Jump to section: What is OptionSmart.com? Getting Started with OptionSmart Auto-trading Option Trading Technique

1. What is OptionSmart.com?

   a. Basic OptionSmart Features
   b. Direct Benefits of OptionSmart
   c. OptionSmart Policy
   d. Track Record Accounting
   e. Accessibility, login/password, etc.
   f. Payment Options
   
 


2. Getting Started with OptionSmart

   a. Subscription Packages
   b. Publications and Alerts: How to Use
   
 


3. Auto-trading

   a. Partner Brokerages
   b. How the Auto-trading Works
   c. Auto-trading Settings
   
 


4. Option Trading Technique

   a. Top Four Reasons to Prefer Debit Spreads
   b. Option Spread rolls
   c. Key Option Strategies
   d. Black-Scholes Option Pricing Model
   e. E-book "Worry-Free Option Trading System"
   f. Eighteen Trading Rules
   g. Glossary

What is OptionSmart.com?

a. Basic OptionSmart Features

OptionSmart^SM is a think tank coupled with state-of-the-art technologies to deliver high quality option trading signals. That means: superior returns with little downside risk.

You can use our option picks and expertise in your own decision-making as well as in auto-trading with major brokerages. OptionSmart^SM is leading auto-trade service that allows you to stay away from trading decisions and save your nerves and time.

We focus on short-term trading because market plays these days are mostly short-lived and the market becomes much less predictable in the long run.

Our key trading vehicle - call/put option spreads. These powerful and easily adjustable option strategies - until now, exploited only by professionals - are available for everyone. They give you a very good chance (historically, well above 90%) to capture profit opportunities arising from stock market shifts.

We not only offer trading alerts but also publish in-depth Research Notes with detailed pros and cons, suggested market play descriptions and recommended option trading vehicles. In this way, you tap our expertise for your own decision-making. This research is based on our 3-D Option Trading© methodology that takes into consideration not only technicals and fundamentals, but also the market game being played.
 

b. Direct Benefits of OptionSmart

When advances in technology reduced brokerage commissions, execution time and the minimum required investment, the new option trading technique became available to an audience of innovative retail investors.

Direct advantages in time and money:

1. You don't need to put your entire capital at risk. Use only a small fraction. Keep the rest in risk-free bonds. Option trading gives you exciting leverage along with a possibility to capture profits from underlying stock price movements.
2. You avoid "dead money" situations and the necessity to invest for a long time. We bet on short-term stock price changes that are, naturally, much more predictable. Therefore, you can reduce your market exposure any time you want.
3. You can be involved in real-time trading as little as you like. Auto-trading technology gives you the unique opportunity to put your trading on auto-pilot. You can monitor ongoing trading activity in real time and take back full control at any moment.
4. You make your bets on quite foreseeable short-term trends established by large traders. We recognize these trends and show you how to benefit from this knowledge. The point is that large traders use program trading technology and all their market power to support these trends. It would be naive to ignore this real fact of life and believe that stocks are driven only by technicals and fundamentals.

c. Track Record Accounting

Our Track Records include ALL auto-traded picks with actual entry/exit prices reported by optionsXpress. You can find the links to our Track Records at:
http://www.optionsmart.com/qqq.htm
http: //www.optionsmart.com/sectortrends.htm
and
http://www.optionsmart.com/vhf.htm

The current lists of open positions are available for subscribers at:

d. OptionSmart Policy

OptionSmart Policy and Terms of Use can be found at http://www.optionsmart.com/tou.htm

If you are experiencing a credit card authorization problem, or you find it more convenient and safe to pay by other means than credit card, please let us know at billing@optionsmart.org.

e. Accessibility, login/password, etc.

You can retrieve your user name or password here.
Want to change my email address in your mailing list? Email your old and new addresses to billing@optionsmart.org

f. Payment Options

A: In fact, we have no access to credit card details. There are two options.
1. You can contact our payment collectors - PayPal - on this issue.
2. We recommend to resubscirbe. It is easy. We will refund a prorated amount of your current subscription.
Please do it ASAP to avoid any interruptions in the service.

