version 0.42.3
BETA

FAQ

by Uncle Bob Williams

Q: How much capital ($) do I need to start trading Options?
Q: Do you offer a Free Trial?
Q: What does UncleBobsMoney offer me?
Q: What symbols / stocks do you support?
Q: Trade Alerts on Portfolios? (yes: SMS & email)
Q: Which Options Brokers do you recommend?
Q: Iron Condor vs. Condor - what is the difference?
Q: Do you teach adjustments / rolling and other position 'saving' techniques?
Q: What's the biggest mistake traders make?
Q: Real-Time or Delayed?
Q: What happens if everyone starts trading Options, won't the profit disappear?
Q: What Auto-Trading options do you have?
Q: How to upgrade from monthly to annual subscription?
Q: Do you offer managed accounts?
Q: How do I cancel?
Q: Don't see your question? Ask Us. We are here for you.



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Q: How much capital ($) do I need to start trading Options?

A: First, you need a "margin" account to trade Options. There is an SEC "minimum margin" account requirement of $2,000. http://www.sec.gov/investor/pubs/margin.htm

Second, if you only have a few thousand dollars, you have to make sure that your commission rate is low enough, otherwise the commissions will eat most of your profits. (thinkorswim / TD Ameritrade will give UncleBobsMoney subscribers a flat per contract commission rate with no minimum and no 'per ticket' charge. If you are a subscriber, contact us for details. We do NOT receive a commission or any compensation. We are able to arrange for this as a courtesy to our subscribers.) See our list of Options Brokers.

HOW TO START:
a) Start with $0. Paper Trade as much as you can and get used to the process and how to remove trades that require adjustments.

b) When you are ready to trade real money, start small. Trade 1 or 2 contract spreads. It's a lot different psychologically trading real money than Paper Trades, even if the amount of risk is small.

c) You can increase your trade size according to your comfort level.

note: Options trading involves risk. In general we suggest that people limit their Options trading to 10% to 15% of their investment portfolio. It is common for beginning traders to have a series of wins, which encourages them to increase their trade size. Eventually, the Market will have a correction - they won't remove the positions when they should because they cannot stomach a small loss and they end up with a large loss. That ends their Options trading career. We try to help people avoid that costly mistake so they can make consistent profits for the long term.


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Q: Do you offer a Free Trial?

A: We have a 'no questions asked' 14 day money back guarantee.

However, if you don't feel comfortable with that, we will give you a free 14 day trial with no credit card required. Just ask us here:
Contact us for a free 14 day trial
Please give us one business day to get yours set up.


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Q: What does UncleBobsMoney offer me?

A: There are 3 parts to our site:
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A) The TOOLS to find and manage great trades:

    1) The Trade Finder helps you find the ideal spreads to trade.

    2) After you enter a trade, the Trade Monitor gives suggested exit points and shows you the status of each spread so you can maximize profits.

These tools do the calculations for you so you can decide what to trade.

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B) MODEL PORTFOLIOS:
We give specific trade suggestions that we trade with real money, and we monitor those trades until we close them. The Model Portfolios are monitored in the Trade Monitor, in our weekly emails and email updates. We keep you informed on the status of all positions, along with a specific trade plans and exit / conditional order points.

We send email and/or SMS trade alerts on all trading activity. You place the trades with your own Broker.
(The SMS trade alerts are available in the USA and most International countries)

Model Portfolios Details:

CONSERVATIVE PORTFOLIO:
The Conservative Portfolio focus exclusively on Super High Probability Iron Condors on the main Indexes (RUT, SPX, NDX), and usually makes ONE trade per month. We will find, trade and monitor a 1 contract spread. You can adjust the number of contracts to fit your own account and investment goals. [If we make an NDX spread ($2,500 maintenance per contract), we will normally offer an SPX or RUT alternative ($1,000 maintenance per contract) for those with smaller accounts or who are not yet comfortable making $2,500 spreads.]

The Conservative Portfolio is geared for maximum profits for conservative Options traders. The people who follow our Conservative Trades are generally not full-time traders — they're most interested in making the highest returns with the lowest risk and least effort. We only trade positions that have a very high probability of profit.

Learn more about the Conservative Portfolio here: http://www.unclebobsmoney.com/learning/income-generating-strategies/conservative-portfolio

ADVANCED TRADER PORTFOLIO:
The Advanced Trader Portfolio is for experienced traders with higher risk tolerances who are looking for higher returns.

We suggest smart but aggressive Options spreads, which we will trade, monitor and adjust as 1 contract spreads.

