Suggested Options Trading Rules

Rules for buying PUTS

1. Down trending stocks in down trending industry groups
2. stocks that are just starting to break through support or are consistently trading below their 30-day MA
3. A declining MACD just as the stock reaches resistance and begins to drop
4. Weak Volume on rallies and increasing volume on down days
5. Stocks with poor Phase 2 scare

Steps for buying PUTS

1. Make sure the stock and industry are trending down
2. give yourself enough time to let the stock move lower
3. Pick a strike price that fits your risk tolerance
4. Plan an exit from a profitable trade
5. Plan an exit from a losing trade
6. Enter the trade
7. Monitor the Position
1. Watch the trade on a daily basis
2. look for signs of a bull market in the broader market
3. Watch for a change of trend in the stock or industry

Steps for buying CALLS

1. Define your market posture: decide if you're bullish or bearish
2. Pick a stock to play, use searches
3. Check the Chart, make sure the stock and industry are trending higher
4. Give yourself enough time before expiration
5. Pick a Strike Price
6. Plan your exit from a profitable trade
7. Plan your exit from a losing trade
8. Enter the trade
9. Monitor the Position
1. Check your position daily
2. Look for changes in trend
3. Watch for weakness in overall market
   

Steps for selling a Covered Call

1. Identify Optionable Stocks in Your Portfolio
2. What is the forecast? Analyze the stock for the short term before selling a covered call
3. Check the options Quote, Determine if the trade is viable by checking the prices of the options
4. Run the Numbers, use the covered call calculator
5. Sell the call
6. Monitor the Position, Watch the trade daily for changes in trend or market sentiment
7. Close Out the Trade, Exit the covered call trade in one of three ways, depending on your profitability in the position