With all the market volatility comes great trading opportunities to the ones that know what they are doing. But, how about after spending years to learn a product, it now becomes much more expensive to trade? You have the skills and the knowledge to trade the instrument, but the Notional Value of the instruments has driven up intraday margins to trade them. We have seen this in the last year with the introduction of the Micro Equities which were introduced in May 2019, as a means and way to bring more traders to the liquidity table of trading products such as the E Mini S&P 500, and the Emini Nasdaq.
When I got into trading E Mini Equity Futures were already far introduced in the late 1980’s, after the larger contracts were not a thing for the retail market to even try to dabble with them. One wrong tick against you and it costed a weekly salary for most. But then they also got expensive for most traders to participate in, and thus then Micros were introduced.
But what about when market volatility spikes up margin costs, and you have been trading from a small account? You now have a situation here with this current coronavirus pandemic, and “geopolitical noise and headlines” have caused volatility so such, that intraday margins on Crude Oil are set at 100% margin requirements. Over $10,000 per contract to trade what was once a $4000 margin with day trading requirements of ONLY $500.
What do we do, with the skills and knowledge we have but now with a limited account size to exploit a trading plan and strategy on crude oil? SIMPLE. We put on a Calendar Spread in the direction of our desired direction. Let me explain.
Say for example we are trading June Contracts of Crude Oil at $19.69 per barrel close of day on Friday.
Based on your own technical or fundamental reasons you find you want to take advantage of the continuation of this long trade come this week. You use whatever strategic pullback of price rules, to take an entry but you can not afford to participate, OR you do not want to be a participant in the volatility and thin liquidity of the current month trade. (JUNE)
We can move over another month FIRST, BUY or LONG the July contract month, and then SELL August at the same time, and create a spread (hedge) trade to reduce not only some of the volatility of the outright contract (June) move, but to reduce the margins it would take to trade by up to 70-95% in most cases. So now rather than needing a $10,000-20,000 dollar account to trade one contract, we can so this for as low as, $1,000 with what is referred to as Automatic Span Margin Credits. This is provided to us at some of our preferred broker accounts and platforms that we use. Let us look at the July-August Spread Trade from Thursday of this last trading week.
So why are we not taking advantage of trades like this, rather wasting time talking about it with friends and coworkers, etc.? I personally believe that most of us are not aware on how to trade these products like this and if you have a chance to know how, you can really have a lot more diversified ways to make money in your portfolios. With a strategy the way I use like this, plus with the correct instrument like Crude Oil, you can trade this intraday.
Other things may be to use my technical strategies to trade other products with, such as stock options, forex and any futures and commodities.
The strategies I teach and use for myself are not just here to create a business sale and forget about you. It has far more meaning than that.
#1 Help a Fellow Trader Make Some Cash.
#2 Learn from other traders how to trade better (I am always in the seat of a student)
#3 Make new friends around the world to meet one day
#4 Better market relationships (birds of a feather)
#5 Helping communities grow. Everyone has goals and desires with their success in trading. A lot come from unfortunate places and they want to grow as a community. I believe in the same. I believe everyone deserves a shot at the markets in an affordable, efficient, and systematic way, with no stress, no BS, and no hyper techno market babble jargon.
The approach I was given and took upon myself years ago was one that had pain, ups and downs, and sometimes serious rejection from large players that I would approach for help. That is how the business is. Too much ego and selfishness. My plan is to help the trading community get into these professional trading styles and prosper from them. I plan on meeting everyone that is part of my trade family and share experiences around the world that WE ALL DESERVE!
Trade Safe out There and Trade it When You See It!