20 Questions about the HOT Options Trading System

1. What do you mean by a “trading system”?

A structured, systematic approach to stock options trading that relies on rules and strict management.

2. Is the System based on “automatic trading” ?

No. You the trader make all the strategic decisions, which are then automatically executed by computers and filled by the market.

3. What are some of the unusual features and benefits?

designed for normal hours, Hawaii time
focussed on stocks above $200
prefers “high probability” trades with “defined risk”
no more than 5% of capital at risk on any position
prefers selling to buying options
usually profitable, regardless of overall market direction
uses paper money as a training tool
requires no day trading, and no more than 1 – 2 hours a day, including research and record keeping

4. So what results is it designed to achieve?

5. Does the plan cover all kinds of stocks?

No, only those that meet our criteria. That means we usually avoid options on pharmaceutical stocks and others with erratic price movement. We also don’t include many popular stocks such as Citibank or General Electric because they do not meet our primary criteria.

6. Can I trade the HOT System in my 401k or IRA?

Possibly. It depends on the account rules. Check with your accountant or TDAmeritrade.

7. What strategies do you use to trade?

We most commonly use credit spreads, which result in a net positive cash to the account.

8. How do you select the stocks you trade options on?

We review all optionable stocks above $200 and arrange according to probability of success. Then we choose appropriate strikes and time periods to minimize risk and maximize returns.

9. Do you use stops?

Not usually, as stops are for stocks, and we are not trading stocks. However, we use TDAmeritrade’s “Alerts” which tell us when our positions need attention.

10. Do you trade options of all lengths–weeklies, LEAPs, as well as monthlies?

11. How do you select what strategies to use on these stocks?

Our analysis of price patterns tells us whether the trade should be direction or non-directional.

12. How do you organize your trades?

Our records are arranged by month of expiration. At any time, we can evaluate the profitability of our positions for that month and make adjustments.

13. How do you get the “fills” you want for your trades?

We use automatic “limit” fills. In other words, if we don’t get the price we want, we don’t do the trade.

14. How much do you place at risk on any one trade?

15. How much can I lose if a trade goes bad?

You can lose all of the amount you originally calculated when you put on the trade. If your analysis says profit was limited to $5 and potential loss was $6, then could lose the whole $6.

16. How do you keep a public track of your trades?

HOT maintains a $100,000 demonstration account which can be reviewed by students at any time. In addition, we will release an audited statement of the account in January of each following year, as review by a CPA.

17. How long does it take to learn the HOT Trading System?

Most students are able to learn it in about 6 months of classes. We begin with Fundamentals (12 classes), and follow with Advanced (8 classes). Classes are held weekly.

18. Do you make stock or options recommendations, or give investment advice?

No. We teach you the tools you will need to trade successfully , but the choice of which stocks or options is up to you. No investment advice is given. All examples used in class or written materials are for educational purposes only.

19. Do you have any suggestions for beginning traders?

Yes! Do not use real money until you understand options well and have a track record of at least 100-200 trades. Instead, open a paper money account and learn to trade that to achieve 80% success, and at least 8% profit per month.

20. Does Honolulu Options Traders, LLC make commissions on my trades?