About

I have been an active trader now for over 10 years. My original interest was spurred by the beginning of the dot com bubble in 1997 and the growth of on-line trading. At first I dabbled in stocks of internet companies, and quite frankly made a lot of money. I mean, you couldn’t go wrong back in those days. I was young then (well, right now 49 sounds pretty young) and I could put more money at risk.

I retired early (1999) and went on the road as an IT consultant and also did pretty well from an income perspective. I was able to slip in a few trades during the day, but I did most of my research and trade selections at night. I have always been what is called a swing trader (trade the peaks and valleys) and never a buy and hold investor – I just don’t have the patience.

Around 2003 I started to research options. I did a bunch of paper trades and then jumped into live trades later that year – just buying Calls and Puts. My favorites were Apple, RIMM, Google, etc. For the most part I was successful, but I was also very nervous if I could not monitor these trades during the day. I was trading slightly OTM options with 4-8 month expirations.

During that period I was also trading some option spread strategies, such as Straddles and Iron Condors, but I really didn’t know what I was doing and certainly didn’t know how to adjust a loosing trade. I had one Iron Condor that went against me and I couldn’t sleep for 2 nights!

At the start of 2006 I was laid off. While I was actively looking for work, I also had a lot of time to spend looking at other trading strategies. I signed up for a Forex trading course that cost a lot of money and tried that for a while. Talk about high pressure! While I didn’t lose much, I couldn’t stand to see trades go from +$400 to -$400 in seconds. I tried other option strategies – Iron Condors, Calendar Spreads, Straddles, Butterflies, etc., but the one strategy that I consistently made money on was Covered Calls.

During the first few months of 2007 I was considering starting up my own Covered Call service, so I did some research looking at the potential competition. I signed up for a few services, but quickly canceled them during the trial period. Then I found John Brasher’s Call Writer web site. I signed up for his service and soon found out that I could not compete with the sophistication of his ‘real time’ Covered Call and Naked Put tables and research tools.

If you have done any research on Covered Calls, you will see some articles that imply this is a bad trading strategy. The main reason in their argument is the limit on gains for stocks that are on a bull run. While this may be true for a buy-and-hold investor, it does not ring true for a trader looking to hedge risk while maintaining steady gains. You can tell the source of these opinions originate from web sites of traditional thinking investment firms. I don’t mean to degrade or slam that methodology; it’s just not my style.

It’s now mid-2009 and I have been very successful with Covered Calls (and they have taught me a lot), but unhappy with the limitations in markets that are trending downward. I was also looking for ways to increase my leverage without increasing my risk. Since March I had been trading Credit Spreads in my paper account and making a killing! I was unsure if I would be able to trade this strategy in an IRA, so I checked with my broker and found out it was OK.

In July I started to enter into Credit Spreads in my live account, increasing to over 50% of my account in August and 90% in September. I won’t get into any comparison with other strategies – that was a subject of a post in August – but right now, with market volatility decreasing and option premiums drying up, this is the way to go.

So how could I continue with a blog devoted to Covered Calls? It wasn’t right because my heart wasn’t in that strategy anymore, so I decided to create a new blog and to host it myself – giving me a lot more freedom to do some really cool things on the blog. After weeks of searching for a URL and creating a list, my wife and I decided on The Option Guru. Yeah, it might sound a bit arrogant, but the definition of Guru that I like to go with is: “A trusted counselor and adviser; a mentor.”

So on this blog you will be able to journey with me into the world of Credit Spreads and Iron Condors, and maybe a few Covered Calls and Naked Puts thrown in to keep everyone honest. I will share my successes and my failures, my thoughts and concerns – and maybe a few opinions on the world thrown in for variety.

I write because I have to get it out! Enjoy!

- Jeff

  • Bill

    Jeff,

    Is John Brasher’s CallWriter web site still up?

    Bill

    • http://theoptionguru.com/blog Jeff W

      Bill,

      Looks like he has closed up shop. Many readers have attempted to contact him (myself included) with no success.

      ◄Jeff►

  • Leelee33802

    Do anyone know if callwriter.com gone out of business?  thanks

    • http://theoptionguru.com/blog Jeff W

      Lee,

      I had a call in to My Brasher a few weeks ago. Repeated attempts to get a call back have failed, even though the number(s) are still working. Since it was pretty much a one-man operation, I hope that he is not ill. When I find out, I will post and let everyone know.

