So why trade QQQQ, you may ask? Well, the most obvious reason is that the most liquid financial instrument in the option market today is of course the QQQQ. And this is certainly the reason why so many short term option traders focus all their effort on this one particular index.
We will now take a look at one of the most common strategies used to trade various indices, especially the QQQQ index and what strategy is best suited for trading this particular index.
There are dozens of different option trading strategies out there that you can use to tailor to the current situation of the stock market. Some are good when the market is trending strongly while others are designed for when the market is flat or experiencing low volatility. One of the most common option trading strategies used by many option traders who also offer newsletter subscription services to their subscribers, is the Iron Condor/ Credit Spread strategy.
Many option newsletter services almost use iron condor strategy exclusively. The single most important reason as to why this strategy is so popular is because due to it high probability of winning. If done correctly, you can generate consistent income month after month and it can be very lucrative as sometimes you could go on a long winning streak month after month without experiencing a losing month in a year.
However this strategy is not without its pitfall and dangers. The single most important drawback is it requires a high margin to establish the trade and when the trade does go against you; you could be looking to lose a significant portion of that capital.
What most traders aim to achieve is a 5% to 10% return on the capital that they put to risk, so for every $5,000.00 they risk, they aim to bring back a return about approximately $250 to $500. However if the index or stock gaps at the opening and continues in the direction, either up or down like what we experienced in the subprime crisis, you could end up losing up to 100% of your capital for that particular trade.
A lot of option traders tend to promote iron condor strategy as one which works in both trending market and sideway market, but the truth is it works best only in sideway market. When the market suddenly starts to trend strongly from a flat market, you could lose your shirt with this strategy.
The purpose of this article is to bring your attention to a completely different strategy based on hours of trial and error which is developed by a hedge fund manager who is actively using this strategy to trade his money and as well as his clients’ money.
This strategy is known as the Ride the flow system. It is a little known strategy which dynamically hedges its position accordingly based on the current movement in the QQQQ index, where you simply put on the trade and hold it month to month. It seeks to generate a 5% to 10% a month conservatively without requiring you to put up with a high margin. This is NOT your everyday Iron Condor or Credit Spread strategy as this strategy can really profit in up, down and sideway market so long you keep dynamically adjusting with the flow of QQQQ.
This is one of the best strategies out there in terms of risk and reward and as this is a self-developed, own proprietary strategy which you will never find anywhere else, so you can be sure that there wont be too many people using this same strategy as opposed to strategy like Iron Condor Spread strategy which is used many traders out there from novice traders to veterans. One problem with Iron Condor is that almost every option newsletter out there trades this strategy exclusively and nearly all of them tend to trade the same indices, such as SPX, RUT, SPY, etc. Now when too many people are trading the same vehicle, you are bound not to be able to get filled at the price that you want.
In addition this strategy doesn’t require day trading or daily monitoring so users do not need to be glued to the system every second. This is a conservative winning strategy which is good for people who are medium to long term trader.