You can select which trades are appropriate for you, and adjust the amount of contracts to match your risk tolerance and portfolio goals. At any given time, you may be trading all, some or none of the Advanced Trader positions.

Learn more about the Trade Ideas here: http://www.unclebobsmoney.com/learning/income-generating-strategies/advanced-trader

PAPER TRADES:
Paper Trades are for investors who want experience trading all four strategies, with no financial risk. We place Virtual Trades in all Market conditions so we can experience the good and the bad. Different Market conditions can affect how each strategy will perform, and the Paper Trades are our guide to becoming great Options traders. We explain which trades are good or problematic from the start of each trade.

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C) HELP FROM REAL TRADERS: We are available for questions and help all the time. We usually respond within a few hours during normal Market hours.


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Q: What symbols / stocks do you support?

A:
We will support all Options symbols shortly: in the Summer 2014.

We currently support these popular symbols:
INDEXES:
NDX, RUT, SPX, SPXPM | EEM, GLD, MDY, MNX, OEX, RTH, USO, VIX, XEO

Mini-INDEXES:
IWM, SPY, DIA, QQQ

STOCKS:
AAPL, AMZN, BRK/B, DELL, EBAY, FB, GOOG, GS, IBM, INTC, MA, MSFT, NFLX, YHOO


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Q: Trade Alerts on Portfolios?
(Conservative Portfolio, Advanced Trader Portfolio, Paper Trades)

A: SHORT ANSWER: Yes: we have both SMS and/or email alerts.

LONG ANSWER:
We try to give advanced notice on Portfolio trades.

Before we trade:
We send an email a few days before we enter any trades to let our members know which day we will be trading, and what types of trades we will be looking for.

When we make a trade:
Members can receive trade alerts (SMS and/or email) on the Conservative and Advanced Trader portfolios. The trade alerts are sent automatically by our system as soon as we enter or exit any trades. We architect-ed the alert system to send all the emails within a few seconds of our trade.

You can find the trade alerts selection boxes on the "My Account" page on the bottom side of the left column.
http://www.unclebobsmoney.com/profile/

NOTE: You should be able to get similar pricing to our trades in most cases even if you can only trade many hours later, so don't be in a panic to make a trade.

Trade Update Emails:
We have a weekly email update that goes to all members every Sunday. We also send any trade changes to all members via email as they occur. These general updates are much more detailed than the alerts mentioned above. But, because they are more detailed, the general emails are created by hand and generally go out within the hour after any trade was made.

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You can learn more about our Portfolios here:

Conservative Portfolio guidelines:
http://www.unclebobsmoney.com/learning/income-generating-strategies/conservative-portfolio

Advanced Trader Portfolio guidelines:
http://www.unclebobsmoney.com/learning/income-generating-strategies/advanced-trader

Paper Trades:
Paper Trades are for investors who want experience trading all four strategies, with no financial risk. We place Virtual Trades in all Market conditions so we can experience the good and the bad. Different Market conditions can affect how each strategy will perform, and the Paper Trades are our guide to becoming great Options traders. We explain which trades are good or problematic from the start of each trade.


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Q: Which Options Brokers do you recommend?

A: There are many excellent Options Brokers. We don't specifically recommend one Broker over the other. If you are happy with your current Broker, and you are able to trade effectively, then you don't need to switch to one of these.

=> thinkorwwim / TD Ameritrade
(thinkorswim / TD Ameritrade will give UncleBobsMoney subscribers a flat per contract commission rate with no minimum and no 'per ticket' charge. If you are a subscriber, contact us for details. We do NOT receive a commission or any compensation. We are able to arrange for this as a courtesy to our subscribers.)

=> Interactive Brokers

=> EOption

=> Trade Monster

=> Options House

=> OptionsXpress

=> TradeKing


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Q: Iron Condor vs. Condor - what is the difference?

A: We refer to an "IRON CONDOR" as both a PUT + a CALL vertical credit spreads.

A "CONDOR", would mean either a PUT credit spread or a CALL credit spread, but not both sides. (You'll find that these terms are loosely used: there is no right or wrong and that some groups will use them a little differently.)

In our Portfolios, we often have only a CALL Condor position or only a PUT Condor position. So, yes, you can definitely trade only one side.

The reason that people are 'excited' or 'enthusiastic" about trading both the CALL and the PUT sides (IRON CONDOR), has to do with the maintenance requirement of the Brokers.