      ◄Jeff►

  • Jose P.

    Hi Jeff,
    I recently found your informative site and got the TPS material off of your blog. Must admit I had some hesitation, but wow! … this is really valuable material, so many thanks for your frank endorsements.
    Couple of  aspects still clarifying though, a) In choosing to use a Double C.   vs.  an Iron C. What variables do you consider for each strategy?  DCs are more directional than range-ideal ICs, yet wonder if you’ve developed criteria of conditions,  and b) for DCs TPS ‘s approach is to pick strikes closest to the market, which almost ensures the need for adjustments, particularly with recent huge market fluctuations.  May be deeper wisdom there,  or perhaps it goes back to point a),  matching the right stock with the right spread strategy.  Would appreciate your thoughts.  
    Best for 2012,
    Jose P. 

    • http://theoptionguru.com/blog Jeff W

      Jose,

      Nice job digging into the material! I still think TPS is just an awesome collection of lessons.

      Alright, in order:
      a) I always open with an IC. Double Calendars are only used for adjustments. DC’s in combination with IC’s creates a very wide and high ‘tent’, which is why I call my strategy Profit Tent Portfolio™ – since I frequently end up with one DC which creates the characteristic tent-like appearance. So, if I feel I need an adjustment, then I look for DC’s on underlyings that have a higher IV on the back month strike and are on my A+ list.
      b) David didn’t blindly pick his strikes based on a fixed delta, like I frequently do. He used technical analysis to pick a direction or support/resistance prices and biased his IC accordingly. That’s why he always had 3-4 position/underlyings with different directional bias that helps him to maintain his delta neutral portfolio.

      Do a search in my blog on PTP or Calendars and read up of more of my observations.

      Hope you kick a** this year!
      ◄Jeff►

  • Colbus50

    Hi Jeff, thank you for the site and have found your video donwloads helpful. I also purchased the pro trading system.
    I was studying the SuperPut Strategy and was seeking your thoughts  as to instead of buying stock buy a DITM call, an example using QQQ buy april 42 call for 15 and 57 put for 5. Total cost is then 20 with a locked in gain of 15(57-42), then  to recove 5 cost by selling weekly calls or even put while out of money. Given about 20 week to expiration seems like can collect almost 1 a week with QQQ for a gain then of 20-5 of 15.
    Any comments appreciated.
    Thank you
    Frank
    Dublin, Ohio

    • http://theoptionguru.com/blog Jeff W

      Frank,

      Dublin, huh? I’m not far from you, writing from Canal Winchester.

      To tell you the truth, I have never been able to justify spending very much time on SuperPuts, including your suggestion – they never really worked for me. I have also looked at Covered Calls using Long Calls vs the underlying and those don’t work very good either.

      Why? It’s the decay on the Call over time and if the stock moves in a Bearish over the life of the Long Call it’s a real looser. Better, in my mind, to stick with owning the stock, especially if it pays dividends, or just selling Naked Puts.

      So I actually attempted to prove one way or another, using ThinkBack on the TOS platform, your idea – I just changed the expiration dates. I gave up after 8 weeks of simulated trades, since it was losing money hand-over-fist.

      One of the things I like best about reader comments is it makes me think. I don’t know where this idea came from, but I thought “what if I just opened a Bear Put Debit Spread one strike OTM every week on QQQ and let it ride to the next week, close it and open the following week?”

      The results surprised even me! Over the course of 12 weeks the trades made $343 (not including commissions)! Since I only opened one lot, I never had more than about $50 at risk for any one week.

      I’m going to provide more detail in a post (hopefully this weekend) along with one other what I call no-brainer strategies.

      Thanks for your comment, Frank, and watch for the next blog post.

      ◄Jeff►

  • Burt

    Jeff,

    I really like what I see on your site, and especially the discipline you exercise in trading.  I am a big believer in the power of option spreads as income and have done a good bit of spread trading in the past, but came to realize I do not have the necessary depth of knowledge, nor do I feel comfortable enough with my skills to “go it alone” in making sound and disciplined trading decisions that result in consistent income.

    Being able to mirror trades that a wiser and more patient trader (you!) enters would be a gift.  Your site is clearly an educational goldmine, but do you also provide specific trades that your followers can mirror?

