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The Call Calendar Spread Explained

The call calendar spread, sometimes called the bull calendar spread, is an options spread strategy that is most suited to market conditions where you believe the underlying financial instrument is due to rise within the short term, but not by too much.

Over the longer term however, the options trader is bullish on the underlying.

Here’s how the call calendar spread is constructed:

Sell 1 Out-of-the-money (OTM) call option with near term expiration
Buy 1 Out-of-the-money (OTM) call options with longer term expiration

The idea is to reduce your entry price by selling the shorter term options and with the intenion of riding the longer term call options for profit.

For this strategy to work, you don’t want the price action of the underlying to spike upwards before the short term option expires. These days, with weekly options, you can come up with all sorts of interesting combinations of expiration dates to make this work for you.

Your intention is also to take advantage of accelerating time decay on the OTM short options, as expiration approaches.

Expiration months on the call calendar spread can be anything from one month apart to whatever distance into the future you wish you place your bought options. Some people are happy to close both positions for a small profit at expiration of the short options, while others would rather ride the long option into potentially larger profits over time. It all depends on your long term view of where the price of the underlying is expected to be.

Call Calendar Spread Example

In this hypothetical example, we’re looking at trading options on the QQQ in an imaginary situation where we believe that it will continue to rise over the next few months.

So with the QQQ trading at $106 we decide to sell (short) the nearest OTM options at $107 expiring in 20 days, while at the same time, purchasing $107 call options expiring in 50 days. The total cost is $0.69 per spread position and since we’ve taken 10 positions, the total debit is $690 plus commissions.

Now take a look at the image below, where we’ve analyzed the risk graph.

call calendar spread

You’ll notice that if the QQQ doesn’t rise above $108.78 before the near month expiration date, then a profit will be realized if both positions are closed simultaneously. But if the QQQ’s fall below $105.24 we begin to realize a loss, which falls away up until a maximum of the $690 cost of the debit spread. So this is definitely a calendar spread with a bullish outlook.

The maximum profit of $711 is realized if the underlying is sitting at the option strike price of $107 at expiration date.

Things to Look Out For

Before entering a call calendar spread position, make sure you check that there is not too much of a discrepancy between the option implied volatilty of the near term options compared to the longer term ones. If the longer term options are too over-priced, the deal may not be as sweet as you imagine.

Since this position is a debit spread, there will be no margin requirement with your broker. Margin requirements only come with positions where you receive a net credit upon entry.

Experiment With Strike Prices

In the second example below, we have taken a different approach. Instead of using $107 calls, we have chosen to go for $109 call options, which are further out of the money. So now our risk graph looks different – and our risk to reward ratio has also changed.

call calendar spread

This time, our position has only cost us $460 instead of $690, so that is our total risk. Our maximum profit on the other hand, has risen to $849, which is almost double our maximum risk. However, we need to believe more strongly that the price of the QQQ will rise in the near term because, unlike the $107 calendar position, there is no room for a fall in price before we start losing money.

Our upper level breakeven point however, has risen to $111.40.

Consequently, the further out of the money your call options are, the more it approximates a simple long call option position with a later expiration date, except that the entry price is reduced and the upside profit potential is also capped. This sounds like a bull call spread, except that if the price rises too much, too quickly, you begin to see a loss.

The Three Legged Box Options Trade

Whether you only have a few thousand dollars or a large sum to invest, the Three Legged Box Options Spread is one of the best option trading strategies available for retail investors today. You can try all kinds of strategies but according to well known veteran trader David Vallieres, this one is the best. The appealing thing about it is, that it’s execution is easy while it’s results are reliable and consistent.

We would call the three legged box spread a “lifestyle” type trade, meaning that you don’t have to keep watching the market for most of the day. It’s the type of setup which, once entered, only requires monitoring a few times each week in conjunction with setting up an alert with your broker as to when a target price in your underlying instrument has been reached.

It’s not a day trading, nor a high frequency options trading system. Nor is it about scalping, or forex options trading, or binary options. You could almost call it the perfect option strategy.

Some Benefits of the Three Legged Box:

A high profit to loss ratio – you don’t need to get a high percentage of trades correct to make an overall profit.

Flexibility – there are many variations on how you choose to enter the trade.

Longer expiration dates – gives you plenty of time to be right and less account “churning” (turning over your money many times and paying multiple brokerage commissions).

A clearly defined loss – over hundreds of trades, the average loss is about $413 and you don’t need to place stops. Have you ever put on a trade, only to be stopped out just before it goes into profit? Three legged box options eliminate this from happening because a maximum loss is already built in – and it’s time friendly.

Defined profit targets – The average profit, based on one contract for each leg of the trade, is $1,340.

Very easy to open and close trades – no complicated spreads.

No overnight “worries” i.e. big moves or assignment.
Clear entry and exit points.

No adjustments necessary – it just works or it doesn’t.

Relaxed, informed and thoughtful trading. You just scan the markets, looking for a special set of parameters in the underlying and then place the trades.

You can trade single contracts and keep brokerage commissions low

This system is more effective than using iron condors, calendar spreads, butterflies, etc. etc.

Successful option traders know what kind of market they’re in. This is critical. With the above option trading strategies, the ideal time to place these trades is when the VIX (Volatility Index) is at 40 and coming down. At such times you have premium in the market, which provides option selling opportunities. When the VIX is below 20 these are not the most optimum strategies, (even though they’re still very effective).

