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Rookie Blog: The Hour Glass

November 19, 2020

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This week I want to talk about time. Are you a new trader? Are you just dipping a toe in the trading pool? If you are reading this blog then maybe you are a true rookie. If you are a rookie then maybe the following situtaion may be familiar to you.

If you are new to trading then I am guessing this is not your full time vocation and if thats the case then you probably have a full time job that takes your attention from the markets for a large portion of the trading day. This constraint can be detrimental to certain types of trading that require more focus. Swing trading can be done if one is only focusing after market hours as long as the work is done atferhours and then orders are set on autopilot. However this type of trading still requires daily attention to be truly effective. So the question begs, what if you don’t have the time to give your trades daily attention?

If you find yourself in a postion such as this then you must take a look at the systems and types of trades you are employing and be sure to match the ability to monitor with the specific needs of any trading style or system. This brings us to noe of my favorite trading strategies. This particular strategy gives a lot of leeway as to how much attention is required to successfully navigate the position.

The trade I speak of is the diagonal spread. This spread has many names such as a calendar spread, or a poor boys covered call. The beauty of this type of trade is it versatility. If you have a eye on a direction but your not really sure how fast the stock will go in that direction then this strategy is great for exactly that. If you have a positive outlook on a stock that just seems to trickle up on a regular schedule then this is your strategy and of course if you don’t have the time to watch a trade then this is defintely your strategy.

The versatility that I spoke of comes from the way we can construct these types of trades. We can make them long or short term. We can make them pay quickly or pay slowly. We can even handle short term changes in direction and still have the opportunity to profit from the trade. In short, we can massage this type of trade to fit pretty much any trading style and trading time frames.

Below is the risk graph of the diagonal trade. Take a look at it and get familiar with it. Over the next few weeks of this blog we will explore all the versatile ways we can play with these awesome trades!

Happy Trading,

Coach “Old Money” Holmes

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