Safe trading strategy

This Safe Trading Strategy Will Give You Consistent Monthly Dividends.

My stock market research and recommendations focus on the area of dividend paying stocks, looking for those stock market investments that can provide attractive and steady yields during this extended period when fixed income investments like CDs and government bonds are paying very tiny yields. However, there may be times or you have set aside some investment cash with which you want to generate returns greater than the 5%, 6% or 8% you can get from quality, high-yield stocks.

Many of the methods you can find to provide “safe” double digit returns involve complicated strategies – such as dividend capture and/or covered calls – that require you to keep a close eye on your brokerage account and take unnecessary risks to the downside to earn a few more percentage points on the upside.

To avoid these complications and risks, I have developed a strategy that works counter to what the large crowd of dividend capture and covered call traders are trying to accomplish. I label the strategies as “low drag” from my years as a USAF fighter pilot. When flying, if you focus on performing maneuvers to minimize the drag factor, you save on energy, fuel and effort. The “low drag” strategy covered here will produce better returns with less time, effort and assumed risk on your part.

The Counter-Trend Dividend Swings Effect.

For a number of stocks that have high yields and steady dividend payments, a trend develops that can be profitably traded without ever collecting a dividend. This counter-trend exists because of all of the dividend capture and covered call traders moving in and out of these stocks at the same time. The result is a self-defeating trading pattern for these traders and one you can profitably trade by going against the crowd .

When a stock goes ex-dividend, the share price drops by the amount of the dividend to be paid. After the ex-dividend date this type of stock will often fall further as the dividend capture guys sell off their shares. The share price will climb over the next several months and peak sometime between the next dividend announcement and the following ex-dividend date. This simple, but profitable, strategy involves watching for a low share price post ex-dividend to buy and selling at the peak prior to the next ex-dividend date.

As an example, Ares Capital Corporation (Nasdaq: ARCC) a business development company (BDC), pays a steady quarterly dividend producing an 8.8% yield. In four out of the last five quarters, the ARCC share price has followed the low-to-high swing pattern between ex-dividend dates with share value changes of 6.4% to 10.4% with and average swing of 7.8%. For the one quarter that did not swing, BDCs as a group where hit with negative market news and most dropped in value. ARCC still gained 0.6% from post ex-dividend to just before the next ex-dividend date. If you catch 75% of the swing each quarter you generate an average return each quarter of 6%, for a 20%+ annual return compared to the 8.8% dividend yield.

The ex-dividends swing trade can also work for more growth-focused dividend paying stocks. One that has shown a nice swing between dividends is Royal Dutch Shell plc (NYSE: RDS. B) , an American Depository Receipt (ADR) of a foreign company trading on the NYSE. Since announcing its 2013 first quarter dividend on May 2, 2013 the RDS. B share price has gained 26%, closely matching the S&P 500, and shareholders earned an additional 4% in dividends for a 30% total return over 13 1/2 months. In contrast, the five ex-dividend to ex-dividend swings from May 2, 2013 through June 19, 2014 (currently holding shares for the August ex-dividend) have produced a 59% total share price gain, double the buy-and-hold strategy for RDS. B. Of course, you probably cannot perfectly time the buy and sell dates, but it is very possible to add a significant number of percentage points to the buy-and-hold return.

Running the Strategy.

Here are the steps to run the counter dividend swing strategy like I use in my 30 Day Dividends service.

Look at price charts of high yield stocks for a pattern of share price drop and then rise between ex-dividend dates. Usually, the pattern pops out at you when a stock shows this pattern. Here is the chart for ARCC as an example: Buy shares after the ex-dividend date when the share price has fallen from the day before ex-dividend by more than the dividend announcement. The low price usually occurs within 2 weeks of the stock going ex-dividend. Picking your entry point after the ex-dividend date is most of the “art” behind this trade strategy. Set a target sell price based on recent quarterly price swings. For example, with ARCC the target gain would be 6% above the entry price. Sell when the target price is reached or no later than the day before the stock next goes ex-dividend.

