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Options Trader FAQ

What do you mean when you refer to "big money traders" and "the smart money"?

Smart money is usually big money. That is, smart money is typically managed by institutional investors who place big bets. Occasionally, smart money is represented by individual investors who have a unique perspective.

Some of the biggest returns an options trader can make can be uncovered simply by following what the "big money" is up to. These mega-traders, representing institutions and funds and other cash-flush entities, aren't just out to make average returns.

Nope, they've got massive resources at their fingertips -- both financial and informational -- and they use them to their advantage to make amazing, under-the-radar trades; not just before headlines hit, but oftentimes even creating those headlines with their actions!

Is it legal for us to profit from what these big-money buyers are doing?

Let's face it, these big-money traders know something. We don't know exactly what they know, but when options start trading frenetically and the underlying stock stays pretty much flat, something's definitely going on that deserves a second or third look.

But we're not just looking at trading volume. Among many other factors such as open interest, delta and the size of the trading blocks, what really separates the "maybes" from the killer trading opportunities for us is the persistence of the buyers.

That is, if they keep going back to the well for more, and paying incrementally higher amounts of money each time they return, they clearly know something that the rest of the world isn't (yet) privy to, and they're positioning themselves for profits.

So, long story short -- the big money may know something, but whatever it is, we don't have access to that data. But what we do have access to is not only a real-time, bird's eye view of their trading activities, but also a direct line to the options exchange floor traders and market-makers who are actually handling these trades as they come across the tape.

Our on-the-ground intelligence network can ferret out those trades that are simply being done as hedges from those that are clearly coming out of the blue as significant directional bets on where the stock is going to trade, and when.

How do you arrive at your trading recommendations?

We use advanced computer analytical tools to observe and identify in real-time smart money trading activity in all of the U.S. option markets. With our technology systems and decades' worth of experience working with institutional money managers, our objective is to identify and communicate to you important, money-making trade opportunities.

Upward of 10 million option contracts trade hands on the exchanges each day, so not only do we see every trade as it's happening, but we know the difference between "business as usual" and significantly out-of-the-ordinary bets that stick out like a sore thumb to us, but that the average trader or investor would miss.

When will I receive my newsletter and trading opportunities?

We publish a Weekly Trading Landscape every Monday afternoon, to give you our take on where we think the markets are heading based on what our options indicators are telling us. These will be sent to you via e-mail and will also be archived on the Web site.

Trading opportunities will be sent separately from your Weekly Trading Landscape, as we are committed to finding you the best options trades and they may not coincide with our standard publication day.

Additionally, because our Alerts contain actionable information -- whether it's a new buying opportunity or a directive to cash out -- it is our goal to deliver those opportunities to you during market hours as they arise. Because we are taking cues from the big-money traders' actions, they could be getting positioned on any day of the week.

Just like with our weekly issues, we will send your trades straight to your inbox so that you don't miss a beat.

We understand that you may be in the boardroom, operating room or family room when alerts and issues arrive in your inbox. For your convenience, we offer you the option to add a secondary e-mail address to your account so that, whether you're at home, on the road or at the office, you receive your trades in a timely manner. All you have to do is contact our customer service team and they'll get you set up!

Where should I set my stop-losses on my options trades?

We generally have not used sell stops with options because of the extreme volatility of options. We watch all of the option positions all of the time and try to control possible losses from positions that are not working out. There will clearly be some cases where our recommendations are not profitable. But, in many cases, if we react too quickly because of a current paper loss, we will lose an eventual realized cash profit.

We try to follow the option signals very tightly. We find that following option signals is more reliable than reacting to the radical, short-term swings in the market. Our goal is to keep losses to a minimum and let the winners run.

When is it time to close my trades, and how do I know at what price to close them?

We are constantly monitoring the portfolio and will issue an alert to sell a half-position or a full position as conditions warrant. If you receive an alert to close 50% of your position, that's exactly what it means -- if you bought 10 contracts, you cash out of five of them (which serves to protect your original investment capital) and the five remaining contracts that are still "in play" are a way of using what might be pure profits to generate even more profits.

Just as we issue Buy Under prices, we also provide a recommended price where you should sell. But when the markets are incredibly volatile and fast-moving, a sell alert telling you to "Close the XYZ Puts for $2 or better" may seem easy enough when you receive the alert. But if you put in a limit order to sell at $2 but the price never exceeds $1.95, you may have a decision to make as to whether to put in another limit order or to take the $1.95.

Again, we are monitoring the trading activity and know whether our subscribers were able to get the recommended prices. If we recommend $2 as a closing price and we see a ton of trades go off at that price, that's the one we will use in our model portfolio to calculate our track record. But we've heard from many subscribers that they were able to get $2.10, $2.15 and even $2.20 -- far and above our closing price! (That's where that "or better" comes into play.)

And sometimes, yes, we may have to give up a nickel or dime to get out of a trade (i.e., $1.95 or $1.90). But it's better than overstaying our welcome and cutting into our profits even more.

In both our Weekly Trading Landscapes and in Alerts, we will address positions that need further clarification. We seek to provide you with the information you need, which could be to keep the faith with your limit orders, to seek a different price, or to simply let the trade go and wait for the next one. Because, trust us, there will always be a next one!

What do I do if I have a question about this service or need to make changes to my membership?

The Options Trader customer service team can be reached the following ways:

Phone: 1-888-225-9373

E-mail: Options@ChangeWave.com

Web: ChangeWave.com/Options/CustServ

Although we regret that we cannot provide individual investment advice, we look forward to assisting you with inquiries about current open positions, our trading strategies and other questions related to the service. We recognize that many of you are trading options for the first time, and we look forward to helping you to become successful along the journey!

Our customer service team can also assist you with account-related questions such as password changes, updating your billing information and, as we mentioned above, adding a secondary e-mail address to your account.