, they present a scoring system that uses a trend score and a volatility score, removing the guesswork and giving you a solid guide to the markets. Based on the score, the authors provide a toolkit of option strategies that are best to execute in each specific situation. Using common indicators and patterns, the book provides analysis for choosing your right strategy while managing risk. * Authors Swope and Howell are accomplished market educators and their partners are the leaders in trading and investing, including ETrade, CBOE, OIC, NYSE, NASDAQ OMX, CME and ISE* An easy-to-use guide that will help you make the best decisions in any situation, the book is essential for traders at all levels Trading by Numbers outlines a proprietary market scoring system that helps traders determine the best option strategies to execute in any market climate.
Acknowledgments xi Introduction xiii CHAPTER 1 Market Scoring 1 Intuition Can Be High Tuition 2 The Role of Technical Analysis 3 CHAPTER 2 Trend Scoring 9 Trend-Scoring System 10 CHAPTER 3 Volatility Scoring 27 Volatility Overview 28 Volatility Scoring System 34 Know That You Don't Know 42 CHAPTER 4 Protecting Your Position 43 Seven Keys to Risk Management Success 44 Three Legs of Managing Risk 54 Setting Stops 63 Safety in Numbers 66 CHAPTER 5 Covered Calls 67 Getting to Know the Strategy 68 Strategy in Action 70 Strategy Management 71 Strategy Application 76 CHAPTER 6 Long Calls 81 Getting to Know the Strategy 81 Strategy in Action 85 Strategy Management 91 LEAPS 92 Strategy Application 95 CHAPTER 7 Long Puts 101 Getting to Know the Strategy 101 Strategy in Action 102 Strategy Management 104 Speculative Puts 107 Collars 110 Strategy Application 111 CHAPTER 8 Straddles and Strangles 117 Getting to Know the Strategy 118 Strategy in Action-Straddle 119 Strategy Management 122 Strategy in Action-Strangle 124 Strategy Application 125 CHAPTER 9 Debit Spreads 131 Getting to Know the Strategy 132 Strategy in Action 135 Strategy Management 136 Strategy Application 141 CHAPTER 10 Cash-Secured Puts 145 Getting to Know the Strategy 145 Strategy in Action 147 Strategy Management 149 Strategy Application 153 CHAPTER 11 Credit Spreads 159 Getting to Know the Strategy 160 Strategy in Action 160 Strategy Management 162 Strategy Application 168 CHAPTER 12 Horizontal Spreads 171 Getting to Know the Strategy 173 Strategy in Action 175 Strategy Management 176 Strategy Application 179 CHAPTER 13 Diagonal Spreads 183 Getting to Know the Strategy 184 Strategy in Action 190 Strategy Management 191 Strategy Application 193 CHAPTER 14 Index Options 197 Getting to Know the Strategy 198 Strategy in Action 204 Strategy Execution 204 CHAPTER 15 Butterfly Spreads 207 Getting to Know the Strategy 208 Strategy in Action 210 Strategy Management 212 Strategy Application 213 CHAPTER 16 Iron Condors 217 Getting to Know the Strategy 218 Strategy in Action 218 Strategy Management 221 Strategy Application 223 APPENDIX Strategy Profit and Loss Diagrams 227 About the Authors 231 Index 233
