Options Trading: Trade the Haystack NOT the Needle

Tom Gentile

Posted in
Education

By: Tom Gentile
January 24th, 2023

3 mins read

I teach what I do and the process I follow in options trading is three-fold.  1) Spot the Opportunity. 2) Crete an acceptable risk options trade and then 3) Manage that trade for profit or loss.

This educational piece is going to discuss a concept in accomplishing number 1 – spotting an opportunity.

The opportunity is the stock or the ETF I want to then execute an options trade on.

There are tons of optionable securities to choose from.  How does one even choose which one to consider trading options on?  Start with the Overall market indexes, Dow Jones Industrial Average, NASDAQ and S&P 500 and then look further into the sectors of the markets, like Technology, Healthcare, Energy etc.

Sector Search

One website I like to use is www.sectorspdr.com. Check out that website and you will se a means to track which of the 11 S&P 500 Sector ETF’s knowing if they are trading higher or lower over multiple time frames.

Figure 1: Top part of www.sectorspdr.com website
Figure 1: Top part of www.sectorspdr.com website

On this page find the Select Sector SPDR Tools:

Figure 2: Select Sector SPDR Tools
Figure 2: Select Sector SPDR Tools

Click on that button and it will allow you to search up sector performance of the 11 ETF’s and see which ones are performing the best from best at the top to worst at the bottom.

Select the time frame you want, and it will adjust the list ranking.

To the right of this search tool is the list of the stocks in that sector ETF.

Click on a symbol from the list of ETF’s to bring up the list of stock for each on that right side of the site.

One can also type in a symbol in the search window at the top of the page, click Go and a page will populate for that specific ETF.

Picking the Stock?  How about Picking the ETF?

When you are looking over the list of stocks and trying to decide if you know the company or want to click on each to find out more about them why not make that tedious process less burdensome?

You see, each ETF is a basket of all the stocks chosen to represent that sector of the market.

It can seem like you are trying to find the needle in the haystack that you deem will be the best opportunity out of all those listed.

Again, that can be burdensome and time consuming.

Why not just consider trading the ETF itself?  Or consider trading options on the ETF?

The ETF is the ‘HAYSTACK’.  Most of these, if not all the Sector SODR ETF’s are optionable.
Consider researching with this site which ETF’s are showing the best performance over the time frame you want and then, instead of trying to find that one stock (needle) in that ETF (Haystack), consider the appropriate options strategy on the ETF / haystack itself.

App: Toms Option Tools

Toms Option Tools scan the markets for bullish and bearish trade opportunities using our proprietary scans and strategy algorithms. TTR Darknet finds bullish entries based on triple stack channel collisions. Money Calendar identifies seasonal patterns with at least 90% accuracy looking back 10 years. Weekly Cash Clock finds short term opportunities that last a week on average. Microcurrency Trader applies Darknet technology and moving averages to cryptocurrencies. Velocity Trader utilizes volume spike and Velocity indicators on custom stock lists. Quantum Scripts scans the markets for momentum acceleration signals and employs Quantum noise filters. Optimal Trader finds directional pre-earnings opportunities that are optimized for entry date, stock movement, and volatility surge. My Trades tracks the profit/loss of your trades, displays stock charts and risk graphs, creates new trades, and edits existing trades. Morning Report provides top 10 option rankings in 6 categories each day.


Disclaimers

Stock and options trading has large potential rewards, but also large potential risk.

You must be aware of the risks and be willing to accept them in order to invest in the stock and options market. Do not trade with money you cannot afford to lose.

This is neither an offer to buy/sell/ or recommend a particular stock or option.

Hypothetical or simulated performance results have certain inherent limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been actually executed, the results may have under or overcompensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with hindsight.

No representation is being made that any account will or is likely to achieve profits or losses similar to those shown.

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