Elections Results are in and the Markets Popped Higher

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I would anticipate everyone knows by now former President Trump is going to be current President Trump once again.

I will not discuss that he won both the popular vote and the electoral vote. I won’t discuss how many ‘battleground states’ he won (all of them). Nor will I discuss why one candidate won or the reason the other candidate lost.

My concern is the impact this decision will have on the markets overall and focus on what I am going to do in my options trading to be profitable with this outcome in place.

The markets overall had a bullish of all bullish reactions to the outcome with the Dow futures alone up $1,300 points or so. That was an increase of around 3.1%.

The NASDAQ 100 futures were up by about 2.2%, and S&P 500 futures rose near or at 2.0%.

Now that the results are in – it’s back to the business of options trading.

Market in Focus: SPDR S&P 500 ETF Trust – SPY

Let me re iterate, my focus is on not overanalyze to death why one candidate won or lost or even try and rationalize the decision.

When it comes to my options trading I need to know three things: 1) what’s my directional bias for the security I want to consider trading options for 2) where do I anticipate it going and 3) by what time (date to I expect it to be able to do so. Once I have those items assessed I look for an option trade.

What my concern is now is we’ve experienced this huge pop in price higher for the SPY, (which is the tracking ETF, if you will, for the S&P 500).

I have to be on the lookout for a fill of the gap lower or a continued move higher or a stall.

I have 5 Styles of Options Trading for All Directions the Markets Can Go

Rather than do more tools teaching I feel it a prudent time to discuss how to prepare to work the Options Trading Process from an overall perspective.

If you have ever seen an informercial or advertisement for almost any stock or options trading company and their lead traders you have heard the phrase, ‘We will show you how to trade and make money whether the market goes up, down or sideways’.

And I am here to tell you that it is possible, you just have to learn how to assess a directional bias and know what ways you can use options to trade and make money should that directional assessment come to fruition. And then effectively manage that or those trades.

Here are the three directions the markets and any security can trade along with that how I would trade with options for each.

Up – Bullish Option Strategies (Long Call, Call Debit Spread, Call Butterfly are a few examples)

Down – Bearish Option Strategies (Long Put, Put Debit Spread, Put Butterfly are a few examples)

Sideways – Neutral Option Strategies (Calendar or Time Spread or a non-directional Butterfly Spread)

I have 5 styles of option trading based on my directional bias for the security and with these 5 styles I then have these option strategies ready to go when I am ready with my assessment.

The 5 Styles Options Trading

Seasonal, Momentum, Volatility, Trend and Statistical

My primary means to trade is based on Seasonal right now. What securities (Stocks or ETF’s) have a consistent habit of trading a specific direction from one start point to and end point.

But with the market pop higher because of the election, I am going to continue to use my Seasonal Analysis, which I use my utility patent pending scanning tool Money Calendar for, but I am monitoring what the markets do from here.

If this market continues higher I will also analyze my Momentum and Trend style of trading.

If the market consolidates I will lean on the Statistical style looking for securities that trade in a range and see if there is a neutral option strategy that provides me anticipated ROI I feel is worthy of trading.

We are still in the earnings season for Q3, though we are more towards the end of this quarter’s earnings reporting period, If there is an opportunity based on Volatility around a company’s earnings reporting date I will consider those.

I like to be prepared so when the situation is determined to employ one or more of these styles I am ready to go.

This is a better process for me then trying to figure out what style to use when it may be too late and the security’s are already making there move.

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