Trading Weekly Options using Ichimoku Cloud

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Andrew Keene - Floor Trader @ CBOE 10+ Years Market Maker in Over 125 Stocks Active Trader in Futures, FX, Stocks & Commodities Regular Contributor to CNBC, Bloomberg, CBOE & BNN

Weekly Options This is the BEST time ever to trade Options: Markets are Tighter, Penny Wide, and More Liquid that Ever There are 8700 stocks and 4200 stocks with options. Of the 4200 stocks with options, there are over 320 stocks with listed weekly options CBOE lists weekly option on indices, stocks and ETF’s CBOE publishes a list of all assets with weekly options Gives traders 52 expirations to trade instead of 12 Weekly index options accounted for 11% of all index options volume in 2011 and this number has only grown over time.

Weekly Options CBOE has tracked the increase in weekly option volume since they have been launched.

Weekly Options Why should a trader want to trade weekly options? Stocks are boring, they move 1-3% on a BIG move and traders have to outlay huge amounts of capital to own stocks. Due to inherent leverage, options can take returns and magnify them. Small moves in the underlying stock can lead to HUGE returns using weekly options.

Weekly Options Why should a trader want to trade weekly options? Pinpoint a Catalyst: Whether a trader wants to trade AAPL or GOOG for Earnings or GLD and TLT for the Fed Announcements, Weekly Options represent the best opportunity to trade the catalyst and then not hold a position after that catalyst. Decline less in value from resulting implied volatility drop post-news than standard options Because there isn’t much time in the contracts life delta can explode as options move even the slightest bit in the money.

Weekly Options The Best Stocks to Trade Weekly Options: The best stocks to trade are stocks with a catalyst: Weekly Options for a stock that has Earnings: We always use weeklys to trade earnings announcements. Using weeklys givers us the best exposure to the event Economic Data Releases: The SPY, GLD, and TLT for Event Driven Events such as Economic Data, Fed Meeting. Do NOT trade Options where the ATM straddle on Monday is less than $.75, this is a commission killer and hard to beat the ‘juice”

FB 5 Min Bar

Components of the Cloud The Tenkan-sen Line: Short Term Trend: Similar to 10 Period MA = (highest high + lowest low)/2 over the last 9 periods tenken-sen line

Components of the Cloud The Kinjun-sen Line: Longer Term Trend: Similar to 30 DMA = (highest high + lowest low)/2 over the past 26 periods Kinjun-sen line

Components of the Cloud Senkou Span A: Future Short Term Trend = (tenkan-sen + kinjun-sen)/2 plotted 26 bars in the future Senkou Span A

Components of the Cloud Senkou Span B: Future Long Term Trend: Fib 50% Retracement = (highest high + lowest low)/2 over the past 52 bars plotted 26 bars in the future Senkou Span B

Components of the Cloud Kumo “the cloud”: How Hard or Easy it is to Break the Trend Kumo

Components of the Cloud Chinkou Span Line: How does the Today’s Price compare to last Month = current bar’s closing price plotted 26 bars back Chinkou Span Line

This is the second bar of the day, FB breaks the cloud to the upside

ATR Implied Move Targets Hit Cloud Breakout

Trading Weekly Options With the Ichimoku Cloud My Trade: ENTRY to Open and filled: I bought 40 FB weekly 62 Calls for $.41: Targets: $.55 and up every $.15 I sold 10 of FB Weekly 62 Calls for $0.55 I sold 10 FB weekly 62 Calls for $0.70 I sold 10 FB weekly 62 Calls for $0.85 I sold 10 FB Weekly 62 Calls for $1.00 Look how the stock moved…

Trading Weekly Options With the Ichimoku Cloud How Do I Pick Targets? FB Statistics for YTD on May 2nd Trading Days 83 Up Days 36 43.37% Down Days 46 55.42% Average Range 2.20 Standard Deviation 5.17

Trading Weekly Options With the Ichimoku Cloud Summary: Weekly options offer a trader more expirations than standard options Generally these options trade at a lower price than standard options These options expire on Friday, listed the Thursday before. Weekly options can experience fast, violent moves in delta Can use the as a vehicle for trading during the day in stocks like FB, TWTR, AAPL, and TSLA

SPECIAL TOPIC COURSE June 3rd : Trading Weekly Options Using the Ichimoku Cloud Iron Condors (30-40% Returns if Stock Stays a Wide Range) Iron Butterflies: Make Money if Stock Doesn’t Move at all or only a little bit (200- 400% Returns) Butterflies Using Measured Move Target to get 500% Returns in Days Calls on the 5 Minute Bar: AAPL, FB, TSLA, TWTR (Double Money in Hours) 312-261-5581 http://keeneonthemarket.com/wichimoku $97