If you have a April RUT CALL Condor that has a maintenance requirement of $5,000, then you can also have an April RUT PUT Condor without any more maintenance requirement. The Brokers only take maintenance on one side of a Condor (the highest side if they are not even trades). They do this because at expiration, you cannot be wrong on both sides.

As a result of this 'one side maintenance' requirement, many people look at trading one side as 'free': no additional maintenance, yet they get to take in more premium.

We always evaluate the potential risk of each side independently, and in many cases we will only trade one side. For example, one of the factors that we evaluate is the IV (Implied Volatility). If the IV is low, that means that the price of the Options will be low, and you won't be able to get your Short Strike very far away from the current market price. Depending on the Market conditions, we may only trade a PUT or only a CALL in that situation.


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Q: Do you teach adjustments / rolling and other position 'saving' techniques?

A: To adjust or not to adjust.
Our philosophy: we will remove a trade that has gone bad and take a small loss. We will then start fresh looking for the best possible new trade.

We don't play the constant adjustment / rolling games because you can too often turn a $5,000 or $10,000 trade that's gone bad into a poor $20,000 or $50,000 trade that is also on the edge of taking a loss. Adjustments cost money, and they use up capital that you could use profitably on different trades.

The Trade Monitor gives specific exit points for each trade so you can set conditional orders to remove your spreads if they get into trouble.

We are not against adjusting / rolling and managing positions by the Greeks. If you have a large trading account, and you know how to manage a portfolio using the Greeks, by all means please do. But managing a rolling portfolio by the Greeks is a lot different than pouring money into a bad trade.

On the practical side, many of our members are either beginning Options traders or have small trading accounts. We play things straight so these people can budget their accounts and positions in a normal fashion. Whether you have a $5,000 account or hundreds of thousands, you can allocate appropriately to maximize the use of your capital. We make consistent trades: like 2 High Prob Condors every month on the Advanced Trader Portfolio so people can allocate a specific % of their capital each month on those trades. (We may add additional Calendar / Butterfly or Double Diagonal trades depending on Market conditions - but we don't expect everyone to make all of our trades. Many members only trade the Condors.)


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Q: What's the biggest mistake traders make?

A: The biggest mistake traders make: Trading without a plan.

Successful traders trade with a plan:

A) A plan to find and enter great trades. Trading off your gut, or off of good / bad news is basically gambling. You may get lucky, but you won't be lucky over the long term. Successful, long term traders have specific trade criteria and they only go for great trades.

B) A plan, in advance, to exit the trade when the market goes against you.

You need to decide where your exit point is and stick with it. When the Market goes against you, you don't want to second guess or convince yourself that the market will 'turn around'. If things go against you, exit.

The mistake that knocks off beginning traders is that they don't exit when the market hits their exit trigger. They start rationalizing how the market will turn around, or they only have 'n' many days left or [ insert reason here ]. They just can't stomach taking a small loss - so they don't. Then the market continues to go against them, and their losses continue to grow.

Next thing you know things keep getting worse and they final exit with a massive loss after many fretful nights of no sleep and worried days. That ends their Options trading career on a very sad note.

Be disciplined. Set your exit points BEFORE you enter the trade, and stick with them no matter what.

IMPORTANT TIP: If you are just beginning, we strongly suggest that you Paper Trade for a while to get used to the trading process. When you start to trade with real money, limit yourself to only 1 or 2 contracts. It's easy to exit on time in a Paper Trade, but when you have real money on the line, even a very small amount it is psychologically very different.


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Q: Real-Time or Delayed?

A: The values you see on UncleBobsMoney are delayed.

Remember, UncleBobsMoney is about Income-generating Options Trades: we are not a 'day trading' company. You don't need 'real-time' data to be successful with our Options strategies:

=> If the market pricing is volatile, you shouldn't be trading Income-generating Options strategies.

=> Patience in your price negotiation when you enter or exit a position is probably the MOST IMPORTANT factor for maximum profits: not minor price fluctuations.


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Q: What happens if everyone starts trading Options, won't the profit disappear?

A: We wish everyone would trade options!
Why? Because there is no limit to the number of Options that can be sold. In fact, the more Options there are makes it better for everyone because more liquidity brings better pricing.

Options are not like stocks. There are a specific number of shares issued for each stock, and so the price goes up and down with the supply and demand. If everyone wants to buy a specific stock, the price will go up until the demand goes down. So stocks have a natural limit. If there is a 'hot tip' the price will adjust quickly depending on the demand, and the 'hot tip' won't be so hot.

Options have no limit. As long as someone is willing to buy or sell, there is a market price to do so. While it is true that the price of specific strikes may go up and down depending on demand, any unusual demand on one strike will create an opportunity on a different strike.

