Asked a while back how I get into a SPY options position, I replied just how I did it.
Step 1: Check your personal situation… are you well rested, free of medications and 100% in the space?
Step 2: Check the news… news moves markets. Knowing what is relevant and how it affects pricing is important, both past and upcoming events.
Step 3: Check technicals… support and resistance, trends on various time frames and chart patterns all affect pricing.
Step 4: Check volatility… to determine what you will buy and what profit or loss you would accept.
Step 5: Trade with resolve… confidence and success go hand in hand, building on each other. Trade with conviction.
Step 6: Keep emotions in check and remain vigilante of your money to brains ratio.
Funny thing about SPY options, most traders do not understand them, thinking there is some kind of magic behind the numbers. Nothing could be further from the truth. When you grasp the concepts that determine the pricing and master your emotions, it is uncanny just how lucrative this business can be. I love watching the evolution of our clients as they become proficient in this endeavor.
If there is one other factor to note, it is to recognize that becoming a great trader takes time and excellent coaching. Best not to downplay the importance of finding the right mentor. They can make or break your trading career. We can show you how to find the ‘right fit’.
Head Trader Hugh Grossman at DayTradeSPY.com