Trading Rules

General Rules:

• Trade with the trend
• Trade what the price is not what you think it should or will do.
• Place new trades after 2Pm or after market
• Do not enter any new trades during an Investools workshop.
• Only trade prior to 2pm if defending or exiting a trade.
• Do not overexpose yourself in any single industry or sector. Limit your portfolio risk to no more than 10% per sector.
• Stop all trading once your entire portfolio is down 20%. Go to Paper trading until you uncover your
• Use GTC orders to exit trades
• Use DAY Limit to enter trades
• Plan 3-5 exit strategies prior to placing the trade.
• No single trade should have more than 2% loss on your entire portfolio.
• Do not turn a winning trade in to a losing one.
• Do not place any new or adjusted trade with out a written exit plan.

Strategy- Diagonal Spread Trades
Products traded-

ETF’s,
Indexes
A few Highly Liquid Stocks

Time Frame-

Long position is 4-6 months and ATM strikes.

Short position is Front month (>22 -14 trading days left) ATM or 1 strike OTM.

Other-

• Delta on long strike is at least .80
• Look for a 5% return in the front month or better
• Do not lose more than your max loss unwinding a spread.

Strategy – Short Vertical Spreads (Bear Call Spreads [BRCS]/Bull Put Spreads[BLPS])
Product-

ETF’s Indexes and short list of Highly Liquid Stocks (See current watch list)
Time Frame -
30 – 19 trading days left till expiration

Other-

• Delta on short position of <.20
• At least 1 strike below a support (resistance) level

Exits-

• Do not lose more than your max loss unwinding a spread
• 10-4 days till prior to expiration if profitable
• Buy back short side for .05 AND/OR  Close for 80% profit
• Closes below pre-determined support line / Trend line is broken
• Close when losing twice the original Credit