For example, what if we make a Call Condor spread, on the SPX (the SPX is the Options Index for the S&P 500):

STEP 1: My friend Steve, finds this great trade that he tells me about:

Sell the SPX 1620 Call strike for $3.50
Buy the SPX 1630 Call strike for $3.00
This will result in an immediate $50 credit, and the Broker will hold $1,000 in maintenance money (which is the maximum possible loss) in the account until the position is closed.
Resulting in a 5% return on the trade.

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STEP 2: It turns out that Steve, told the whole world about that spread. He was interviewed on CNBC, The Wall Street Journal, Yahoo Finance, and then Warren Buffett went live on every TV channel to say that Steve's trade is the best options spread he has ever seen in his life. This trade is getting HOT, and it is getting HOT fast. We can say that the demand will be extreme.

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STEP 3: We decide that we can't miss out on this action, so we go to place this trade, and we find that the pricing shot up on these strikes because of the high demand:

Sell the SPX 1620 Call strike for $3.25 (The 'sale price' went down because too many people wanted to sell it.)
Buy the SPX 1630 Call strike for $3.20 (The 'buy price' went up because too many people wanted to buy it.)
This will result in an immediate $5 credit.

OUCH. $5 is a lot less than $50. That's a 0.5% return vs. a 5% return. Definitely not worth it.

However, the increased demand on those strikes creates a better opportunity for us:

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STEP 4: We use this increased demand to make a different spread that capitalizes on the skewed Options prices:

We can instead, go for the more conservative spread:

Sell the SPX 1630 Call strike for $3.20 (This is the strike that everyone wanted to BUY, so the price went up. We can use the inflated buy price to our advantage to make more money buy selling this strike instead.)
Buy the SPX 1640 Call strike for $2.60
This will result in an immediate $60 credit.

GREAT. $60 is more than the original spread price of $50, and we have the added benefit of taking a spread that is 10 points further out (safer). That's a 6% return vs. a 5% return on the original spread. Definitely worth it.

If we were more aggressive traders, we could have gone for the:
Sell the SPX 1610 Call strike for $4.05
Buy the SPX 1620 Call strike for $3.25 (cheaper than the original price of $3.50)
This will result in an immediate $80 credit. Of course we take a little more risk with this closer spread, but we are able to grab an extra $0.25 (2.5% of profit) because of the high demand on the original strike.

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When these types of pricing anomalies occur, they are very easy to see in the Trade Finder page because the YIELD value will be higher on the spreads adjoining the trades with the high demand. You don't need to do any math, you just need to select the trades with the highest yield in the strike range you want to trade.

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Plenty of liquidity with Options:
Some people ask how big the Options market is and if there are limits. The Options market is huge, and there is plenty of liquidity to support all the trades that are posted. We have a page that shows the how much it would cost to buy all the outstanding Options contracts. http://www.unclebobsmoney.com/learning/understanding-options/options-cash-value

For example, SPX (Options on the S&P 500), usually has over $60 Billion in outstanding Options. That's Billion with a "B". That is a lot of money buying and selling options on one symbol.


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Q: What Auto-Trading options do you have?

A: We no longer support Auto-Trading, and we removed all official Auto-Trade partners.
(We offer Managed Accounts as an alternative)

The problem with Auto-Trading is that there is no direct connection between our trade decisions and your trades. When the market is calm, auto-trade can work OK. But, when there are problematic trades (Market moving too fast / gaps up or down), the Auto-Trade system fails because of the very limited communication and functionality between the us and the Broker. These limitations can lead to large and unnecessary losses for the investor.

Here is the whole picture, so you understand why we no longer support Auto-trade:

Opening a new trade, is not ideal, but can work out OK with Auto-trade. When we place the opening trade, our system sends the Auto-Trade Broker a trade alert email with the trade parameters and limit price. We may hear back from the Auto-Trade Broker in 30 minutes to an hour that all the contracts have been filled (we have no idea how many contracts the Broker needs to fill). However, the Market price can change and we may have to send emails to the Auto-Trade Broker to adjust the price. Again there is a waiting process. If we don't receive an email with a fill, we normally have to send a more aggressive price (which is worse for our customer) in order to get all the contracts filled. If we don't send the more aggressive price, then our auto-trade customers don't get our positions and they get upset. In almost every case, they preferred the worse price over missing the trade.

The real problem is closing trades with Auto-trade.