This strategy can be used to accumulate shares of your favorite high-yield stocks. Add to your positions when the share price drops by more than the dividend amount post ex-dividend. If the desired share price swing does not occur during the two to three months between ex-dates you can choose to hold the shares, collect the dividend, and wait for a price gain prior to the next ex-dividend date. In this case it may take six months to hit your target gain, but you will earn a nice dividend as payment for waiting. You should have a list of several stocks that you watch for the dividend swing pattern. If for some reason the expected share price drop does not occur, do not force the trade. Use this strategy to boost returns in your IRA, where short term capital gains taxes are not an issue .

For the income investor this strategy can put some extra gains into your portfolio using a small portion of your capital. You may start to see the price swing trends from your longer term holdings and trade a smaller number of shares of the same stocks to take advantage of the swings.

This is one of several strategies I use in my new 30 Day Dividends service. The newsletter is new, but I’ve been using these strategies for years to “juice” my returns from dividend investments. If you want more stocks and strategies like these I invite you to check out my service here: the July issue is coming out in about a week and we’ve got more exciting dividend trade set-ups coming. Click here for more.

Swing Trading Options!

Swing Trading with Options: the Safest and Most Profitable Method for trading with Options.

Buying and selling options can be the quickest way to get really rich. or to lose a lot of money! Option trading is a thrilling process, and adds spice to your trading portfolio. Many people are scared by the idea, but there is no need for fear, despite the hair-raising stories that float around.

On this site, you will learn about the Swing Trading Options strategy , which is an uncomplicated process that will lead to steady, reliable and protected gains. Here it is:

Swing Trading PLUS Option Trading = Swing Trading Options.

Why Swing Trading?

Swing trades are executed within 2 - 10 days. This short time frame is critical to successful option trading.

Why Option Trading?

Firstly, because of the huge profit potential. Secondly, because of the variety of trading strategies available to an options trader, most of which are MUCH safer than stock trading, and all of which are more profitable than just about any other investment vehicle you could name.

There is no myth and magic; the "Fear Factor" is obliterated; you do not need a PhD in Greek; there are no state secrets here.

Best of all.

All this information is FREE! Having spent several years and too many dollars on newsletters, advisories, books and glamorous looking sites, I found that I could have found most of this information for free anyway - it just took lots of scratching around. I have tried to bring some of this great material together in one place. I recommend one or two outstanding books, and a couple of truly excellent training course, for those who want to dig deeper.

Here you will learn how to:

Match stock trading strategies to an appropriate option trading strategy ; Use a one-step trend analysis strategy applied to selling options (e. g. credit spreads and naked puts) and; Use a simple swing trading strategy applied to buying calls and puts and forex .

You will NOT need to have a huge knowledge of myriads of technical indicators, nor will you need to spend hours sifting through fundamentals. Once you have your head around the concept, you can sit and make trading decisions in about 10 minutes for each stock. The wonderful thing that I have learnt about Swing Trading Options is just how many trading strategies open up from the basic concept - which is quite easy to understand.

Some Basic Essentials before going further:

FIRST: Keep it Simple! Complicated systems lead to stressful, emotional trading, which is gambling.

SECOND: Start witha basic, profitable, safe strategy before charging at windmills. Many beginners start too quickly, expecting to make a fortune (I did!). Statistics say that 90% lose their shirt (I was nearly such a statistic!). Call it "school fees" if you like, but education does not need to be so expensive. I have found it better to start with a moderately profitable, simple strategy, and then expand to a variety of methods that require a bit more skill.

FINALLY: There is one key concept that is absolutely critical to being successful at option trading: TIME DECAY . This is the Secret Monster lurking behind every option trade. Learn how to keep this monster working FOR you, not against you.

Good Trading!

Welcome to Swing Trading Options!

Swing trading options is a concept that I hope you will find helpful and useful! I have filled this site with information that will both stimulate you and help you to broaden and spice up your investment strategy.

There is a lot of stuff here, so make yourself a cup of coffee, get comfortable, and enjoy!

NOTE: Part of the proceeds from this website go towards supporting an education programme for underprivileged children in Mongolia.