But with the three legged box spread, it doesn’t matter what kind of market volatility you’re in. It could be high (VIX above 40) or low (VIX below 20) or somewhere in between – and this type of trade works just as well in any.

If you specialize in your trading style, you will make a lot more money than if you’re trying different things. This is because you’ll perfect your technique and know a lot about your strategy. The three legged box is the best one to get to know.

You have to treat this like a business and this means an expectation of a profit. Studying volatility and understanding what kind of market you’re in, or entering, increases your winning percentages of profitability. If you want to be in the top 2 percent of traders then you have to know this.

The three legged box spread has limited risk but unlimited profits to the upside.

What’s a Box Spread?

Before we can talk about a three legged box spread, we first need to understand what a regular Box Spread is. It’s a trade that has 4 option ‘legs’ at two different strike prices which, if purchased for less than the difference of the strike prices, gives you a guaranteed profit.

So let’s break down a box spread into its components, with the added feature of the delta.

box spread options

Looking at the graph above, with the underlying stock currently trading at $67.50, the 55 calls would be in-the-money (ITM) while the puts would be out-of-the-money (OTM). This being the case, we can speculate that the delta on the call options would be about .89 while the puts, being OTM, would have a delta of .11. Adding the two deltas together would give us a combined delta of 1.00.

Now if we were to simultaneously purchase a 55 call and sell a 55 put under these conditions, we would create what is called a “synthetic stock position” which is another way of saying that in terms of price movement in the underlying, the unrealized profit or loss would be the same as if we had actually bought the shares. It would be much cheaper than buying the underlying stock, but would also carry the associated risk of losing more than our initial trade investment amount, in the same way as if we had “gone long” a leveraged futures, spot forex or CFD contract.

If we were to do the same thing on the 75 calls and puts, per the chart below, we would create what is called a “synthetic short stock position”. The effect would be just the same as if we had short-sold the underlying stock covered by the options contracts, instead of using options.

So by creating a regular box spread with just one contract for each leg, we achieve the same thing as if we had purchased 100 of the underlying stock at $55 and short-sold 100 shares of the same stock at $75. One counter-balances the other, but with a $20 price difference in between.

Now here’s the trick – if you can enter the 4 legs of this trade for less than the difference in strike prices including brokerage commissions, then you can forget it until option expiration date when you will make a guaranteed profit – being the net credit.

Unfortunately, it is very difficult for retail traders to put a full box spread trade on and make any money. Floor traders can do it because they don’t pay brokerage commissions and if they can buy it for less than $20 (in this case) they will make a guaranteed profit.

However, there are some retail traders who have “legged into” the box spread and done so in a retail environment, to their advantage. If your expiration dates are far enough away, giving you enough time to get the initial direction right, you can lock in profits.

The Long Three Legged Box Spread

Instead of having 4 option ‘legs’ which creates a box spread, we’re only going to have 3 legs. So taking the example we’ve been looking at above, if we remove the ITM long call option from the equation, we end up with a basic long 3 legged box spread. So we’re going to be:

Buying a 65 call
Selling a 65 put
Buying a 55 put (for protection, as well as for margin reasons)

three legged box spread

The first two above positions have effectively created a synthetic long stock position and the third position covers, or “insures” it to some degree with a protective put.

We would place the above trade if we anticipate the future price action of the underlying to rise by at least 5 percent. So in this case, it would be $67.50 x 1.05 = $70.88 (let’s say $71 to keep it simple). Notice that all the strike prices are below the current market price of $67.50.

The above “long” three legged box gives us a predefined loss on the trade, which means we don’t need any stops. It also satisfies our broker’s margin requirements because we are not over-exposed to risk.

If this stock doesn’t move, the sold $65 put will generate some theta premium for us. We essentially have a bear put credit spread alongside a long ATM call position. Let’s take a look at the profit graph at expiration.

three legged box risk graph

If the stock goes nowhere, we have a maximum loss of $230. If the price action goes against us, our maximum loss will be $520. But if the price action goes in our favor (i.e. it rises) then a 5% move in the underlying will give us a target profit of $1480. If we’re lucky and see a 10% move, we realize a profit of $2960 on just one options contract.

Once in a while, we will “hit the jackpot” when a news event or similar, causes an upwards price spike. Sometimes the market will initially go against us but then will reverse and go in the direction we have anticipated. Using the 3 legged box, we give ourselves plenty of time for it to do so.

The Short Three Legged Box Spread

In this case, if we remove the OTM put options from the original box spread above, we get our short three legged box. We going to:

Sell 70 calls
Buy 80 calls
Buy 70 put

It’s simply the reverse of the Long Three Legged Box spread described above.

short three legged box spread

Looking at the profit graph again, a 5% fall in the underlying will realize a profit of $1480 while a 10% downward move will rewards us with $2960. If the price of the stock goes up instead of our anticipated downward direction, our maximum loss will be $520. If it goes nowhere, we lose a maximum $230.

All the above figures are based on using only single contracts. If you traded 2 contracts per leg, you would double your profit potential as well as your potential loss levels …. and so on.

Three Legged Box Spread – Things to Keep in Mind

Before entering a three legged box spread you have to know the kind of market you’re getting into, especially the historical volatility of the underlying stock or other financial instrument. You’re looking for an underlying stock or commodity future that you believe will MOVE.

You also need to choose a financial instrument that has a liquid options market for this to work. Implied Volatility in the options can provide opportunities for variations in the strike prices you choose.

