REVEALED: 3 Red Flags for Options Traders

Today’s featured article reveals the “3 Red Flags for Options Traders.” Continue reading to find out what they are. March 18, 2022 [Option Sensei] [REVEALED: 3 Red Flags for Options Traders]( I'll be ending work early today to visit my father for a few days. Even though he mentored and introduced me to trading and has forgotten more than I could ever know, our styles have taken a divergent path. I’ve coined him the “[maniac]( Nonetheless, we don't talk about trading or even the market too much. No, on this trip, he'll get to see his grandchildren for the first time in 10-plus years. Everyone is very excited! [[FREE VIDEO] Access the unconstrained options trading approach method that raked in 82% profits in 2021 for its members.]( Additionally, I think we're all also looking forward to a geography change. As much as I love the beach it will be a nice change of pace to see some lakes and hike some leafy trails. For my kids, ages 14 and 16, who rarely leave the 5 boroughs of New York City, rural Tennessee is going to seem like another planet. It will also be a much-needed recharge of my batteries. Although most positions in the Options360 Concierge Trading Service are performing well and the portfolio's up 6.8% in 2022, I've been beating myself up this week over a single position we had in Deere ([DE]( which thankfully died today due to options expiration. I consider it a mercy killing. I'm going to briefly write about it in order to get it out of my system. But, this will also provide some useful education. Admittedly, I should've cut and run last week rather than attempted to battle through adjustments. The position was established on March 8 as a bear call spread in the 390/395 strikes with a March (3/18) expiration (indicated by the blue circle on the chart below) — for a net credit of $1.15 for the spread. My reasoning was that on the prior day, DE had tipped above old highs (resistance ) at $400, and then reversed sharply lower, leaving a bearish candle on the chart. [deere de stock chart 2022] It looked like a great entry against the $390 level. However, my first mistake was selling a strike so close to the money and near my mental stop-loss level. Also, the bid/ask was very wide and overall liquidity was poor. By midday, I saw many strikes only traded 5-10 contracts and open interest was below 500 contracts in strikes. [Watch this FREE VIDEO to learn my trading process and approach!]( I dismissed this as a risk, figuring the liquidity would return and bid/ask would tighten once the market settled down. And we'd be out of the position anyway in a couple of days once the stock tanked. After all, it had already dropped as low as $367 the next day. I was wrong on both assumptions. Over the next few days, DE shares moved over 10% intraday as headlines on Ukraine created some of the most volatile markets; and due to its exposure to agriculture, DE was seemingly more correlated to wheat than stocks. Red Flag #1: I initiated the trade based on chart price action. But, it became clear the headlines were taking precedence. The following day on May 10, the broad stock indices were down over 2%. But, DE was up over 5% and threatened our 390 strike. I decided to defend the position by selling a 360/365 put, turning it into an iron condor for a $2.15 total credit. At some point in the next day or two, DE touched $400 before retreating back below $370 which made turning it into an iron condor look foolish; the put side of the position was being threatened. Yeesh! We held firm. But on the next rally, took DE back to the $400 level. I decided to roll up the puts to higher 370/375 strikes to collect more premium. Below, I've added an image of the order ticket to show how wide the bid/ask spreads were, not just on each individual strike; i.e. the 375 put was $1.73 bid at $2.54 or some 35% range from the midpoint. Ridiculous. Red Flag #2: Terrible liquidity and wide bid/ask spreads. [deere stock analysis] We eventually got filled and our iron condor collected a $2.80 total credit. Essentially, our breakeven points were $372,20 and $397.80; seemingly a decent risk reward. I figured time decay would soon kick in and we'd be able to exit prior to expiration for around $1.50 debit, which would've been a 35% return on the initial risk — assuming shares stayed between our strikes for the next few days. Early this week, I entered orders to close for around $1.50. On Thursday, I bumped it up to $1.75. With only one day left, DE was trading between our strikes. Here's the order: [DE snapshot analysis] No dice. Nothing filled. At this point, I should've issued an Alert directing members to close it, even if it meant going up to $3.00 for a small loss. Thankfully, some members took it upon themselves and closed it earlier in the day for a profit. Red Flag #3: Stubborn pricing Part of what I love about Options360 is the educational aspect. The service provides specific actionable trades while also “teaching” you to fish. To wrap up today, THE shares zipped above $405 and we were forced to close the position on today's expiration for a 65% loss. I'll end with what I wrote to members in this morning's Alert: “The bottom line I woulda, shoulda, coulda closed this on Wednesday for breakeven or slight profit. I don't write this as 20/20 hindsight regarding the stock price movement. Rather it was my mistake staying in this position even after seeing after the illiquid and wide/bid-ask of the options was a problem. Instead of complaining, I should have taken action. Instead of hoping for a favorable price movement and being too stingy (and cute) with the limit prices used in our prior orders to close, I should have taken a prudent exit even if it wasn't a price I deemed fair.” Live and learn. And have a great weekend. [LAST CHANCE] Claim Your FREE VIDEO on the options trading approach that's delivered its members annual profits for 6 consecutive years [82% in 2021]( SPONSOR [Nevada: A Lithium "Treasure Trove"?]( Nevada may be known as the "Silver State," but it's also the hot spot for North American lithium. With China controlling 80% of the world's lithium supply, the defense industry and electric vehicle manufacturers are scrambling for more domestic sources of the valuable metal. [Show Me What's Going on With Nevada Lithium – And Who Could Benefit]( Copyright © 2022 Mesh Publishing | All rights reserved. 146 W 29th St, Rm 8E, NY, NY 10001 [Contact]( / [Terms & Conditions]( [Click here to unsubscribe](