Good morning, traders…
I’m sure you’ve noticed it.
This market has been whipsawing accounts for two straight weeks.
Big rips on Monday with sharp drops by Friday are the new norm.
Economic data is sparse thanks to the government shutdown, which means we’re trading on headlines and sentiment more than fundamentals right now.
This isn’t the smooth uptrend we enjoyed for months…
This is a textbook “chopfest” — where prices swing back and forth without making meaningful moves higher or lower.
Want to survive this chop? You need to make a few shifts to your approach.
I’ve made four tweaks to my trading strategy over the past two weeks.
And they led to a 46% gain in less than 30 minutes yesterday.*
If You Want To Keep Your Account Secure (While Maximizing Your Opportunities)…
Make These 4 Adjustments Right Now.
Raise Your Trade Standards
When the market gets choppy, I get even more picky with my trades.
This is a conscious decision that comes from experience. I know how easy it is to get chopped up in these conditions. That’s why they call it a choppy market.
I’m waiting for the setups that fit my process perfectly.
Like yesterday, when my OMEN Scanner kept flashing an insane about of calls on Merck & Co Inc. (NYSE: MRK).
I couldn’t resist. The chart looked amazing and the calls were extremely cheap.
I bought the OCT 24 $88 calls at $0.52:
Less than 30 minutes later, I was already scaling out of my second batch for $0.76 — a 46% gain.*
That’s the power of low-priced options. A mere 24-cent move on these options gave me 46% gains.
I’m still holding some with a target of $1.02.
But these setups don’t show up every minute of every day.
If no clear trends are forming and every setup seems to be failing … don’t trade.
Don’t try to manufacture opportunities when they aren’t there.
You have to know what you’re looking for in the options market. Patiently wait for those setups to appear. Trade like a farmer waiting for the ideal harvest.
If a five-star, bread-and-butter setup appears … by all means, make the trade.
But don’t force setups you’re not 100% confident in.
You don’t have to trade every day. You have to live to trade another day.
There’s nothing wrong with sitting on the sidelines until you find the setups you’re looking for.
Go back to the basics. Only trade the patterns that consistently work for you.
Size Down Your Positions
In a chopfest, there’s nothing worse than oversizing your positions.
Smaller positions can offer more wiggle room to make mistakes, especially if you’re trading a small account.
It’s always easier (and more gratifying) to add to a winner than it is to trim a loser.
The most important thing is that you go on to trade another day. Protect your account at all costs.
NEVER risk more than you’re willing to lose.
This is even more critical if you’re trading a small account.
I can’t tell you how many traders I’ve seen blow their entire careers on a few poorly-sized trades.
Don’t be like those guys.
If you’re unsure about position size, lean smaller.
Pick the Right Strike Price (and Expiration Date)
WARNING: Don’t buy strike prices that are way further out of the money than your price target.
Let’s say you’re looking at a setup on Stock XYZ, currently trading for $10.
If you think XYZ could run to $11 in the near term, you should buy $11 calls.
This may sound obvious, but I see students make this mistake all the time.
A less-experienced options trader might buy, say, a $15 call on Stock XYZ, going for a home run.
But this is a mistake. Not only does this increase the implied volatility (IV) of the contracts, but it also tempts you to hold beyond a reasonable target.
Furthermore, the same type of problem can occur when choosing expiration dates.
When the market is choppy, don’t make multi-week swing trades.
After all, who knows what’s gonna happen next week?
You want to offer yourself some margin of error while still sticking to relatively short-term contracts.
Two weeks is a solid amount of time to reap rewards if you’re immediately correct, while also offering wiggle room to exit quickly (if the trade goes south).
Or, you could do what I do: Let the Smart Money choose your contracts for you.
Be Flexible
When the market is a chopfest, embrace your flexibility as an options trader.
Traditional stock traders have two choices — long or short.
But as an options trader, you aren’t limited to these choices.
Your trade possibilities are essentially endless.
You can bet on general volatility or the spread between two contracts, buy puts to hedge long positions, and even sell covered calls or puts on stocks you hold.
Many beginner (and even intermediate) options traders don’t even know these strategies exist.
There’s nothing wrong with sticking to simple calls and puts…
But don’t ignore the huge array of possibilities the options market provides.
For example: You might be ignoring the 1 strategy that works in 80% of market conditions…*
I’m talking about the same approach I used to turn $50 into $1,260 in just 2 months…*
And I’m about to reveal exactly how YOU can weaponize this strategy during my Simpler Options 2-Day Virtual Bootcamp.
If you’ve been wanting to understand how options really work, now is the time…
The market won’t wait for you to figure this out on your own.
The market won’t wait for you to figure this out on your own.
Happy trading,
Ben Sturgill
*Past performance does not indicate future results.
