Celebrity adsense

I have never been much satisfied with Adsense for celebrity sites anyways. Since last 5-6 months Google Adsense has been paying a cent or two for every click i get on my celebrity sites network. Believe me, i have lot of traffic on those sites and i really do get lot of clicks there. An average 100 clicks give me $2.00 only. I mean, this really is insane. Isn’t it? Is that what the advertisers at adwords are really paying for celebrity sites? I feel totally looted here!

Anyways, recently i was browsing my Adsense account and there in those green highlighted pointers it was written that verifying your website via Google Webmaster Tools will help us serve you better. Well, i thought this is it. Much targeted ads, much more money and much better revenue for the celebrity sites. So i readily added and verified all my celebrity websites. So what do you think? Problem solved? Am i earning more now?

Lol Not really. It’s even worse! Now an average 100 clicks give me $0.50 to $0.75. There you are Google Adsense. You really are brilliant with getting much more targeted ads.

My Dear God. Who in the world pays less than 1 cent per click to any advertiser program in the whole wide world?

I checked the ads running on my sites. Just reading the url and opening them in new windows. Each and every site is Made for Adsense (MFA). And they look worse. With absolutely no content. For God sake even blogspot blogs are being advertised by Adsense! Where is the Google TOS of “good landing page” being applied? I just want to ask, why is Google so dumb with their advertisers? And yet they come out brave and merciless when it comes to paid advertising on other sites which we have, by deindexing and banning and PR ripping things. What is it with you Google? Why don’t you get a life? Why can’t you live your own life and let live others their own?

Fact is, Google won’t let you sell advertising on your sites and blah blah blah, because they want people to use Adsense instead. But hey, they will not let you earn with Adsense either. Because they can’t filter MFA’s from their advertiser program.

So there you have it. Google Adsense vs. Celebrity Sites. You clearly know who the winner is! Don’t ruin your life. Get some better publisher advertisement programs on your celebrity sites.

Option Trading Books

ere are many option trading books worth reading. Before you consider one, you should have a basic understanding of technical and fundamental analysis. I believe you need to be a good stock trader before you can become a good option trader.

Here are a few of my favorite option trading books in order of complexity.

Options: Essential Concepts, Third Edition by The Options Institute. The Options Institute was formed by the various option trading exchanges to educate retail and institutional clients. This option trading book gives an overview on the history, pricing, strategies, floor operations and Market Making. It is easy to read and it provides an excellent foundation.

Options for the Stock Investor, by James Bittman. This option trading book goes through many of the basic option trading concepts and the terminology. James is an instructor at The Options Institute and he has decades of experience. He is one of the most knowledgeable authors in the industry.

Options As a Strategic Investment, by Lawrence McMillan. In short, this book is known by many as the "option trading Bible". I have read it cover-to-cover many times. It is detailed and comprehensive. It explains every option trading strategy and every option pricing concept. If you read it and understand half of it, you will know more than 90% of the people engaged in option trading.

McMillan on Options, Second Edition by Lawrence McMillan. Larry is one of the foremost authorities on option trading. In this option trading book he rolls up his sleeves and dives into some of his favorite option trading strategies. He uses examples to illustrate his approach.

Option Volatility and Pricing: Advance Trading Strategies and Techniques, by Sheldon Natenberg. This option trading book gets into serious option trading strategies and you need to have a good understanding of the basics.

As I mentioned before, to be a good option trader, you need to be a good stock trader first. Start with basic books on technical and fundamental stock analysis and then work your way up.

Index Trading vs Individual Stocks

Option Trading Question

Today Lloyd R. asks "I understand why someone would want to be long options, but why not use indexes for credit spreads? Stocks are so unpredictable and a news event (takeover, earnings pre-announcement, law suit...) can come at any time. The penalties are extreme"

Option Trading Answer

Great question. Stocks do carry a surprise component and obviously, when you are long premium you want that to a degree. You don’t want random surprises where you are continually blindsided. Indexes are diversified and consequently they do not have “unsystemic risk”. They only have “market risk”. There is a statistical advantage to selling out of the money put spreads, on indexes and I do like that trade under the right circumstances. With the market near a seven month low and the implied volatilities (IV’s) spiking - that trade is setting up.

As you know from my prior blogs, I do not advocate Iron Condors or neutral trading strategies. There is too much slippage and one big market move can strip away half a year’s profits. These are very popular “seminar” strategies and they are typically index based. At $3000 per seminar, they’re the ones making the money.

On the topic of index call credit spreads, I do not feel I’m properly being compensated for the risk. As the market rallies, the IVs collapse and you have to get too close to the money to get any premium. Look at the OEX July 600 calls and the 530 puts. Both are 35 points out-of-the-money (OTM) and one trades for $.70 and the other trades for $4.40. The risk reward ratio is not there on the call side.

Indexes have so many eyes focused on them that I don’t feel I have an edge. Every large institution is analyzing the SPY, OEX, SPX and they are executing baskets of stocks and futures against their option positions. I won’t pretend that I know more than Goldman Sachs and its 50 Floor Traders. There is no edge for me. I could tell you stories about the sophisticated trading tactics I witnessed in the OEX pit 15 years ago. If ever there was “fair value” it’s the exact price of that product at any moment. In the end, when I trade indexes I’m forced to predict what the market is/isn’t going to do.

My edge lies in my ability to find relative strength and weakness within the market and I have a proprietary program that helps me find that. There are opportunities that large institutions are not interested in. They can’t get the size done to justify trading it. There is a large advantage to trading a balanced long/short portfolio of stocks with relative strength/weakness. Choose well and the strong stocks gain more than the weak stocks lose when the market goes up and vice versa. This strategy helps me reduce my market risk. I also feel that I can identify supply/demand imbalances in a stock and I know when someone is trying to move “size”. That comes from my chart reading skills and I like to shadow them. In a crowded arena like an index, that trail is masked by “noise”.