First, it's not possible to place a conditional order with an Auto-Trade. For example, on a Condor Put spread, we want to place a conditional order to close our position if the price of the underlying drops down too much in the case of a 'crash'. IE: If the RUT is at or below 700, then close our spread at the Market price. You can't do that with Auto-trade, so if there is a crash, you are relying on a chain of slow manual events to get your position closed, in which case you could have a massive loss instead of a small loss.

Second, if the Market is moving fast (but not crashing), you run into the very slow and very inaccurate 'price negotiation loop' mentioned in the "open trade" section above. Again, your risk for a large loss with the Auto-Trade is high.

In those rare but critical times, your positions really need active trading, and Auto-Trade simply fails to provide the necessary connection and speed between the decision maker and the trade execution.

A better alternative to Auto-trade is Managed Accounts:
There are many people who simply don't have the time or availability to manage their trades, which is why we offer Managed Accounts, where people are able to maintain full control of their money, yet they enable us to actively make the trades for them.
Learn more about Managed Accounts.


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Q: How to upgrade from monthly to annual subscription?

A: There is a button on the 'My Account' page to "upgrade to Annual subscription" which will take you through the very quick process of cancelling the monthly subscription and starting the annual subscription.

** Your annual bill will only be charged after the monthly subscription has ended. You will not be double charged for any time that you are member.

Because there is no period of double charge, you can make the upgrade to annual at any time.


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Q: Do you offer managed accounts?

A: Yes, we offer managed accounts.

WHAT IS A MANAGED ACCOUNT:
A managed account is where we place the trades for you. Using Interactive Brokers, you setup your own account, that you maintain full control over at all times. Interactive Brokers has a feature that allows us to be the 'money manager' so we can make trades for you in your account. We cannot move money out of the account, and you can log in and see your trade positions at any time. You get the benefit of personal money management with safety of controlling your money at all times. (YES, we can manage IRA accounts.)

We set up the managed accounts this way for your protection. There is no shortage of money management scandals in the news where lowly individuals misused or lied about how the funds were invested.

With our managed accounts, there is no possibility of a scandal.

=> Your money is in your own brokerage account, and you maintain full control at all times.

=> We never have access to your password.

=> We cannot transfer money out of your account.

=> You can see the current positions and all the trades we make for you.

PROFIT GOALS:
We seek a 18% - 20% annual return after all costs.

You can select to remove the profits after we close each trade for income, or reinvest all or part of the profits.

=> Interactive Brokers allows you to make one withdrawal per month at no charge (wire transfer or ACH transfer to your bank). Additional withdrawals are only $10.

=> At the close of each trade, your funds are in cash. Most trades last only 30 to 60 days, so your funds stay liquid to give you the flexibility of adding or removing funds without tying up your money for long periods.

MANAGED ACCOUNT FEES:
1% annual management fee, calculated on the net liquid value.
20% performance fee on profits.
High-water marking. (This means the performance fee is only calculated on real profits. If there is a loss, we do not collect performance fees on the recovery profits.)

Interactive Brokers calculates the fees and deducts them automatically on a Quarterly basis, 5 days after the end of the Quarter.

(For those not familiar with managed accounts, industry standard fees are 2% annual management fee, and 20% of profits. We give a discount on the annual management fee because the funds are held in your own account.)

HOW TO GET STARTED WITH A MANAGED ACCOUNT:

1) Please contact us, and let us know you are interested in a managed account.

2) We will have Interactive Brokers send you a customized link to start the process.
(The link is generated by Interactive Brokers, and it links your new account to us as the money manager. You can remove the money management authorization at any time in the future.)

NOTE: If you already have a Interactive Brokers account, we will explain how to set up the money manager authorization. Please note that Interactive Brokers only approves money manager authorizations once per week, on Friday.

NOTE: Interactive Brokers has a $10,000 minimum to open an account, and you need to be authorized for US Options trading.
(If you have any questions about the account opening process, just ask us.)

3) Sign the Advisor Agreement, and email/fax back to us. (We will send you the advisor agreement when you start the process.)

4) Once your account is funded, we will start trading on the next available trade.

Of course, if you have any questions, we are always available.


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Q: How do I cancel?

A: You can cancel your subscription at any time. There is a button on the "My Account" page to cancel, which will send you to Amazon Payments so you can stop your subscription.

You will still have full access to the website tools and the private email updates until the end date of your paid subscription. IE: If you paid through the 20th of the month, even if you cancel on the 5th of the month, you will still have full access until the 20th when your subscription expires.


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Have a Question? Comment? Suggestion?
Ask us.