You should also never use 2x or 3x ETF’s. These are designed for day trading and can hurt you. You should also prefer stocks or ETFs that are trading in the $100 price range. This makes the 5% rule as outlined above much easier to calculate. Historically speaking, stocks in the $100 range are more likely to move the required 5% for this strategy to work effectively.

Typically, we would not hold a 3 legged box till expiration date. We choose options which have 6-9 months until expiration. This gives us plenty of time to be right.

Three Legged Box Spread Variation Example

If we can’t get a favorable P&L graph due to Implied Volatility being unfavorable, we can create a slightly skewed three legged box which converts the risk graph into something more appealing. In the end, you want to see a favorable profit & loss at expiration graph.

So experiment with strike prices and analyze.

Here’s another example of a three legged box taken on the DIA (“Diamonds”) ETF (which is based on the DOW Index). Notice the initial strike prices which are around the DIA when it’s trading at $170.50

But due to the implied volatility in the options, we might choose to buy a 165 put instead of the 170.

Here are some examples of stocks and ETFs that trade on the US markets that work well with the 3 legged box spread:

DIA
GLD
AAPL
SPY
IWM
QQQ
EEM
XAU
TLT

Near Riskless Trading Strategies

Have you ever wondered whether it’s possible to enjoy trading setups in the financial markets, that are not only highly profitable, but virtually “risk free”?

I’ve recently been reviewing a series of training videos by a well known trading veteran, where he explains to his viewers, exactly how to do that – in 3 different ways.

He calls it “Near Riskless Trading” – or NRT for short.

These excellent training videos reveal the specific strategies and market conditions under which you implement them. All the assets on the site are fully downloadable.

Discover the NRT Strategies Here

How Near Riskless Trading Works

The strategies involved, create a unique arbitrage opportunity that makes a profit, no matter which way the underlying instruments move after you’ve placed the trade. The hedged positions protect you from losses, don’t require you to have “stops” in place and don’t involve constant monitoring. You can hold them over the weekends without worrying what might happen on Monday.

I don’t believe this particular strategy is, at time of writing, being taught anywhere else.

To appreciate the true value of these strategies, you will first need some undersanding of how the “option greeks” and especially, the delta, affect the pricing of options.

For this reason, the “Near Riskless Trading” strategies are part of a larger concept, known as “High Level Options Mentoring” (HLOM).

At time of writing, there are 48 videos available, covering two separate mentoring groups. There are approximately 22 videos per group, as some groups are combined. They are a little ‘long winded’ because they are recordings of live training sessions, but if you want the short version, you can also download and print the PDF ‘written’ version and read details of the three NRT strategies there.

Then you might want to head over to the recorded ‘live’ sessions and listen to the discussion and watch the actual setups on your TV or computer screen. The trainer uses the ThinkorSwim (TOS) platform to describe the setups. More than that in fact – you also receive downloadable ‘templates’ which you can import into the TOS trading platform. These give you the signals that you’ll need to enter and exit positions.

You can also ask questions about any content that you see in any of the mentoring videos, or any other training material on the site for that matter – in the “comments” box and receive answers.

One thing that occurred to me while watching the Near Riskless Trading videos, was that, even though the focus of these strategies is based on US markets, some of the strategies could be adopted to option trading in countries outside the USA, where other trading instruments such as “contracts for difference” are available.

The only thing that you will need to be sure of, is that your options broker, or software, can provide you with the “delta” in the option chains.

Trade With Other Peoples’ Money

Once you understand the Near Riskless Trading strategies, you’ll also find another series of training videos on the membership site, which teach you how to use your knowledge to trade with between $30,000 up to $250,000 of “crowd funded” money.

These firms don’t require any entry costs, but they do expect you to “pass their test” before giving you real money to trade with. When I say “test”, this doesn’t mean anything academic – they just want to see how you perform with “paper trading” first.

Discover the NRT Strategies Here

Here’s a summary of what you get with the High Level Options Mentoring and NRT strategies:

Downloadable files, spreadsheets and TOS templates relevant to the system.
48 Downloadable recorded private mentoring sessions.
“Trading Room” recorded sessions.
Technical Analysis for charts, training.
Opportunity to join any future “live” mentoring sessions.
Information on how to use these strategies successfully with crowd funded money.

Is Binary Options a Scam? Read This and Decide

Is binary options a scam or not? That is the question. Now for the answer. What I’m about to tell you is my honest assessment of the value of binary options trading. But first, for those who don’t know, let’s define exactly what binary options are. Once we’ve done that, we will then assess their worth in comparison with traditional options trading (sometimes called “vanilla options”). We will do this based on a “return on risk” principle.

Finally, we’ll draw some conclusions based on our observations and in the light of other ways of risking capital for a return.

What are Binary Options?

Binary options have three main elements:-

1. You need to predict a future outcome to be realized within a specified time period – anywhere from 1 minute up to more than a week away.

2. During the period before expiration, no adjustments can be made, nor can the options be sold early for a profit or stop loss. Profits or losses can only be realized at the time of expiration. They are also absolute and final.

3. If the outcome is realized, you receive a profit on what you risked – usually about 70 percent. If the outcome is NOT realized, you lose most of, if not all, your invested capital on that trade.

In summary, the reason why they are called “Binary Options” is because the results can only be a win or a lose. This is final and absolute. There is nothing in between. Hence the term “binary” (meaning “twofold”).

Binary options can be traded over a range of commodities, indices and currencies. Currency pairs (forex) seems to be the most popular, as they trade 24 hours, 5 days per week and are very liquid.

Is Binary Options a Scam?