Getting Started with OptionSmart

a. Subscription Packages

Want to switch to the quarterly/yearly billing? Please subscribe again and notify us. We cancel your current monthly subscription and issue a partial refund. We can't switch you directly because we have no access to your credit card details.
 

Compare Our Services

QQQQ PicksSM QQQQ Enhanced Portfolio SM Virtual Hedge FundSM Underlying Securities QQQQ (NASDAQ-100) tracking stock QQQQ, ETFs and individual stocks individual stocks, QQQQ, ETFs, bonds Featured Option Strategies call/put  spreads single options,  spreads, stocks, covered calls call/put vertical and calendar spreads, single options Portfolio Diversification moderate high very high Avg. Gain per Trade 12% 11% 10-12% Detailed Track Record Holding period 2-4 weeks 3-4 weeks 2-4 weeks Avg. Number of Open Positions 4 4-5 up to 10 Entry/Exit Email Alerts Complimentary E-book "Worry-free Option Trading System" Recurring Billing Available Periodicity 3-4 picks per month and daily Morning Updates 4-6 picks per month and daily Morning Updates 6-8 picks per month and daily Morning Updates Minimal Capital Requirements none none $300,000 Allocation Tips 20% of account value per trade to be emailed to be emailed Trading Capital and Subscription Plans Silver Membership: less than $150,000 Gold Membership: $150,00 - $300,000 Email for special plans for accounts exceeding $300,000 Silver Membership: less than $150,000 Gold Membership: $150,00 - $300,000 Email for special plans  for accounts exceeding $300,000 above $300,000 One Month Subscription Price/ Gold Membership $149.95/ $299.85 $199.95/ $599.95 n/a One Quarter Subscription Price/ Gold Membership $349.95/ $809.95 $499.95/ $1499.95 n/a One Year Subscription Price/ Gold Membership/ Light Version (30% off) $1299.95/ $2999.85/ $999.95 $1499.95/ $4499.95 on performance basis E-mail for details

b. Publications and Alerts: How to Use

The detailed Actionable Insights and Research Notes come with our "QQQQ Enhanced" subscription packages. We publish 1-2 Research Notes every week. We release the Research Notes before the market opens.

You can use these picks in your decision taking or/and rely upon our trading alerts. We monitor the pre-selected picks for better entry/exit points and can send our trading alerts via email at any time depending on market conditions but most likely before 9:00 am EST.

Trading alerts are included in all our subscription packages.

Auto-trading

a. Partner Brokerages

Broker Profile Apply now Auto-trading signup instructions OptionXPress Profile Apply now Open Investrade Profile Apply now Open American Option Services Profile Apply now Open thinkorswim Profile Apply now Open TradeKing Profile Apply now Open eOption Profile Apply now Open Speedtrader Profile Apply now Open Global AutoTrading Profile Apply now Open

b. How the Auto-trading Works

1. Select "OptionSmart" as a service.
2. Your brokerage requests our authorization.
3. We authorize your auto-trading and keep sending trading alerts to you and your brokerage.
4. Your brokerage executes our trading alerts on best-effort basis.

Please login to our site with your personal User ID and Password to review the list of currently open positions. Some of them may remain attractive. Our recommendation is to sync your portfolio and  open attractive positions manually. In fact, we have no access to individual brokerage accounts and can’t do it for you. Please contact us via email for specific recommendations.

c. Auto-trading Settings

Q: When did you start your auto-trading service?

A: We started auto-trading with optionsXpress.com in March 2003.

Q: How can I auto-trade with optionsXpress.com?

A: If you would like to add additional Xecute services for your account you must add them on your account Xecute settings page. To do this first log into your account, click on the Account tab, and then the Xecute (auto-trade) link. Select OptionSmart as a Publisher. Select a Service. Please note you must have an active subscription for each service to be approved for auto-trading. Other partner brokerages offer similar autotrading settings.