    Thank you.

    Burt

    • http://theoptionguru.com/blog Jeff W

      Burt,

      I do not have the desire to provide people with a pick service. I do, occasionally, provide some trades and some trade ideas on Twitter, but I hardly ever follow up with them on Twitter.

      You should download my spread trading plan and use that to guide you in placing your trades. It takes time to learn this, but you don’t have to know everything to be successful. Start small follow your open positions closely. Write all your observations down each time you look at an open trade or one you are contemplating.

      I keep a spiral-bound notebook next to my computer that I usually fill up 1 or 2 pages each day. Even if you never go back to read it over, it’s amazing how much better you remember if you write it down.

      Keep in touch – I would like to know how you are improving and gaining confidence.

      ◄Jeff►

  • Us271782

    Hi Jeff – found your blog after doing some research for the David Vallieres DVDs.  Do you still recommend them?  Although I’ve traded option for several years, I”ve not made any money (and tried too many strategies) until I accidentally created a ‘PTP’ situation several months back and did fairly well with it.  So I may have found the model that works for me.  I’d like to use the DVDs to fine-tune my trading plan.  I also wanted to ask if you still do the SPY weeklies credit spreads shown in your videos.  I didn’t see any followup blog entry to see how that strategy works over a longer term.   Thanks for  blogging – I appreciate all of the resources on your site.

    Klaus

    • http://theoptionguru.com/blog Jeff W

      Klaus,

      I most definitely recommend the Trading Pro System. Not only is it the foundation of my PTP™, but the additional information contained in the videos has opened the door for me on other spread strategies.

      Right now I am focused on directional trades in my Spread portfolio, such as credit and debit vertical spreads. With the strong correction we are currently in, you can hardly make a bad call.

      I haven’t been doing any SPY weeklys – I have been using other, more volatile underlyings such as AAPL, BIDU, GS, etc., but I’m sure the strategy would still work well.

      ◄Jeff ►

  • Parasuram Geetha

    Hello Jeff, I was watching your unbalanced butterfly video. Your short strike was an ITM put. (AAPL was trading at $338 and your short strike was $340) I do feel stupid asking these questions,since you obviously have worked out the trade. But will you not be immediately assigned if your short strike is ITM? Although the P/L analysis shows a profit, would you have the luxury of time, waiting for the stock to move up? nI chanced upon your site only about 2 weeks ago and I must thank you for your prompt, clear and matter of fact advice, so far. I agree with and endorse all the positive comments I read here. nGeetha

    • http://theoptionguru.com/blog Jeff W

      Geetha,nnThat’s a good question and has been asked before. Let’s think about it.nnFirst: if you look at the Open Interest on any ITM strikes, you will see hundreds and even thousands of contracts that are open. Each contract has two sides: an owner and a seller. If assignment happened immediately, there would not be any “Open Interest”.nnSecond: when the owner bought the contract they paid a premium over and above the difference between the strike and the price of the stock. There are two components to the price of the option. One is the intrinsic value which is the difference between the strike price and the current underlying price. The other is the extrinsic or time value of the option. That is the premium. So if you buy an ITM Call option at a strike of $100 and the and the stock is at $110, you will pay more (premium) than the $10 difference – the further out from expiration the bigger the difference. If the owner chose to exercise the option at that time they would eat that premium and it wouldn’t be a good trade. Most of the time, in this case, the owner would wait until expiration to exercise and the seller of that option would have to take the appropriate action on the underlying.nnThird: Not all people who buy options intend to exercise them, but rather buy/sell Puts and Calls and use spreads for gain. As a matter of fact, a vast majority never intend to exercise. At expiration, if you have short options that are ITM by a penny or more, you will have them exercised – whether you intended to or not.nnSo to answer your question, no, I wasn’t worried about assignment.nnu25c4Jeff u25ban

      • Parasuram Geetha

        Thanks Jeff. I get it now.