The answer to this question is really one of perception. If you’re one of those people who can consistently pick winning outcomes and can do with for an overall profit, or have a proven binary options trading system that does this, then I’m sure you will be waving the flag for binaries.

But let’s run a few numbers. We’ll assume a generous profit of 75 percent for wins and 100 percent loss for losing trades.We’ll also start with $1,000 capital and each trade will risk $100.

On a given day, you place 5 trades on anticipated outcomes for currency pairs within a 5 minute expiration period. Your first 3 trades are losing ones – you’re now down to $700 capital. Then your next 2 trades win and at 75% profit, you make $75 on each. So you’re down $300 to begin with, then up $150 – an overall loss of $150.

Let’s say that you’re better at picking winners and you win 3 and lose 2 trades. You’ll be up by $225 ($75 x 3) to begin with and you’ll be very happy at your new account balance of $1225. Then you’ll lose the last 2 trades and be down $200. So your ending balance for the day is $1025 – a profit of just $25, for risking a total $500, in 5 x $100 trades.

If you’re really good and win 3 out of 4 trades (or 75% win rate), you’ll make $225 on the wins and lose $100 … a net result of $125 profit.

How confident are you, that you can achieve an 75 percent success rate, bearing in mind that you can’t close out a position if it temporarily goes into profit – you have to wait until expiration for the result?

The service offered after clicking the image below, offers Binary Signals via text message and boasts 72.5% accuracy. Combine this with the above strategy and enjoy the profits.

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Looking at it Another Way

You could say that trading binary options where the profit is 70 percent and the loss 100 percent, is like betting on the favorite in a horse race, where the win dividend is $1.70. The only difference is, that in this “race” there are only two horses – one is called “Up” and the other “Down”.

If one horse in this “two horse race” was far superior to the other, then you would feel confident of a win. That would be like saying that the odds of the currency pair being above where it presently is, in five minutes time, is very high.

Is Binary Options a Scam if you Have a System?

So here’s the thing – at 70 percent profit, can you devise a trading system whereby one winning trade will “pay” for all previous losing trades and then some?

You could employ a trading strategy whereby, after each loss, you increased your bet by an amount where the winning bet would “pay” for all previous losses and then some. But at only 70 percent profit, you would need to increase your “bet” by a minimum 2.35 times the previous one in order to win overall.

So now you need to decide what your first trade amount would be. For example, after 3 losing trades on a starting bet of $20, your 4th trade would be $261. But if you had started with $100 then you’d be risking $1300 on your fourth trade.

I suspect you’d be feeling a little jittery by then! If you started with only $2,500 trading capital and you lose this one, then your next trade will need to be more than your entire starting bank. If you’d started with $50,000 then you might not be so concerned … yet.

If you’re only starting off with $20 for your first trade, you then have to ask yourself whether the investment of time and patience, waiting for the right trade setup and realizing profits at 70 percent, is worth it to you.

Conclusion

So is binary options a scam or not? Looking at the above numbers, my conclusion is that, considering the absolute and inflexible nature of binary options in comparison to traditional options, it would not be a preferred trading instrument for me. There are so many more opportunities with traditional options.

Even if I was going to implement a money management system as described above, then I would be looking for a much higher dividend payout than $1.70 for a win. I would be better off picking the eventual winning horse in races only paying above $5.00 for a win, or a minimum $2.00 for a place and doubling my bet each time until it pays.

At least then, my chances of profiting without wiping out my entire capital would give me more losing opportunities before the winning trade saved the day. But then I’d have to be good at picking winning horses.

is binary options a scam

Gold ETF Investing – 10 Facts You Should Know

Gold ETF investing has come back into focus for many investors this year thanks to the soaring price of gold bullion in 2016. Gold is actually up about 20% so far this year which easily trounces broad markets in the time frame, while there has been quite a bit less volatility too.

This is in stark contrast to how the yellow metal had been performing for much of the past few years, as gold was mired in a serious bear market, pushing the commodity far lower than the S&P 500 over the trailing five-year time frame.

But with questions about future interest rate hikes and inflation hitting the market now, gold is definitely making a resurgence, putting gold ETFs into the spotlight once more. However, gold ETFs remain widely misunderstood by many investors out there and there are still several myths and misconceptions about investing in this space.

So for investors thinking about buying into this soaring market, it is important to know the following 10 facts about the gold ETF and gold mining ETF world in order to make sure you get the right type of exposure, and understand some of the most important details about investing in this market:

GLD Isn’t Everything in the Gold ETF Investing World

Most investors who think of gold ETFs go right to the big dog in the space, the SPDR Gold Trust. This ETF has over $35 billion in assets and a great daily trading volume, making it an easy pick for most.

However, there is another great option for investors out there that can get the job done, the iShares Gold Trust (IAU). This product still has a robust volume and an impressive $8 billion in assets, but it is often overlooked despite its cheaper expense ratio, coming in at 25 basis points compared to GLD’s 40bps fee.

But in addition to the expense differential, there is another key factor to note. GLD trades as 1/10 of an ounce of gold while IAU uses a 1/100 scheme. This may not sound like a big deal, but it actually makes GLD have tighter spreads between its bid and ask which can be important for traders.

So, traders and very large investors should probably stick with GLD as their preferred vehicle, but long term investors and those buying in smaller quantities would probably be better served by buying IAU instead. The expense ratio difference will really add up over time, and especially if you aren’t doing a whole lot of trading.