Top 3 Safe Option Strategies.

The first opinion more investors have of stock options is that of fear and bewilderment. Contrary to belief, what most investors fail to appreciate is that stock options are suitable securities for investors interested in conservative, income-generating schemes. Investors looking for the safest trading strategy to use would certainly need to take options into account.

Options are useful tools for trading and risk management. However, using the right strategy is key to its success. It is imperative to understand what stock options are and how they do operate to get the right strategy. The safest option trading strategy is one that can get you reasonable returns without the potential for a huge loss.

An option offers the owner the right to buy a specified asset on or before a particular date at a particular price. Stock investors have two choices, call and put options. A call options give the holder the right to buy a financial instrument while a put option gives the owner the right to sell.

Options have been used to hedge existing positions, predict the direction of volatility, and initiate play. Furthermore, options do assist in helping investors to establish the specific risk they have taken in a particular position.

The primary idea behind options lies in the strategic use of leverage. Investors ought to be systematic in their choice of strategy. The better options strategy to employ should always be determined by the general market opinion and what the investor’s goals are. The following are some of the best options strategies in the market.

Covered call.

The covered call strategy is also called a buy-write. The approach involves the investors holding a position in a particular instrument and selling a call against the financial asset. The investor’s market opinion should be bullish towards that similar instrument.

This strategy limits the maximum profits that may be made by the investors while the losses remain quite substantial. Volatility affects the outcome since while volatility increases the effects are negative. The reverse condition is also true.

Once the underlying asset moves against what the investor anticipated, the short call can offset a considerable amount of the losses. Often, knowledgeable traders employ this strategy so as to match the net returns with reduced market volatility. This approach is particularly friendly for beginners since it enables its users to limit volatility in a particular position.

Covered calls are viewed widely as a most conservative strategy. Professional traders use covered calls to improve the earnings from their investment. Covered call strategies can offset risk while adding returns. Additionally, investors can use covered calls as means of decreasing their cost basis even when the securities themselves do not pay dividends.

Bull and bear spreads.

Bull call and bear put spreads are commonly known as vertical spreads. This is because the two occur within the same month. Moreover, they both have two different strikes. Contrary to the covered call option, the bull and bear spreads strategies quantifies the investor’s risks more easily.

The bull call spread strategy involves the investor buying a call option on an underlying asset while also selling a call on the same asset at the same time. Additionally, both options have similar expiration months only at a higher strike price. This option should be employed when the employer has a bullish opinion of the market in future. This should mean that the investor hopes the market will go up. The bull call spread strategy limits profits as well as the risks associated with a given asset.

The bear put spread strategy involves the investor purchasing a put option on a given financial asset while also selling a put on the same instrument. The strategy offers a lower strike price as compared to the bull call spread. Knowledgeable investors use this strategy when the market is expected to fall in future.

Here is a good article on what a bear call spread is: Bear Call Spread.

Calendar spreads.

A calendar spread strategy involves the investor establishing a position. This is done by the trader simultaneously getting into a long and short position on the same asset, but with varying delivery months.

The primary idea behind this strategy is that as expiration dates get closer, time decay is evidenced more quickly. The point is once the investor shorts the front-month option, he or she has an evaporating time premium. The time premium evaporates faster than the decay time in the out option. Just as in the call and put spreads, the investor is technically paying for the spread. The more out of time he or she goes, the bigger the payment is.

In calendar spreads, the further out of time the investor goes the more volatility the spread is. In case the investor picks an at the money strike, the underlying asset will have to lie around the strike for this technique to work. If the investor selects an out of the money strike and a high spread, the underlying asset has to go up. Moreover, traders picking an in the money strike hope that the underlying asset will go down.

Editor's Note.

If you're into trading stocks, but are still learning the ropes, we suggest harnessing the expertise of those who've been hugely successful in the business. John Thomas, the voice of Diary of a Mad Hedge Fund Trader, is a trading veteran who offers subscriptions to his trade alerts, cueing subscribers when to buy or sell which stock. This is a great opportunity to learn from the best and profit from it. Learn more here.

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