  • Rahul

    Hi Jeff,nnI was looking for a good read and I stumble across your blog, Just like what you explained in the introduction video about how people trade and there 30% trades goes in right direction but the 70% take them down. I am an option level 2 player, Buying Just calls and puts, although always worried of assignments and so I play them very carefully.nI want to learn from your way and was wondering if you course makes me also understand the basics of Options like level 2, along with the spread , condor etc. nI would not be able to afford the assignment , and that is my objective since i will a small pool of money to invest.nnI would appreciate your reply.nnThanks nRahul

    • http://theoptionguru.com/blog Jeff W

      Rahul,nnWelcome to the world of options. Congratulations on taking the first step. Now it’s time to limit your risk using option spreads. I personally don’t have a course, and the one that I endorse is really for those that have a good grasp of basic spread strategy. So before you jump into that, here’s a list of To Do’s for you (all free):nn1. Make sure you have a Paper or Test Account to practice in. I don’t know who your broker is but any decent one should offer this. If not, I suggest you open one at http://thinkorswim.com (my broker of choice and all my recent videos use that broker and trading platform).nn2. Go to http://www.theoptionsguide.com/ and go through the Options Basic and then Option Strategies.nn3. I suggest you start with Credit Spreads. You can download my Credit Spread Trading Plan on the Downloads area on the right. Start with that document and get really good at trading them in your Paper Account.nn4. I wish I could recommend a book, but I can’t. My knowledge was acquired from multiple sources – books, YouTube, web sites and TOS videos. Just keep looking and learning.nnLet me if you need anything else and make sure you let me know how you are progressing.nnu25c4Jeff u25ban

  • Ed

    Hi Jeff:nnI hope you can help me. Last Thursday I set up a “weekly” Double Calendar in SPX, based in large part upon the TOS “Analyze / Risk Profile” chart. My shorts where in March4 and the longs in March5. The strikes were 1210 (puts) and 1310 (calls). Provided the market stayed within my shorts, the TOS chart showed an expected rate of return at expiration of anywhere from 10% to 200% (I’m not making this up).nnSince Monday, my positions have gotten hammered, presumably by the fact that volatility decreased significantly. Specifically, up until Sunday evening the TOS chart showed my positions as of today increasing in value by 80% with the market at 1290 (using the “day step”), but in actuality my positions were under water with the market at 1290.nnI’m not sure if my failure was based on not selecting a proper underlying, or strikes, or months (although the TOS chart looked spectacular at the inception of the trade) or failing to properly adjust (or even abandon) my positions when my longs were quickly deflated. In any event, I screwed up.nnCan you offer any suggestions or counsel?nnThanks.nnEd

    • http://theoptionguru.com/blog Jeff W

      Ed,nnI’m always willing to stick my neck out and offer my humble opinion. Let me also say that’s it’s very easy to reverse engineer a trade – don’t take anything that I say personally, but treat it as knowledge to help make you a better trader.nnOverall, the spread strike prices and the strategy is OK. On the other hand, I usually don’t play the cash indices (SPX, OEX, COMP, NDX, RUT) for two reasons: the strike prices are far apart, usually $5; and the bid/ask spread is very high – as I will explain later.nnThe day that you placed this trade was the most volatile since July of 2010. It was a huge spike up and should have warned you about placing a delta neutral trade. Better to have entered a directional trade on that day. The high IV on your shorts (around 19) was good because you collected a lot of premium. You’re right about volatility collapse on our longs. It moved from around 22 then to 15 now. That’s a huge difference for an index. So you paid for a lot of IV and now it’s gone, so you won’t get much when you want to sell you longs. Generally for Calendars you want the back month long IV to be equal to or less than the front month. It it’s not, that’s a danger signal.nnSpeaking of buying back your longs, notice that today (pre-market) the bid/ask spread on the 1210 is .50/.95 and the 1310 is 5.50/7.40. So if I bought a 1310 Call right now, I would pay $740. If I turned around and sold it, I would only get $550. Ouch!nnHaving been devastated more than once on Calendars in similar situations, I am very careful now. I find that Butterflys in some ways offer similar performance without as much danger of volatility collapse. That being said, there are situations where Calendars work much better, such as adjustments on a delta neutral strategy, like the Profit Tent Portfoliou2122. You might want to experiment (in a paper account of course) with Calendars with the back month farther out where the IV will be more stable – but those long options will cost you more. Nothing is free.nnWithout all the details of your trade, I can’t help you much with an exit strategy. Also, expiration is today on your SPX so there just isn’t any way to adjust. Overall, Weeklys are unadjustable because of the short expiration period.nnKnowing when to “hold ‘em” and when to “fold ‘em” is one key to success. I myself am still learning that. Oh great, now that stupid song is going to be in my head all day!nnu25c4Jeff u25ban