Futures vs. Physical

Most commodity ETFs simply offer investors exposure to futures contracts tracking the commodity. But because precious metals have a relatively high ‘value-to-size’ ratio and are easy to store, investors have the option of either buying physically-backed ETFs like GLD or IAU, or purchasing futures-based funds like DGL and UBG.

Futures-backed funds can be more expensive and they also may suffer from futures curve issues (such as contango), though this can also become an asset (backwardation) in certain market environments too. Over the past year though, DGL has underperformed GLD and to me it probably isn’t worth it given the physical exposure options and the lower holding costs. Better to get the real thing in this case, and especially since most commodities don’t offer up the option at all.

gold etf investing

The only saving grace is the issue of taxes. DGL may have a lower short-term capital gains tax rate than gold ETFs that hold the commodity thanks to their structure as a ‘commodities pool’. However, this may result in a K-1 at tax time, so there are some potential headaches with that approach too. For me, it seems like physically-backed is so rare in the commodity world and it gets rid of so many problems, that you might as well go for it in the gold world.

Gold Mining ETF Holdings Secrets

There are also a few ways to invest in gold miners if you do not want the gold bullion products directly. Among the most popular is to convert 401k to gold IRA or even more so are GDX and GDXJ which are both from Van Eck. GDX zeroes in on the gold mining industry and holds companies across a range of market cap levels while GDXJ focuses on small cap securities.

While GDXJ is definitely more volatile, most investors may not know that there are actually some similarities between the two funds. The top holding in GDXJ finds its way into GDX, while all of GDXJ’s top five holdings are in GDX, granted at a much lower allocation level.

So if you are thinking of buying GDX and GDXJ for ‘complete’ gold mining exposure, think again, as you are bound to get some overlap.

Additionally, it is worth noting that silver companies actually make up a decent portion of both ETFs.

In fact, for GDXJ, two of the top five holdings have ‘silver’ in their name (AG and PAAS), while GDX has Silver Wheaton in its top ten holdings too. So both might not be as pure as you are thinking either, something to note if you are getting into the precious metal ETF space.

Another Way to Invest in Gold with ETFs

Two often overlooked ways to invest in gold include products that utilize hedging techniques. In essence, they invest in broad markets, but use gold as a sort-of hedge in order to mitigate risks.

A great example of this approach is GHS from REX. This ETF invests in both the S&P 500 and it takes a long position in gold futures contracts, making the ETF designed to outperform broad indexes when gold is soaring. This technique can also act as a bit of a hedge, since gold and broad markets generally have low correlation levels as well.

gold etf

Gold Exploration ETF: The Final Frontier?

For investors who don’t like the idea of leverage but still want to roll the dice, then the gold exploration ETF market may be for you. This segment of the ETF world is arguably the most volatile thanks to the companies that it holds.

These companies don’t produce gold, but are on the lookout for gold fields and deposits around the globe which can be recovered at a profitable rate. They are sort of like what the E&P market is for oil, making them highly leveraged to the price of the underlying commodity.

As you might expect, these are top performers in bull markets, but can be sluggish if we enter a bear market scenario once again . However, they are perfect for risk takers who do not want to delve into the leverage market (more on that below).

Leveraged Gold Mining ETFs Are an Insane Long Term Investment

Investor interest in the triple leverage market has been rekindled thanks to some absurd performances for funds in this space. Year-to-date the triple leverage gold ETN UGLD is up over 60%, while mining triple leverage funds have been even crazier, with NUGT adding over 300% in the time frame and JNUG, tracking junior gold miners, soaring by over 425% so far this year.

However, even with these great performances, all have been horrendous when taken from a long term look. All three are lower by at least 40% over the past three years, with the mining funds posting losses nearing 90%.

gold mining etf

So while it might be tempting to buy-and-hold these given how they have done in 2016, the longer term chart suggests extreme volatility and big losses, proving once again that leveraged funds should be short-term trading tools and nothing more.

Some Broad Precious Metal Funds Are Basically Gold ETFs

There are a couple of ETFs out there—DBP and GLTR in particular—which bill themselves as broad precious metal ETFs, but is that really the case? Not really if you look to their underlying holdings, as these both put the majority of their holdings in gold.

GLTR puts nearly 60% of its assets in gold, leaving under 30% for silver, and roughly 11% for the duo of platinum and palladium combined. Meanwhile, DBP is even worse, as this ETF puts over three-fourths of its assets in gold and has the rest in silver.

So, just because something says it is a ‘precious metals ETF’ it doesn’t mean that it isn’t a gold ETF with a slight bit of diversification on top of it.

GLD Holds More Gold than The ECB

The level of investor interest in physically-backed gold ETFs is staggering. GLD owns enough gold to put it into the top ten holders of gold in the world, ahead of countries like the UK or India, and even the European Central Bank too.

And if you add other gold ETFs to the mix, gold holdings easily surpass one thousand tonnes on the ETF front, making exchange-traded funds a force in the gold world.

Gold ETFs Probably Help Boost Prices

Given this massive supply of gold held by ETFs, it probably shouldn’t be too much of a surprise to note that gold ETFs probably help boost prices in the underlying metal . That is because, at least in Q1, according to the World Gold Council, the main change in gold demand was from gold ETFs.

gold etf investing

As you can see in the chart above ETF demand year-over-year was over 300% higher and was the primary difference when compared to 2015 numbers. Jewelry and technology were both lower showing that the bulk of the increase in gold demand was from investing, and specifically from ETFs.

So for at least part of this year’s gains, gold investors can thank ETFs!

