DISCLAIMER: Stock, forex, futures, and options trading is ...

[Pages:14]DISCLAIMER: Stock, forex, futures, and options trading is not appropriate for everyone. There is a substantial risk of loss associated with trading these markets. Losses can and will occur. No system or methodology has ever been developed that can guarantee profits or ensure freedom from losses. No representation or implication is being made that using the information in this special report will generate profits or ensure freedom from losses. Risks also include, but are not limited to, the potential for changing political and/or economic conditions that may substantially affect the price and/or liquidity of a market. The impact of seasonal and geopolitical events is already factored into market prices. Under certain conditions you may find it impossible to liquidate a position. This can occur, for example, when a market becomes illiquid. The placement of contingent orders by you, such as "stop-loss" or "stop-limit" orders will not necessarily limit or prevent losses because market conditions may make it impossible to execute such orders. In no event should the content of this correspondence be construed as an express or implied promise or guarantee that you will profit or that losses can or will be limited in any manner whatsoever. Past results are no indication of future performance. Information contained in this correspondence is intended for informational purposes only and was obtained from sources believed to be reliable. Information is in no way guaranteed. No guarantee of any kind is implied or possible where projections of future conditions are attempted.

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Options Income Engine: Charting Software & Broker Trading Platform

Objectives: review good charting software and plot the Options Income Engine indicators. And then we want to review a typical online broker trading platform.



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Options Income Engine: Charting Software & Broker Trading Platform

Okay, here I am looking at a chart of Tesla, TSLA, compliments of Trade Navigator Charting Software by Genesis. This is excellent charting software that you may want to use in charting the markets that you are trading. Other good charting software packages include TC2000 by Wardon Brothers and Metastock, and there are others. So I am showing you the Trade Navigator software, most good charting software packages behave in a similar fashion, and what you want to look for is ease of use, good graphics, high functionality and, of course, low cost.

So here we have the TSLA daily chart showing the candles in the candle format. You can change the format by clicking on the `Edit Chart" settings, going to price and changing from candlesticks to open high-low close bars, those are the more traditional kinds of price charts. But I prefer candles even though they give you the same information as the price bars, it's easier to see at a glance what's happening, if it's a down day you are going to see a big red candle body and if it's an up day you are going to see a green candle body. So you can more easily see what is happening here in the price action.

Okay, now to add an indicator, you can add several, but if they are not already listed you can go down to add, click add indicator, and that brings up a whole array of easily over 100 different, commonly used, technical indicators. Okay, now if it is already listed under



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Options Income Engine: Charting Software & Broker Trading Platform

price pane I am going to do moving average, the 50 day moving average, click okay. And there you have it, that simple.

Okay, now if you want to add more indicators, in our case we are more interested in the percent K stochastic, with a setting of 8/3, you can change these settings if need be and you can make the color of the line anything you want. Now for our purposes I have chosen K to be blue and the stochastic D to be red, even if we are not using the D, when you see the stochastic plotted, you're typically going to see both the K and the D. And then you can set your overbought oversold levels if you want, wherever you want. Let's say we want to change this (value) to 25 for oversold, click okay, and there's our percent K at the bottom of the chart, with the oversold dashed line. Anytime the percent K gets down below 25, it's a good indication that market is probably oversold. As long as it's in an uptrend, that could be your cue to watch for an entry on the long side. That occurred again over here.

Okay, now let's add the average true range. Again, I can make that any value I want, in fact let's just play with that a little bit. If we turn that into 15 (from 20) watch what happens to the line here. Click okay, and you see that the line changes because we are only using 15 days. With Options Income Engine, though, we want to use 20 days. It gives you a smoother, less erratic line.