  • James

    Hello Jeff. I purchased Trading As A Business (now Trading Pro System) a year or so ago. I’ve now decided to dust it off and teach myself how to trade! However, I have one question: after you make an adjustment on a double calendar, do you close out the threaten short option or leave it and add another calendar?nnJames,

    • http://theoptionguru.com/blog Jeff W

      James,nnTrading Pro is a fascinating collection of educational videos, I hope you become fantastically successful using the techniques taught in the course.nnI don’t recall ever splitting up a Calendar spread – never thought of it, I guess. Remember, the strategy is not cast in stone. When I do make an adjustment it’s always on the individual underlying that is misbehaving the most and will give me the biggest effect on my portfolio as a whole.nnThere are times when I may close a single Calendar that has the highest delta or is furthest from the current price of the underlying in order to help pay for the adjustment. It all depends on the affect the decision has on the overall portfolio – of the Profit Tent Portfoliou2122 as I prefer to call it.nnu25c4Jeffu25ba

  • Anna

    Jeff,nnI am glad that I found your blog (I will save it as my “favorite”. I work with options too (just for 2 years) and I love it! nnHowever, I use only the basic strategies: Covered Calls and Naked Puts. Same as you, I do not lose money, but I wanted to know more about Credit Spreads and Iron Condors. Is there any way you can help me?nnP.S. Sorry for my broken English…I am Russian.nnThanks,nAnnannn

    • http://theoptionguru.com/blog Jeff W

      Anna,nnWelcome and congratulations of your progress so far.nnI do occasionally offer coaching/mentoring, but I think that right now you would be better served by purchasing the Trading Pro System that I fully support and endorse. You can get to heir web site by clicking the Trading Pro System image on the upper right of my blog.nnYou can also do a search of my blog using the term “Trading Pro” to get all my posts that reference this course. It’s a very comprehensive series of several (almost 100) videos on using option spreads.nnI have had the course for over 2 years and I still go back and reference the videos weekly.nnKeep in touch, I would be interested in knowing of your progress.nnu25c4Jeffu25ba

  • Todd

    Jeff, I have been following your blog for a few weeks andI really like your work. I’ve been through some of the same paths as you, subscribing to Callwriter and taking the Trading Pro Options course. Most of my trading is in an IRA account, so I am writing monthly covered calls and a few collars. You have started me thinking about changing what I do in my margin account where I have more options of what kind of spreads I can trade. I started paper-trading a few things to get used to the adjustments. I’m just not satisfied with the return I get from monthly covered calls right now. I hit 75% to 80% of my trades correctly, but tend to write conservative ITM calls, so the few loses can really nail my profits. I like the risk/reward of what you do much better, so I am contemplating the change. Thanks for keeping your site interesting and informative. nnTodd – http://bloomingcactus.typepad.com/revtodds_ira_plot/

    • http://theoptionguru.com/blog Jeff W

      Thanks for the comment. I like to mix it up and try different things. Heck, if I did the same thing all the time, all I could write about is trades and returns, pretty boring stuff to most people. I am pretty pumped on the whole Trading Pro strategy and I will continue to write more about that. Just to remind you, all my trading is in an IRA. Most brokers, and in my case thinkorswim, allow defined risk trading, meaning you can trade almost any option and spread except naked short Calls and short stock. Heck, you can even trade Futures, as I do occasionally. Because I can withdraw out of my IRA w/o penalty (except for tax), that’s where a huge majority of my money is right now. Most of my regular savings went towards paying down and eliminating debt with the exception of my mortgage.

      ◄Jeff►

  • http://theoptionguru.com/blog Jeff W

    Love you guys from down under. Thanks for reading my blog. Actually, my wife frequently is sitting next to me working (or playing Farmville) when I am recording. If she make a comment that is worth including, well I do it. She gets a kick out of it too.nnu25c4 Jeff u25ba

  • http://theoptionguru.com/blog Jeff W

    Love you guys from down under. Thanks for reading my blog. Actually, my wife frequently is sitting next to me working (or playing Farmville) when I am recording. If she make a comment that is worth including, well I do it. She gets a kick out of it too.