Option Trading Technique

a. Top Five Reasons to Prefer Debit Spreads

• You can lower your risk and reduce your capital outlay by paying a small upfront premium instead of purchasing an option or an underlying stock.
• You can manage the risk and reward characteristics by choosing between many strikes and expiration dates.
• You do not need a quick move in the underlying stock with this strategy, as you would with the straight purchase of a call or put option. The reason for this is that you are off-setting the time premium in the option you purchased with the time premium you sold, thereby avoiding a situation in which time decay is a major risk.
• You benefit because falling commission costs make spreads more attractive for small investors.
• No margin requirements ever. We use debit spreads. It automatically provides for "IRA eligible" trades.

EXAMPLE
Bullish Debit Call Spread: You purchase a call position at one strike and then sell a call on the same stock at a higher strike. The difference between the premium paid and the premium received is a debit in your account.

b. Option Spread Rolls

No one can predict the direction of stock prices with 100% likelihood. That's why you need a backup plan to avoid losses. Our option repair technique is called "rolling" an option spread.

Rolling is a great technique to use when you want to hang onto a position you believe in. Rolling a spread refers to the process of closing both legs of an existing spread, and then opening two legs of a new spread using an option of the same type (call or put) at a different, typically more distant, expiration date and/or different strikes.

Let's consider one of our recent trades. On June 19, 2007 we have opened the bearish credit put spread for the TGT (Target Corp) stock, i.e., we purchased 10 Jul07 70 calls and sold 10 Jul07 65 calls. The initial credit was 0.95. We expected to have this bearish spread expire out-the-money. That could give us $950 profit, or a 23.5% return in one month. The breakeven point was 70.95. So, we bet on the event that the price will not go above this mark. Unfortunately, a month later, on July 16th, the stock price jumped on positive corporate news. However, the trend remained bearish and we decided to repair the spread, by rolling.

The first step is to sell the Jul07 70 calls and buy back the Jul07 65 calls. We paid 3.82 for this, or $382 for 10 contracts. The second step was to open a similar spread for August and receive a credit of 2.92 or $282.

This new spread has successfully expired out-the-money and delivered a small 1.9% return in 59 days. Not bad. This is how we avoided substantial losses and saved the position.

You can roll an option spread several times, but if your losses continue to mount, it's time to move on to something else. When the stock moves against you, it's better to accept your losses.

c. Key Option Strategies

BULL SPREAD Call option is bought with a strike price of A and another call option sold with a strike of B, producing a net debit. OR Put option is bought with a strike of A and another put sold with a strike of B, producing a net credit. WHEN TO USE: you think the stock will go up somewhat or at least is a bit more likely to rise than to fall. Good position if you want to be in the stock but are unsure of bullish expectations. This is the most popular bullish strategy. PROFIT: limited, reaching maximum if stock ends at or above the higher strike B at expiration. If call spread used, difference between strikes minus initial debit. If put spread used, net initial credit. LOSS: maximum loss if stock at expiration is at or below A. If call spread used, maximum loss is net initial debit. If put spread, difference between strikes minus initial credit. RISK: limited. REWARD: limited. TIME DECAY: if stock is midway between A and B, no time effect. At B, profits increase at fastest rate with time. At A, losses increase at maximum rate with time. BEAR SPREAD Put option is bought with a strike price of A and another put option sold with a strike of B, producing a net debit. OR Call option is bought with a strike of A and another call sold with a strike of B, producing a net credit. WHEN TO USE: you think the stock will go down somewhat or at least is a bit more likely to fall than to rise. Good position if you want to be in the stock but are unsure of bearish expectations. This is the most popular bearish strategy. PROFIT: limited, reaching maximum if stock ends at or below the lower strike B at expiration. If put spread used, difference between strikes minus initial debit. If call spread used, net initial credit. LOSS: maximum, if stock at expiration is at or above A. If put spread used, maximum loss is net initial debit. If call spread, difference between strikes minus initial credit. RISK: limited. REWARD: limited. TIME DECAY: if the stock is midway between A and B, no time effect. At A,profits increase at fastest rate with time. At B, losses increase at maximum rate with time.