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Sunday, September 2, 2012

Useful resources for an Income Trading System based on selling Options

In order to successfully trade Out of the Money Credit Spreads for income, you don't really need the ultimate information that nobody has, nor the last minute headline before anybody else does. In fact you don't need to be looking at the markets every second and you don't really need real live data, other than the one supplied by your trading platform. In this article I want to share a list of websites and tools I use in order to generate ideas and stay in sync with the markets at the lowest possible monetary cost. In fact at no cost at all.

1- Finviz, specially the page with information about the futures: This page is updated every second, even during the night while the US markets are sleeping. Finviz is the first place I go to in the morning while I'm eating my breakfast, to quickly get a feeling on how the markets have been doing during the overnight session. There is a lot of information on Finviz, but for my system, the only thing I use is that futures page. That's it. You can pay a premium membership for real data without delay, but I don't day trade and the delayed quotes are just fine for me.

2- Marketwatch and Bloomberg. Right after checking out Finviz, if there is a significant overnight move, let's say beyond plus or minus 0.3%, I go to or I visit these sites just to learn about the news that are making headlines, and be informed about what's going on. But, that's it. I don't try to get an opinion based on those sites' opinions. They seem to want to explain every market move with a Fundamental news going on in the day, which I don't believe is always true. I blogged about this a while ago on this article named The Media and Markets' noise. Also, I don't waste my time reading the comments section, as usually what you find there is the fearful frustrated herd complaining about the markets, the government etc. No useful, just noisy. So, these two sites are only that, a way for me to know what the main headlines of the day are. If the markets didn't make a violent move overnight, I will read on these two sites later on during the day, without much rush.

3- From 11am to 12pm I visit . This is a website managed by a trader who's name is Pete Stolcers. I have found his analysis to be really thorough and very coherent. Overtime he has become my obligated go to site everyday. This complements the formation of my opinion on the markets. Obviously, he makes mistakes too, plus he is also a day trader, which means I look at his comments not in order to follow his trades, but to get information on all the important news around the globe, not only the US markets and his opinions as he is obviously more experienced.

4- ThinkOrSwim desktop application. Which you can download for free at and use for unlimited time. This is my tool of preference for analyzing charts on the different indexes and ETFs I play (IWM, RUT, SPY, SPX, QQQ, NDX). For trade idea generation, analysis of candidate trades using different options chains. Studies of overbought and oversold instruments. Visualization of Risk/Reward profit pictures, probability analysis etc. This tool is so friendly and intuitive for me that my life would be totally miserable if I didn't have it. In fact, I will only use ThinkOrSwim for trade idea generation even if my money is with another broker and platform. Obviously having only a demo account will give you quotes delayed by 15 minutes. But again, for an income trading system, that only trades 3, 4 positions per month, which last anywhere from a week to over 40 days, having the last minute data is not an absolute necessity. When the evening comes and you want to generate posibble trade ideas for the next session, you have the latest data anyways, given that at 4:15pm the delayed quotes reflect the 4:00pm data, and from then on, options prices don't change till the next day. So, during the evening at home, you have the same data as those that have real money accounts on the platform, and it is here where I generate my ideas for possible trades the next session.

5-, and the only thing I look at on this site is the market momentum This is where I get the information on how many stocks are trading above their 20 SMA and how many of them are trading above their 50 SMA.

6-, and the only thing that I look at is the seasonality numbers here Obviously I don't need to look at this page everyday, this is just my tool to know how bearish or bullish the present or next month has historically been, and how aggressive or close or far from current price action I should position my trades based on historical extreme moves these months.

7- Historical and Implied volatility. Finally, I sometimes use, to evaluate whether current options on a specific instrument are overpriced or not. 

And that's all I need. That's how I'm informed about the main subjects going on in the markets, and the few tools that I use, all of them with a free way to use. For an option income trading system based on selling Credit Spreads, I really don't need more than this. I don't get overwhelmed by tons of different information and I keep my research and trade idea generation process simple and no time consuming.

Following specific traders on twitter is good, instructive, an also creates a sense of community and camaraderie. You can check out the people that I follow here. But I try to never enter a trade based on someone else's bias. Remain quiet, train your own system, and you won't have anybody else to blame but yourself. Obviously, if you are still inexperienced and don't trust yourself, following a newsletter advisory is a good option to learn from the veterans and somehow define your own trading style over time with confidence.

Frankly, in order to successfully trade Credit Spreads and Iron Condors, I don't think you need more than the resources I have mentioned here. I hope this helps.

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  1. Great resources! I use the economic calendar on Bloomberg a lot to see what important data releases are coming up and also track the trends over time.

  2. Thanks Options Trading IQ. Thanks for mentioning the calendar. I'll put it here for readers' reference

  3. Useful resources! I use most of them.