I have found that careful research and selection can help me navigate news events. For instance, I don’t do credit spreads on biotech stocks. The chance of a material, unscheduled news event is too high. When all of my research has been conducted only a quarter of my trades translate into option trades for liquidity reasons.

Getting back to selling options, when the stock or the market are uncertain, the IVs are high and I’m rewarded for selling premium. The credit helps me distance myself from the trade and I can keep my objectivity. The key is to watch for upcoming news events and to get intimate with the stock. Know what’s driving it. Just as I would go long or short a stock, the credit spreads are no more than a directional trade with a built-in buffer. Another way to throttle risk is to size the position accordingly.

Never start your search by looking for stocks with high IVs. That is suicide. Those big premiums are there for a reason. There’s a very high likelihood that a lightly publicized event is forthcoming.

How I Use Technical Analysis to Find Stocks!

In today’s option trading blog I will discuss why I rely heavily on fundamental analysis in the latter stages of my research. I don’t start with fundamentals because I don’t want to wait around for five years while market figures out that AAPL is a good stock. That company was sitting at $15 with a pile of cash for years. Once it broke out in 2004, it was time to consider it. That pretty much explains why I start my research with technical analysis.

I want to make sure the stock is on the move so that I can make my money and get out. After all, as an individual, that is my edge. Large firms can’t be in and out of a stock so they rely heavily on fundamental analysis. They tour the company and attend shareholder meetings knowing that they’re in for the long haul.

I start my technical analysis by programming long-term indicators into proprietary searches. Without getting too specific, having a a 200-Day moving average that is higher today than it was 20 days ago is of interest if I’m looking for a bullish stock. Having an ADX that is over 35 and rising is also of interest. Finding a stock where the 20 day average daily volume is higher today than it was 10 days ago is also of interest. These are a few examples of the technical analysis that is built into my research before I even look at a chart. Most of my studies are based on relative value (where the indicator is now, relative to where it was a month or two ago). This filters out the vast majority of stocks on macro basis. As my analysis zooms in on the present, my searches target four basic set-ups I like to trade. On average, about 300 stocks make the list on a daily basis (bullish and bearish).

I trade break-outs/break-downs, gaps, trends and greenlines/redlines. These set-ups represent recent price action. A break-out/break-down is a 10-day high/low. A gap up is defined as stock with a low today that is greater than the prior day’s high (inverse for gap down). I like gaps so much that I even look at two and three day old gaps. A trend is defined as three or more consecutive closes in one direction. A greenline is defined as an open near the low (no gap) and a close near the high (inverse for redline). To recap, my proprietary searches start with macro indicators and end with the tail-end of the chart – the most recent price action.

There is a dilemma that every programmer faces. Searches can be too open (valuable time wasted sifting through symbols) or they can be too restrictive (most good trades are eliminated). I have found an optimal balance. The majority of stocks are filtered out by my search engine and the final step of the process uses the most powerful tool I know – a trained eye. I have and interface that allows me to quickly flip through charts. If a chart looks good I zoom out to a one month view. If it still looks good, I zoom out to a 1-Year chart.

When I perform visual technical analysis I look for nice tight price patterns. Once I have a handful of solid candidates that I really want to explore, I keep my tools pretty basic. I look at moving averages (20, 50, 100, 200), volume, trend lines and horizontal support/resistance levels. At this juncture I use the logic that if every other trader feels the level is important, so do I. If I can spot it so can they. If it is breaks, the event is significant because it will affect the demand/supply.

I am not a big fan of Oscillators, Fibonacci Lines, Elliott Wave… It’s not that they don’t work, they don’t work for me. There are a gamut of other indicators. Some are leading and some lagging. I’m certain a case can be made for all of them. Once a stock is in front of me all I want to do is measure it’s relative strength/weakness to the market. I do that by watching it trade. This is not the right way, it’s just my way. You have to find what works for you.

Once all of the technical analysis is done, I review the fundamentals of the company. This part of my research gives me “staying power”. I’m intimate with the company and I know what’s driving the stock. I also know if there are any news events on the horizon. The resulting “piece of mind” helps me take a little heat on the position without the fear that I’ve missed something.

All of my trade ideas come from my searches. Want to check out six of my bullish proprietary searches? Click Here. You’re bound to see some good stocks.

Bear Put Spread

When your feeling on a stock is generally negative, bear spreads are nice low risk, low reward strategies. One of the easiest way to create a bear spread is by using put options at or near the current market price of the stock.

Like bear call spreads, bear put spreads profit when the price of the underlying stock decreases. Bear put spreads are typically created by buying at-the-money puts and selling out-of-the-money puts.

Example

Using Altria Group , we can create a bear put spread using in-the-money options. With MO Trading at $56.78 in May, you might buy ten of the JUL 60 puts and sell ten JUL 55 puts.

In this case, the maximum profit would be the difference between the strike prices less the $3,000 it cost to put on the position. In this case, the maximum profit works out to $2,000 ((60 - 55 x 1,000) - $3,000). In contrast, the maximum loss would be limited to the $3,000 spent initiating the trade. Once again, this maximum loss is the amount used to calculate the ROI.

MO trading @ $56.89
Buy 10	JUL 60 Put @ $4.00	$4,000
Sell 10	JUL 55 Put @ $1.00	($1,000)
Cost of Trade		$3,000

If you like the idea behind the bear put spread, be sure to check out bull call spreads and bear call spreads. These can be comparable strategies depending on your objectives.