Keene on the Market Trade to Win Using Unusual Options Activity, Volatility, and Earnings

ANDREW KEENE was an independent equity options trader at the Chicago Board Options Exchange for eleven years. He spent most of that time as a market maker in over 125 stocks, including Apple, GE, Sears Holdings, and Goldman Sachs. From 2006-2009, Andrew was the largest independent on-the-floor Apple options trader in the world. Currently, he actively trades futures, equity options, currency pairs, and commodities. Over the last few years, Andrew has become one of the CBOE's most recognized faces in the media, appearing regularly on Bloomberg TV's Street Smart, CNBC's Squawk on the Street, nationally syndicated First Business, and CBOE TV's In the Money with Angela Miles. Andrew received a BS in finance with a concentration in accountancy from the University of Illinois. He can be contacted at Andrew@KeeneOnTheMarket.com.

Preface

Chapter 1: Introduction

To Put It Simply:  I Love to Trade

From a Young Clerk to a Shooting Cowboy?

Trading Career at the CBOE Exchange

The AAPL King

From Trading Pit Legend to Retail Trader

The LIVE Trading Room- From Options 101 to Complex Strategies

Questions

Chapter 2: The Life of a Professional Trader

The Perks of Being a Trader

Might Not Be as Glamorous as Everyone Thinks

The Roller Coaster of Trading

This is Not Monopoly Money

Takes Money to Make Money

The Set-Up

Trading Expenses and Opportunity Cost

Sticking to a Plan

Questions

Chapter 3: Trading for a Living

Hobby or a Career?

Trading for Amusement

Enjoying Your Profits

Moving from Hobby to Professional

Moving from Simulated Account to Real Trading

Moving from Simple to Complex Strategies

Getting Your Skill Set

Investing in Your Options Education

Go Slow, Go Pro

Defining Goals

Questions

Chapter 4:  Who the Players Are
Market Makers

DPMs

The Death of Market Makers

Retail Traders

Hedge Funds

Institutional Traders

Options Exchanges

Questions

Chapter 5: Options Brokers and Platforms
The Right Options Broker for You

Full Service Options Brokers

Full Service Brokers and Options Trading

Discount Brokerage Firms

Researching Discount Brokers Firms

Options Brokerage Firms Fees

The Use of Margin

Automatic Liquidation

Questions

Chapter 6: Technical Trading
Security Timing Tactic

Support and Resistance Levels

What is a Gap?

Dow Theory

Elliott Wave

Moving Averages

Fifty-Day Moving Average

Forty-Week Moving Average

Magnets and Targets

The Stochastic

Other Charts, Technical Indicators, and Money Supply

Japanese Candlestick Charts

Disadvantages to Moving Averages

The Ichimoku Cloud

Summary with Technical Trading

Questions

Chapter 7: Reading the Market and Implied Volatility
Reading the Market Sentiment

Make Money in Any Direction

The Concept of Beta

When to Be on the Sidelines

Questions

Chapter 8:  Options Basics: A Primer, What Are Options?

What are Derivatives?

What is a Call and Put option?

What is an Underlying?

Options—A Deeper Look

Another Example in the GLD

Options Premium

Options Definitions

Option Pricing: Complex Models

Questions

Chapter 9: The Greeks

Delta

Gamma

Theta

Rho

Vega

Questions

Chapter 10:  Call and Put Trading Strategies

Trading Strategies with Calls

Using Calls “Bearishly”

Long Put Strategy

Using Puts “Bullish”

Exiting Long Put Positions

Selling Options

Time Decay with Short Options

How to Exit a Short Call Position

The Short Puts

Deeper Look at OTM Calls and Puts

Using Profit and Loss Graphs

Is Risk vs. Reward of the Option Trade Limited or Unlimited?

What is the Direction of the Profit of the Option Trade?

Where is Break-even on an Option Trade?

Questions

Chapter 11: I am Long Stock—How to Use Options for a Hedge
Why is Everyone Long Stock?

The American Dream

I Have Insurance on Almost Everything Possible

The Famous “Covered Call”

The “Zero Cost Collar”

Questions

Chapter 12: Synthetics
What are Synthetic Option Positions?

Synthetic Long Stocks

Synthetic Long Stock = Long Call + Short Put

Synthetic Short Stock = Short Call + Long Put

The Goals of Making Synthetics

Synthetic Long Call = Long Stock + Long Put – Strike Price

Synthetic Short Call = Short Stock + Short Put – Strike Price

Synthetic Long Put = Long Call + Strike Price – Short Stock Price

Synthetic Short Put = Short Call + Strike Price - Long Stock Price

Questions

Chapter 13: What is Volatility and how does is affect Options?

Getting to Know the Basics of Volatility and Options Trading

Historical Volatility

Implied Volatility

Volatility is a Trader’s Best Friend

The CBOE’S Vix Index

CBOE’s Vix as a Fear Indicator

Contango vs. Backwardation

Questions

Chapter 14: Other Uses of Options
Key Reasons I Love to Trade Options

More Uses of Leverage

Leverage Real Time Example

Speculation or a Hedge

Options for Speculation

Complex Options Strategies

Land of “Only if I Bought Those Calls”

When in Doubt, Hands Out

What it Takes to Make a Bigger Trade

Questions

Chapter 15: More Complex Options Strategies: Straddles, Strangles, Butterflies and Condors

Straddles and Strangles

Short Straddles & Strangles BEWARE! Blowout Risk!

Butterflies & Condors

Keene’s Trading Tips

Questions

Chapter 16: Managing Trades on Expiration

Long Call—Long the FB November 23 Calls

Long FB November 23 Calls

Short Call—Short the AAPL November 500 Calls

Long Put—Long the MSFT November 27 Puts

Short Put—Short the GOOG November 650 Puts

Long Call Spread—Long the FB November 23-25 Call Spread

Long Put Spread—Long the MSFT November 27-25 Put Spread

Short Put Spread—Short the GOOG November 650-630 Put Spread

Long Straddle—Long the FB Nov 23 Straddle

Short Straddle—Short the MSFT Nov 27 Straddle

Long Strangle—Long the AAPL Nov 480-500 Strangle

Short Strangle—Sell the GOOG Nov 650-670 Strangle

Short Condor—Selling the FB Nov 23-21 Put Spread and selling the FB Nov 25-27 Call Spread:

Short Iron Condor—Short the MSFT Nov 27 Straddle, long the 25 Put - 29 Call Strangle

Long Call Butterfly—Long FB November 23-25-27 Call Fly

Long Put Butterfly—Long MSFT November 27-25-23 Put Fly

Questions

Chapter 17: Andrew Keene’s Non-Blowout Trading Plan
How Much of Your Portfolio Can You Risk?

Back in the Day Trading Pepsi

Now That I’m Upstairs…

Limiting Your Exposure to a Percentage of Your Total Book

Andrew Keene’s Confidence Scale: Ranking Every Trade from 1 to 5

Every Trade is a Percentage of My Book

Andrew Keene’s Non-Blowout Trading Plan

Questions

Chapter 18: The O.C.R.R.B.T.T Trading Plan

Keene’s O.C.R.R.B.T.T. Trading Plan

Reading Options Paper

What Call and Put Volume Means to a Trader

How Insiders Read Paper

Using the OCRRBTT Trading Plan

Questions

Chapter 19: Trading Earnings a.k.a. “H.I.M. C.R.I.B.B.I.T.”

Type of Options

R. R. B. T. T. – Risk vs. Reward, Breakeven, Time and Target

Calendars & Advanced Topics

Trading for a Living

Tricks and Tips

Questions

Answers to Questions

About the Video

About the Author

Index

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