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About SENTIMENT

Is it possible to limit risk on strangle trades? How do we use Expectational Analysis®, our proprietary analysis method, to identify winning options trading opportunities? How much of my trading capital should I commit to a single trade? The financial media is extremely gloomy toward the commercial real estate sector. Is this a contrarian opportunity? Welcome to the fifth issue of SENTIMENT, smart options for today's investor. We will explore all of these topics and more in the latest issue of our quarterly magazine. SENTIMENT is for options traders and those interested in learning about this growing and fascinating corner of the investing world. We hope that you will find the articles in this issue timely and insightful , and that they will help make your trading more profitable and more enjoyable. Along with SENTIMENT magazine, Schaeffer’s Investment Research Inc. offers a full array of print and multi-media educational offerings to the options trading community, including the Option Advisor newsletter and our award-winning Web site, SchaeffersResearch.com. If you like what you see in SENTIMENT, please visit our website to see more, and don’t forget to check out our archived issues below.

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Don't put all your eggs in one basket. Sure, it’s a cliché, but like many other clichés, it's also good advice. Still, how much of my trading capital should I commit to a single trade? Money management may be the boring, “green-eyeshade” side of options trading, but in our view , the biggest money management mistake an options trader can make is to over-commit capital to one trade. In this article, we offer some guidelines on risk and the sizing of your options positions.

Let's say you have a moderately bullish or bearish outlook on a stock, but are hesitant to roll the dice with a purely directional play. On the one hand, the profit potential from a call or put is seductive, but you also risk a 100% loss. Who says you can’t have it all? By buying an in-the-money strangle, you can make money if your initial forecast comes true, and still profit if you’re wrong. In fact, your chances for success are significantly enhanced when purchasing in-the-money options, since at least one of your options will have intrinsic value at expiration. We show you how in this article.

Previous issues of SENTIMENT have walked you through the basics of our Expectational Analysis methodology. Still, as author Elizabeth Harrow notes, "As anybody who's ever slogged through Moby-Dick can tell you, reading a book on whaling doesn’t make you an expert on hunting massive sea mammals. You can read about Ishmael's madcap adventures until you’re blue in the face, but you still won't know how to track an elusive white whale in the open seas…you won’t become an expert just by reading about it. Instead, it takes hands-on practice and experience to get a feel for trading with this unique approach. " This article explains a winning trade we uncovered using this methodology, and Elizabeth takes you through the process step by step.

Regular features in every issue of SENTIMENT include The Sentiment Report, a quarterly market roundup; the Idea Lab, an examination of technical analysis tools; Ask Bernie, with Bernie Schaeffer answering some of the most commonly posed questions by traders; and .COM, featuring the "best of" recent commentaries and blog posts on SchaeffersResearch.com.