    ◄ Jeff ►

  • Muddy Farmer

    Jeff, a quick note to your better half for the giggle of the day.

    Watching your video “how to create a combo order in IB TWS” demonstrating a credit spread on SHLD you say: “This puts $700 in my account immediately… I get to keep that amount.”

    Then a pop-up note appears: “No, my wife said she gets to keep the $700.”

    Hoot and a holler! I'm still giggling.

    Keep up the great work. And Mrs Jeff (Mrs Option Guru?): keep up keeping him honest.

  • http://theoptionguru.com/blog Jeff W

    Larry,

    Thank you for the encouragement.

    There are a few issues with doing this – but it doesn’t mean it’s not possible. The first has to do with determining what the limit should be. You can do a theoretical calculation on the price of the option and thus determine the price of the underlying, but since time affects the option price along with volatility, it makes it very difficult to determine.

    The second issue has to do with limit orders associated with stops – called a stop/limit order. On this type of order you are asking that the underlying not be sold if you cannot get x price or better below your stop price. If the stock drops below that limit price, the underlying is not sold. Assuming the objective is to exit the entire trade, you may be ‘stuck’ with a declining underlying.

    Since I have the luxury of being able to trade during the day (some people do not), I prefer to not use any stops except for what I have set in my head or via an alert.

    I hope this answers your questions.

  • Larry Barnes

    Jeff– great site, much useful information, you have done a masterful job! Thank you!
    I REALLY appreciate the time and effort that you spent in your video on using IB to set up and initiate a conditional order for a covered call protection. I have been wanting to know how to do that for quite some time, and your video explains it perfectly. A quick question though: when setting the stop price, you mention that it is best to use a market order for the price of the stock because of the uncertainly of knowing what the buy-write combination might be. Could a limit be used by choosing some amount below your cost basis for the buy-write? In other words, in your example, your cost basis was $15.27. If you wanted to say…. get me out of this but-write if the combination of the stock price and the covered call drops to $14.25, could you enter that price into the limit blank and achieve control over the absolute cost of position exit?
    Again, I really appreciate your site and the abundance of thoughtful and useful information.

    Kind regards,

    Larry Barnes

  • Rich Holmer

    Jeff.
    I found your video on the IB-Excel Adapter to be extremely informative. When I looked for it on the IB website it was gone, but I downloaded it from the CyberXpert website. After install it works great for stocks, but doesn’t work now for options. Do you know if this is because of the OCC symbology changeover, or is CyberXpert no longer supporting the product. Any comments on how to get it working would be appreaciated. I really like the Blog, and look forward to your future announcements.
    Rich

    • Jeff

      Rich,

      Thanks for the comments – having readers that enjoy the blog just adds to my joy of writing it.

      I suspect the CyberXpert will eventually fix the Excel adapter because the have a paid charting program that they sell. The problem is with the conversion itself. The whole process is in 3 steps and won’t be completed until May. I suspect that vendors like CyberXpert are waiting until the process is complete. I have no idea how to fix it, but you can send an email to mailto:support@cyberxpert.com and ask them if and when they are going to update it. I would do that myself, but I not longer have an account at IB.

      Good luck and Happy Trading.

      - Jeff

  • Alan Sherman

    wanted to watch the coaching videos , but cant find where to create a password ?

    • Jeff

      Alan,

      Congratulations on even finding that page! It’s a test page for the future launch of my coaching service. The business plan is still under development, but my plan is to have a section of my actual web site where I will give exclusive access to coaching students of the videos that I will be creating for them.

      - Jeff

  • Oliver

    Jeff,
    Like your work. How do I get this Twitter thing to work though?
    Thanks

    • Jeff

      Oliver,

      Depends on what you mean. If you want to follow me on Twitter, then click on ‘Follow’ and if you have a Twitter account, log in – if not, you can sign up for one. If you want the widget on your blog, there is an icon at the bottom of the box to get the flash code – may not work on non-self hosted blogs.

      - Jeff

  • Wayne Mugar

    Jeff,

    Great site! found you on Call Writer. FYI: Commissions are negotiable at TOS, i pay much lower than your chart.

    Wayne

    • Jeff

      Wayne,

      I sure appreciate your comment and your advice on commissions at TOS. I also heard the same from another reader. Thanks again.

      - Jeff