Okay, and then if we want to add yet another indicator, the on balance volume, again we can make this any value we want. You can even customize the indicator if you'd like, base it on something besides the close. You wouldn't probably do that with on balance volume, but it just shows you the flexibility the charting software provides you. Close, click okay, and there's our on balance volume. And those are the only indicators we are using with Options Income Engine, accepting the SPY filter for our short traders. And in that case we are using a moving average exponential, with an `X' next to the moving average, of 50, and I believe we had that coded in green. And we had a moving average of 200, coded in brown. So click okay. Now we are not applying these to the underlying security but we are applying them to the SPYs, so let's change to the SPY chart, simply by clicking on symbol and bringing up the symbol chart, and there's our SPY.

So now we can evaluate the SPY, which is again the SPDR S&P 500 ETF. Is it in an uptrend? Well, if you look at the 200 day moving average in brown it will tell you, yes, it is in an uptrend. It's going up. So we wouldn't go short on that would we?

Now our other short filter; is the green exponential moving average going below the 50 simple moving average? Well, yes it is, which would tell us that at least that condition is met for going short or buying a put option, however, we can't do it because 200 is going



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Options Income Engine: Charting Software & Broker Trading Platform

up. You need both in order to go short. You need the green below the red and the brown 200 going down.

Now, if you want more bars showing, you just click `show more bars', and you keep doing that until you fill it up with as many bars as you want. If you want to scroll back in history, you can do it that way at the bottom, controlling the scroll bars or the arrows. Very easy to do. You can adjust the width of the indicator panes, however you like. A lot of flexibility in the look and feel and usability of this software.

Now if you want to save these indicators that you've plotted as a template, which you are going to want to do so you don't have to plot them every time you bring up a chart, you just click on `edit chart settings' and go to templates and click on `new' and give a name; OIE indicators. Click okay, and you are good to go. The next time you bring up your chart the indicator plots will come up automatically. If you don't want to show the SPY indicators, just leave those off. And now you are back to the core set of indicators that we apply to the underlying security.

Updating the data each day is very simple. You click the `update' window, click `start' and it will update the data in the matter of a minute or two. You can plot any US stock or ETF, you can plot Canadian stocks, Australian stocks, whatever you like. So if you don't already have good charting software I would encourage you to get some. The cost is very low these days, and it helps you keep a good perspective on price action relative to the indicators, so that you can see firsthand when an Option Income Engine setup occurs, you'll know why.



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Options Income Engine: Charting Software & Broker Trading Platform

As an alternative, you can use the charting software which, essentially, allows you to do the same thing. Now, the graphics aren't quite as good as Trade Navigator, but it is free and it's web-based. You can, essentially, plot the indicators in the same way by clicking on `Add Indicator' and selecting the indicator you want to add. Let's try on-balance volume, for example, and there it is. Then you can adjust the window and so on. To take it off, just click `X'. Very easy to use. The paid version of which is more comparable to Trade Navigator would be TC2000.

So it just depends on what your needs are and how far you want to go with your charting software. Remember, charting software is optional. You do not need it to trade with Options Income Engine, but I recommend that you do follow your trades with good charting software because, in the end, I want you to learn the logic and rational behind these trades so in the future you'll be able to spot these setups without the aid of the software, if you so choose.



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Options Income Engine: Charting Software & Broker Trading Platform

Okay, let's now turn to a typical options brokers trading platform. I am going to use Options Express for this purpose. Options Express is one of several good online options brokers. Most online options brokers trading platforms will be very similar to this one that I am showing you here. Let's just follow through on how you would place a trade.

First, let's look up the option quote so you can get familiar with these in the event that you are new to all of this. You go to Quotes and then Option Chains. This brings up the Option Chain window.

Let's say we want to trade Home Depot. Type in "Home Depot" near the money options. Let's say we think Home Depot is going to go up and we want to buy call options. As of this video, we are in early September. Remember that we want to be two to three months out. We cannot trade the September calls or the October. The earliest we could trade at are Novembers.

Let's click on November, View Chain, and this brings up the nearby Home Depot calls that expire in November. You can see here we have the strike prices, the last trade, the change, the bid and the ask, the high price of the day, the low of the day, the volume of the day, and the open interest. This is the number of contracts that are open. Remember



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