Don’t Buy Gold ETFs for the Apocalypse

Some investors complain that gold ETFs aren’t useful because you can’t take physical delivery in the main funds like GLD or IAU (unless you are a massive investor). They say that one of the main reasons for owning gold is protection against an economic calamity and the ability to use gold as a bartering mechanism.

Investors should just think of gold ETFs as trading tools that can offer up exposure to the bullion market in a very liquid way. Without gold ETFs, the buying and selling of gold by the average person would be a laborious task and would involve high premiums and markups too. But with gold ETFs you can easily trade gold back and forth in seconds with minimal costs, so just think of these as easy ways to trade gold, and not part of a doomsday protection plan.

Bottom Line

Gold ETF investing is a bit more complicated than you might think at first glance. But hopefully this list of key facts allowed you to get a better handle on the market, and find more information on the best gold ETF option for your needs in today’s investing world.

How to Profit Like a Pro Trader

In trading, timing is critical. Especially in this connected world where news and information fly at the speed of light… and your competition is a giant, faceless investment bank with a high-frequency trading desk that makes millions of bogus orders in a second.

So there’s little wonder traders feel like they have to set up house in front of their computers to nail the perfect entry or exit point.

This idea, which as you’ll see is another Wall Street scare story, even works to keep people out of the markets. After all, people have lives, careers, families, and much better things to do with their time besides being glued to a computer terminal.

I hate that Wall Street pushes people around like this, so today, I’m going to show you how to trade with total confidence and have all the time you want to enjoy life on your terms.

No – the solution isn’t to buy a smartphone and trade on the go, although you could if you really wanted to.

What I’m going to show you are three simple orders, just a handful of words, that you can use with your broker or trading platform to get perfect entries and exits every time without being chained to your electronics.

Even better, these orders can actually slash your downside and boost your profits, too…

The Way of the World Today

In times past, a trader would actually pick up a phone and call a human being at a brokerage house, who would take an order to buy or sell at such and such a price, and then relay that to another human being sitting (or, more likely, standing) on the floor of a stock exchange, almost always in the same country.

That created a fairly high barrier to entry, but in the decades since, technology – the great leveler – has lowered those barriers and more and more people can trade more easily.

There are so many opportunities to trade today, all over the world, every hour of the day.

That’s why the myth that you have to be connected to the markets 24/7 has been perpetuated. If everyone knew how easy it was to trade, the whales would have much stiffer competition.

I’m going to show you what it takes to be that competition. You can use the order types I’m about to show you to set specific entry and exit points, even sell at the price you want. After all, knowing when and how to get in and out of your trades can mean the difference between a fat stack of cash or a pocketful of lint.

You can step away from your computer and put your smartphone in your pocket and still be secure in the knowledge that you’re going to get exactly what you want, provided the trade goes your way, of course.

It’s really easy. Let’s get started.

No. 1: The Limit Order

A limit order is an order to buy or sell a security at a specific price (limit) or better. In the world of options, you would use this order to limit the price you pay to buy or sell an option – either to open or close an options trade.

Here’s an example…

Say you’re looking at a September $35 call option with a bid price of $3.50 and an ask price of $3.40. You believe the stock is poised to go higher, but your strict money management rules tell you that you can’t spend more than $3.50 per option contract (remember that one contract lets you control 100 shares of the stock).

You already know that a market order leaves you vulnerable to whatever the current price is or what the market maker prices the option for… so you’re stuck with whatever price they fill you at the moment they decide to give it to you. And in a fast-moving market, where prices are constantly running amok, this option premium can easily pop up from $3.50 to $3.70.

Now you may think a mere 20 cents more for a trade isn’t an issue. But it is, and a big one, too. Here’s why I caution against chasing the trade.

Think of chasing an options trade like speeding on the road… You may feel pretty comfortable exceeding the speed limit by, say, five miles per hour. After all, it’s only five mph, right? But you may soon feel compelled to push the speed limit by 10 mph… 15… 20 mph… and, next thing you know, you’re flying down the road, putting everyone’s lives at risk, including your own.

I know this may be a bit dramatic, but the critical thing is to stick to your discipline. The more and more you chase after trades, even if just by pennies, the more you place your money – and your money management rules – at risk.

But if you place a limit order for $3.50 or better instead, you will not spend any more than $3.50 to get your trade filled. What’s “better” is that you can’t spend over $3.50, but you can certainly spend much less. For example, you may get your trade filled at $3.40 or $3.30. In this case, any price lower than $3.50 is better. So you will either pay your specified price of $3.50, or you will pay a “better” price that is anything lower than $3.50.

Let’s look at an example of how a limit order looks on an options order form. Remember that the example I used is simply to show you what a limit order looks like – this is by no means a recommendation. LimitOrder

Here, we’ve got an example of using a limit order to enter or open an options trade, whether it’s a straight call or put or a “loophole trade.”

You can also use the limit order when you are trying to close an options trade.

Let’s say you own that September $35 call at $3.50, and the stock price drove the value of the call option to a bid price of $5.00 and an ask price of $5.20. You can use a limit order to exit your position and lock in your profits at a specific price or better – just as you would use a limit order to open a position.

No. 2: The One-Cancels-Other, or OCO, Order

A one-cancels-other (OCO) order is in fact a pair of orders where, if one order is executed, the other order is automatically canceled. This is a type of limit order that allows you to manage your options trades – whether you’re in front of your computer screen or not. An OCO order allows you to manage your position at any time for the duration of your trade (until expiration) without having to physically be there when the option hits your target or limit price.

