I was trying different trading rules for the last few trades. The infamous NAL trade came from the Optionetics rules.

These are then are the characteristics we are looking for in a long ATM calendar spread.

1. High near month implied volatility and lower far month implied volatility. (Low cost to buy the spread).
2. Near term low statistical volatility (also called historical volatility) but with higher longer term statistical volatility. (Characteristics of a volatile stock that may have settled down recently)
3. A stock with a recent trading range around the chosen ATM strike. (We want to avoid a trending stock)
4. A stock with a lower price that may be consolidating. (Avoid assignment on the short side).

They obviously make more money from selling trading systems at $2,995 a pop ( plus a few grand for their software ) than they ever could have made trading.

I looked up their rules when I saw that they were having a seminar in my town. I didn’t go.

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This entry was posted on Friday, June 15th, 2007 at 4:58 pm and is filed under Option Trading.