New Book – Swing Trading with Options

It’s not a secret that many enter the options world because they are undercapitalized and want to get rich quickly. No one wants to get rich slowly by averaging 8% a year. The only way to get rich by making 8% a year is if you are already rich.

Options trading can be very challenging. Developing traders are attracted by the leverage options offer, and professionals love the ability to manage risk in a more precise way. Options are not the magic solution to any problem under the sun. They will magnify your trading weaknesses. If you are a lousy, impatient trader, options will help you lose your money quicker. If you know how to pick stocks, size your positions properly, and time your market exposure, options can help you boost your returns significantly.

In this book, you will learn:

  • How to use momentum to find stocks that can go up 30% to 100% in 3 to 6 months. When to enter and when to exit those stocks. Which options strategies to choose to ride those powerful trends and potentially achieve 500% to 2000% returns.
  • Why options can be a superior risk management tool and how to use them to enhance your returns in momentum stocks.
  • How to size your option positions so you don’t blow up your account.
  • How to use weekly options for swing trading. When to use options for swing trades and how much to risk. When to buy them and when to sell them.
  • How to handle the mental side of trading and become consistently profitable.
  • How to manage your overall market exposure and create a plan you can actually follow.

This is an easy-to-read and easy-to-understand guide filled with practical examples, market wisdom, and hundreds of annotated stocks and options charts. There are no complicated and sophisticated options strategies. Everything is as simple as possible. I hope you will enjoy it and find it extremely useful and maybe, even eye-opening.

If you read and liked one of my previous books, you will absolutely enjoy this one. With that in mind, I like to keep expectations reasonable:

If you expect complex multi-leg non-directional options strategies and a magic recipe, this book is not for you. Don’t waste your money. More importantly, don’t waste your time.

But if you want to learn how to consistently pick stocks with great upside or downside potential, how to express your bullishness or bearishness via simple call or put options, what type of options to buy – what duration, what strike, when to buy them and when to sell them, how to manage risk and achieve superior returns, then this practical guidance might be what you have been looking for.

Every time I write a book, I always promise myself that it will be the last one. It takes so much time and effort, but then I realize how much I actually learn while sharing my thoughts and experience in an easy-to-absorb manner.

As always, I benefited tremendously from the whole process of writing this options book – the research, the charting, the thinking, the reviewing of my options trades and journal have been an invaluable experience. I am a better and more profitable market speculator because of it. I am confident it can help your trading process and returns, too.

TABLE OF CONTENTS

What You Can Learn in This Book.

One – The Power of Options – Pros and Cons.

Two – How to Follow Big Trends with Call Options.

Three – Swing Trading with Call Options.

Four – How to Trade Downtrends with Put Options.

Summary

The book is available in digital and paper format.

Momentum Stocks Are Great Leading Indicators

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I pay close attention to the action in momentum stocks. They are called market leaders for a good reason. This is what I tweeted yesterday:

Keep a list of leading momentum stocks and watch how they act. Many of them are likely to get hit just before the market indexes’ selloff accelerates. You can create your own list of momentum stocks by scanning for the top performers on a 6 and 12-month time frames or you can take a shortcut and use established lists like the SL50 from MarketWisdom.com and IBD50 from Investors.com. A list of momentum stocks is a great source of long trading ideas during rising markets, it is a great leading indicator for both rallies and selloffs, and it is a great source of short trading ideas during corrections because most momentum stocks take a hard hit during general market declines.

From a big picture perspective, nothing has changed. All major U.S. stock indexes are still in an uptrend. Dip buyers are likely to step up around $180 for the Nasdaq 100 (QQQ). The sustainability of that potential bounce will largely depend on the price action in individual momentum names, because as I mentioned earlier – they tend to lead on the way up and on the way down.

Is PetIQ Ready for a Monster Short Squeeze?

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Keep an eye on PETQ tomorrow. They make pet medications and are growing at an impressive pace: 98% quarter-over-quarter sales growth and 39% earnings per share growth. PetIQ just absolutely crushed earnings estimates, reporting $0.64 while the market expected 0.38! They also raised their full-year guidance. More importantly, the stock is up 15% after the close and it is trading at new all-time highs near $32. 37% of its tiny 14-million-shares float is short. There’s a decent potential for a short squeeze in the next few days with a target 35-40.

Here are some interesting comments on Twitter that add a fresh perspective to PetIQ’s numbers:

Reaction to News Is More Important Than the News Itself

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Netflix reported a 467% earnings growth a couple weeks ago and it still sold off.

Amazon announced a 999% earnings growth and 39% sales growth. Its numbers were double the average analyst’s estimates and it still sold off.

Shopify just beat the estimates by 170%. They reported earnings per share of 2 cents while analysts expected a loss of 3 cents per share. SHOP gapped down and it is currently trading more than 20% below its all-time highs.

Reaction to earnings is a lot more relevant than the earnings themselves. A triple-digit growth or triple-digit earnings surprise is not essential if the market has already discounted it. What matters more from a practical point of view is the market reaction. If a company reports earnings and its stock gaps up to new 52-week highs and closes near the highs of its daily range, then the market was truly surprised and this stock probably has more upside ahead.

In its struggle to be forward-looking, the market can often act counter-intuitively to many. Short-term tops are often formed when a stock sells off on what appears to be great news on the surface. Short-term bottoms are often created when a stock rallies on bad news.

78 Stocks Doubled Year-to-date

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I ran a MarketSmith screen to see how many stocks priced above $5 and trading at least 100k shares a day, doubled year-to-date. The result: 78.

One can easily assume that most of those stocks probably belong to very profitable companies. I applied an earnings quality filter. It turns out that only 6 out of the 78 stocks are in the top 20% in earnings quality. This should challenge the common-held belief that earnings growth is the driving force behind strong price performance. The market is a lot more nuanced and complicated in a one to twelve months perspective. Expectations for future price gains drive demand and supply in the short-term and nothing impacts those expectations more than recent price action. Price momentum continues to be one of the least understood and most powerful characteristics behind many of the best-performing stocks every single year.