Using an automated trading platform, this order allows you to have your account electronically place one order and cancel the other automatically. This type of order is primarily used when you have open positions but you can’t be in front of your computer to manually enter and cancel orders.

We’re going to look at an example of an OCO order on an options order using the AAPL October $110 calls for $5.00. Remember, these examples are to show how each order type looks and are not trade recommendations of any kind…

Now let’s say that you want to double your money on these calls, but you don’t want to risk more than 50% of this trade. This means that you’d want to have a limit order to close and a stop order to preserve your capital.

In this case, you’d want to sell the option to close at $10.00 or close (stop out) the order at $2.50. You would place the two orders simultaneously on one order ticket. If the stock trades at $10.00, the account knows to automatically sell-to-close your position at $10.00. And it will automatically cancel that $2.50 stop order.

It also works the other way in that if the computer automatically sells the position to close at $2.50, it will also cancel the other $10.00 sell-to-close order.

This is an example of what that looks like:

One Cancels the Other

No. 3: The Contingent Order

This is hands down one of my favorites. Here’s why…

A contingent order is where you initiate two or more transactions at the same time (such as buying a stock and selling a call option at the same time). Like everything we’ve discussed here, this type of order allows you to be in two places at one time. So you can tend to all the things in your life and still have some control over your open options positions.

how to profit The basic premise of using a contingent order for your open options position is that you can sell-to-close your options when the stock hits a specific price.

Let’s say that you’ve got an October $40 call option you’ve been sitting on and that the price of the stock when you opened the options trade was $43.50. If you have an options risk graph, you can use it to anticipate the theoretical value of your option if the stock price moved higher. And if you don’t, then you can at least place an order to sell that call option “contingent” upon the stock hitting a higher price.

You would place the order through your automated trading platform as an advanced order type – specifically a contingent order. You would set the contingent order price to be triggered at the last or latest trade so far that day at “greater than or equal to” the price you specified.

When the latest or last trade so far in the day (not the last trade of the day at market’s close) hits the price you specified or higher, the order to sell your position will be executed as a market order – since not even computers know what the price will be ahead of time.

You can place a contingent stop order as well. If you feel that a support price on a stock will get broken and cause the stock to drop big time, you can place a contingent order to sell your position contingent upon the stock’s trading price. It will trigger on the last price at “less than or equal to” the price you specified.

This is what a contingent order looks like on an options order form…

contingent order

Again, this type of “time”-based order entry or exit can be used for anything; I just wanted to show you an example of why you might want to use it for a pending announcement.

How to Plan Your Trade and Trade Your Plan

Over time, you will come to appreciate one type of order over another. A lot of it will be dictated by your personality type, how busy your life is, and whether you have the time you want or need to monitor your positions throughout the trading day.

So you’ll want to find the order types that bring you the best results and hang your hat on them as part of your overall trading process, making them part of your (all-important) plan. This will give you an even higher likelihood of success because you have taken care of the planning aspect of trading.

And I want to say just one last thing…

I love spending time in front of my screen, collecting and analyzing data, and of course trading. But even if you’re like me – in front of your computer watching, in real time, what’s happening in the markets and every price fluctuation – you may want to consider using these auto-executed orders.

Now, it may be challenging to see an option getting close to your stop price without closing it too early, but chasing a trade can cause you to not only lose money, but miss out on future gains.

That’s why having your trading plan in place ahead of time, knowing when to take your money and run, and setting up your automatic trading platform can make your life so much easier – and so much richer.

Earnings Report Definition

So what’s a good earnings report definition and why is it important for options traders? An earnings report is something that is required by corporations law and is the way that publicly listed companies report their earnings to shareholders.

These report typically include an income statement, a balance sheet and statement of cash flows for the quarter, as well as year to date. The notes to the report also include an analysis of company activities and financial condition, along with various risk disclosures and other matters which may affect shareholders’ interests.

Some countries such as the USA, require earnings reports on a quarterly basis, while others may only want it semi-annually. Either way, when an earnings report hits the news, it can often (but not always) trigger a dramatic reaction by the market to that company’s share price.

Most companies in the USA file their earnings reports in January, April, July and October.

When analysts look at earnings reports, they’re most interested in certain financial ratios such as “earnings per share” (EPS) and “price-earnings ratio” – and these help them decide whether to buy, hold or sell the shares in that company. Since analysts tend to work for large fund managers and brokerage firms, their combined decision making can often have an impact on the share price.

Using Earnings Reports for Options Trading

So how can our understanding of an earnings report definition help us to trade options more effectively? Well let’s think about it. We would most likely be interested in an option trading strategy that relies on large and sudden potential moves in the price action of a company stock. Since earnings reports can be the trigger for these, we simply apply the appropriate strategy as we see the report date pending.

One such strategy is called the Options Straddle. This strategy involves the simultaneous buying of the same number of both call and put option contracts, at the same strike price and with the same expiration date. The strategy relies on the underlying share price moving significantly before option expiration date – so much so, that the “winning” position will more than compensate for any loss on the “losing” position and realize an overall profit. I have personally taken straddle trades which have realized 100 percent profit and many, more than 50 percent.

You simply put on the straddle position about three weeks before the earnings report comes out and wait for the market reaction to it. You need to do it before the report, because options implied volatility tends to increase as the earnings date approaches. You can read more about it at our options straddle page.

Another strategy that works well with earnings reports is are Victory Spreads. These are explained in detail on one of the videos in the very popular Trading Pro System.

