Your Top 10 Questions This Year Answered by America’s #1 Trader

There are hundreds of get-rich-quick schemes out there that promise to “make you one million dollars in 24 hours” or invite you to unlock a “$26 billion safe box…”

But the secret to a lifetime of wealth isn’t a billionaire’s safe box…

It’s knowledge.

And that’s the reason I started Power Profit Trades last year.

My only goal is to arm you with the knowledge and tools you need to make money quickly and safely.

We’ve been talking about a lot of different techniques you can use this year –  such as trading options on stocks that only require small price movements,  buying LEAPS, and trading around earnings.

But you’ve had some questions along the way – like using Bollinger Bands over Keltner Channels – and it’s important to our goal that your questions get answered.

So that’s what I’m going to do right now.

Here are the answers to your top 10 questions so far this year… the first one will blow your mind.

You’ve Got Questions… I’ve Got Answers

We’re going to do things a little differently today, and I’ve actually got a video for you below where we’ll go through your top 10 questions.

Don’t worry, though… I’ve also listed out your questions and my answers in the same order as the video so that you can always come back to them…

 

10. I’m new to options… what advise do you have for beginners on placing trades?

The most important thing you can do as a new options trader is digest as much information as you can before trading options.

Here are three other tips:

  1. Never use a market order to enter your trade – use a limit order so that you won’t overpay for your trade.
  2. Never chase the market. There are hundreds of stocks out there, so don’t waste your time trying to chase after the “perfect stock” – let the market come to you.
  3. Always put an exit in place.

9. How can a trader capture profit from implied volatility rushing out of the premium without subjecting one’s self to unlimited risk?

A lot of people who’ve ever sold options before understand that there’s risk there. What I suggest is an out-of-the-money (OTM) credit spread. This is when you would, for example, selling OTM puts while also buying an equal number of puts. You may have less reward with this strategy, but you’ll minimize your risk.

8. What service has the chart referenced below?
PPT Chart

Is it earningswhispers.com? I’m interested in being able to search companies using the criteria you mentioned.

This is actually my site – no one else has this. But you can use free sites like earningswhispers.com and Yahoo! Finance to track earnings.  I also suggest checking out the Chicago Board Options Exchange (CBOE) Options Hub at www.cboeoptionshub.com. Then, just enter “earnings” into the search bar.

7. Do you find that Bollinger bands are more useful than Keltner channels? Or are there specific situations in which one approach works better than the other?

Why not use them together? While there are some situations where one may work better than the other,  using both of these makes a powerful combination. Keith Fitzgerald, editor of Total Wealth, loves using these together. You can read more about Bollinger Bands here.

6. Couple questions about trading around stock splits… 1) what strike price do you buy before, during, or after the split? & 2) how for out into the future do you buy?

Well, it depends on your reason for buying before, during, and after the split. If you’re buying an option on a stock that you think will go higher, a split means nothing because the stock will split – and so will your options. Don’t use a stock split as a confirmation of something for which you may already be going in to or out of the market.

5. What is the difference between a reverse stock split and when a company has a policy of buying back its shares? How can you find out whether a stock is about to split?

Now there are some companies out there that will try to anticipate a stock split… but truth be told, that information is private within a company until it’s made public.

As far as the difference between a reverse stock split  and company buying back… both will create a positive increase on the stock price, but reverse stock splits never really make a positive increase on your account size. For instance, if a company does a 1-for-2 stock split, you might only have five shares of stock left  but that are woth double the value. A buyback is when a company is buying stock and taking it back off its own load. That actually makes the stock go higher and if you own that stock, would make the amount you have invested in that company go higher. Reverse stock splits aren’t that great for a company, but buybacks are.

4. If you’re using the margin on your brokerage account to buy option spreads, would the borrowing costs be lower if you use bull-put spreads instead of bull-call spreads?

Not necessarily…. Bull call spreads are not margin trades – they’re debit spreads. You’re paying for the higher premium and taking in from the lower premium. A bull put spread is a margin trade. If you’re using the exact same strikes on a bull call spread and a bull put spread, they will be very close – if not exactly the same- in risk and reward.

3. Is there a service that reports on the candlestick patterns you went over (bullish engulfing, morning star reversal, bullish kicker, dark cloud cover, bearish engulfing, evening star reversal, and bearish kicker patterns)?

I have a way of scanning earnings using my tools  on the entire stock market or even a small stock list., but the Chicago Board Options Exchange (CBOE) Options Hub also has market news surrounding candlestick patterns, so you can go to the website, www.cboeoptionshub.com, to search for news surrounding candlestick patterns.

2. In the stock market, there are analysts that track companies so that investors are not surprised when they report earnings. Which group of analysts do you think are the most reliable (Marketwatch, Bloomberg, etc…)?

I think MarketWatch and Bloomberg are very reliable, as are others. The ones that I don’t care to look at are brokerage firms because I’m concerned that there may be a conflict of interest there. Whatever you use when looking at company earnings and revenue, you’ll want to use more of a media-based analyst and not a brokerage-based analyst.

1. Can you provide any insight for binary option traders? How would we know where the stock might go in the next five minutes, two hours, or whatever short term time frame you want to pick…?

I’ve actually been asked this a lot… I’m not a binary trader because they’re too thinly traded. I also don’t trade pink sheets for the same reason. But for those of you that are short-term traders(myself included), I’ve got a surprise about this coming for you very, very soon. So keep an eye on your inbox…

Here’s Your Trading Lesson Summary: The most important thing you can do as a new options trader is digest as much information as you can before trading options. Here are three other tips for becoming a master options trader:I. Never use a market order to enter your trade – use a limit order so that you won’t overpay for your trade.II. Never chase the market. There are hundreds of stocks out there, so don’t waste your time trying to chase after the “perfect stock” – let the market come to you.

III. Always put an exit in place.

Good Trading,

Tom Gentile

4 Responses to “Your Top 10 Questions This Year Answered by America’s #1 Trader”

  1. Company A waits until the NYSE closes to announce it’s sorry assed 3rd Q results. Only to watch it’s stock get hammered and tank in AFTER HOURS TRADING. What the heck is after hours trading? Is it a real exchange of some type? Or simply orders placed for trade when the market opens — and is that a FUTURES?

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