Options Trading System

Why trade indexes?

Unpredictable events such as news, rumors and earnings reports fluctuate the price and volume for individual stocks. We reduce the uncertainty by dealing with multiple options contracts in their aggregate, and by tailoring our indicators to process Nasdaq 100 and S&P 500 index derivatives options. The volatility of any options contracts in our indicators is diluted by addressing them as a group.

The main advantages of the index trading over the stock trading are:

• Less Capital Investment: As easily as you would buy a stock, you can buy into the index directly. Because there are low commissions, there is less concern about the load or other hidden fees!
• Less Volatility: The indexes are less volatile than the individual stocks they contain and represent. Indexes are an "average" of many stocks. Because the news and fluctuations of many individual stocks are smoothed out by the movements of hundreds of other component stocks, the volatility is reduced.
• Many Derivatives: When trading an index, you not only get the ability to trade index share ( SPDRs, QQQ, Diamonds) but you can also trade index options and index futures. Index options and futures carry far more risk, and of course more gain, but are not as volatile as an individual stock.
• Smaller Risk: As indexes are less volatile and less affected by an individual company's reports they are less risky type of investment. In addition, indexes cannot file bankruptcy.

The biggest advantage of the index trading is that index analysis is simpler than the stock analysis. By trading indexes you may skip many aspects of fundamental analysis. The companies that manage indexes (Nasdaq and Standard & Poors for Nasdaq 100 and S&P 500) do it for you. They analyze an index's constituents and they remove weak stocks by replacing them with strong stocks.

For our trading systems we selected QQQ and SPY - Exchange Traded Funds that track the Nasdaq 100 and S&P 500 indexes. By using our systems you will be investing into indexes. The main reasons we selected to trade indexes is that in opposite to stocks we will not get caught by unexpected news or a company report, plus, we may skip fundamental analysis and completely focus on the technical analysis of indexes. Potential profit from index trading could be smaller when compared to a potential reward that could be received from stock trading. However, index trading may deliver the stability and over time bring higher profit to investors.