Daily Profits in Just 4 Hours Each Day

If you’re interested in the excitement and intensity that comes with day-trading futures, then no one has refined that skill better than Todd Mitchell.

His trading strategies focus on consistency with a step-by-step plan for entering and exiting a trade with zero guesswork.

I’m telling you this because, he’s sharing his newest strategy – The 4-Hour Income Strategy

It’s an approach (with an impressively high win-rate) integrating the bond and e-mini futures markets to create a simple, easy-to-follow method for making consistent daily income.

Just wait until you see his results…

It costs nothing to register so if this type of trading appeals to you, then you might just be glad that you did.

This is a day trading strategy that takes advantage of only the most predictable hours of the day. So you’re not stuck sitting in front of your computer all day.

And because it’s day trading, there’s no risk of holding positions overnight.

Register Today for The 4-Hour Income Strategy Webinar

Jamie McIntyre and the 21st Century Academy

In motivational circles, Jamie McIntyre is known as “The 21st Century Educator”. From $150,000 in debt, Jamie McIntyre turned his dream to become a self-made millionaire into reality. Today, he is eager to share his success and does so under the banner of what he likes to call a “21st Century Education”. From a concept that Jamie started, this idea of “21st century education” has now come to the ordinary Australian. It’s about finding a new perspective to life and financial freedom.

He believes this type of information has not been made widely available, keeping the majority of the population constrained to a job and almost like slaves to the banks. Jamie McIntyre is passionate about ensuring the average person becomes financially educated. If you would like to learn how to excel in the 21st Century and create an extraordinary quality of life, including how to make money while you sleep, to free up your time to do other more important things than working for someone else 9 to 5, then read on as it may amaze you to learn just how much success people are having.

Jamie McIntyre – Millionaire Investor and Mentor

From the bottom rung of the financial ladder, Jamie McIntyre made his vision known. All self-made millionaires can describe their direction towards success and this direction is driven by specific goals. So when Jamie told himself that he wanted to be a self-made millionaire one day, he had his goal clearly defined despite the tremendous odds against achieving it. Jamie McIntyre aimed high and reached high.

As a successful entrepreneur Jamie first realized that in order to get to the top, a different approach is required. His focus shifted from the ordinary to the most opportunistic situations. With the different challenges he faced, he learned that changing his mindset would help him climb the hill faster. Self-made millionaires find opportunities in doubts and optimism in hesitations. Jamie McIntyre definitely applied the best financial strategies to reach his goals.

As a student of 21st Century Education, he knew that the shift in mindset is not so easy. While Jamie knew he had the talent and skills to be successful, he also appreciates the saying that “Rome will not be built in a day”. The desire to get ahead and to improve gave him the initiative to learn under the most successful self-made millionaires in the world. Under these leaders, Jamie shaped himself and developed the concept of 21st Century Education.

At his apex of his success, Jamie McIntyre developed a new passion to share what he learned and make a difference in the lives of other people. So when he built his multi-million dollar educational organization, Jamie transferred his success to people who are also hoping to find the right fit of success for them. Jamie continued to travel all around the world and in Australia to conduct seminars and training session on creating the best possible quality of life, reaching one?s potential, financial achievement and financial freedom, and making an a lasting impact.

Having achieved success as an entrepreneur, Jamie McIntyre is now a sought after educator, although in more recent times, some of his programs have become controversial. His seminar content has been reviewed as some of the most relevant material that this century needs. His insistence on dynamic learning transcends what typical college students learn in classrooms. His highly effective program has been recognized as applicable to people of all ages and from any financial circumstances.

Jamie’s own investigations led him to believe that there must be a secret formula, some little known strategies, that make all the difference between the average person working a 40 hour week for their wage that is barely enough to make ends meet, and those elite few who have more money than they could ever need. He was determined to find out what that difference was, and to achieve absolute financial freedom.

Figuring out what the average 95% of the population are doing and doing the opposite is what will set a rich man and a poor man apart. The ordinary and the common create the financial failure for most people. Thus, Jamie suggests that there must be another way.

Within less than 5 years Jamie had succeeded. He became a self made millionaire while still in his twenties! He was then nominated for Young Australian of the Year in 1999 for his financial achievements. He decided this information should be widely available to everyone and co-founded 21st Century Academy. He has now educated more than 165,000 average Australians and New Zealanders, and now people world wide from the United States, UK, Europe, India and Asia. With today’s technology and the way the internet has revolutionised business, anyone can be next no matter where in the world you live.

Jamie explores the idea of people’s professed attitudes to money. Finding how money works for you and your life is just as important as other things that contribute to your well-being and happiness. Those who profess that they are not interested in money are usually the ones who end up working hard for it. If you aspire to a better quality of life, your focus should shift from just working for money to how money should work for you. The right attitude towards money reflects not only your financial success, but also how you want to live your life.

Jamie McIntyre believes that much of the valuable information and strategies he learnt to turn his life around, especially financially, isn’t taught in today’s education system, because many industries and systems profit immensely from people being ignorant of these things. So he has created a free 3 hour DVD which he will send to anyone who is interested, called “What I Wish I Had Learned in School, But Didn’t”

You cannot be truly wealthy if you don’t know how to be satisfied with what you already have. It starts with how you feel inside. The more grateful you are for your small successes, the more you will feel wealthy. Realizing that being “wealthy” does not necessarily mean already having a lot of money or financial assets is actually the first step in achieving financial freedom.