Issue 24: [KISS] Technical Analysis For Dummies - Masters in Trading Digest

[KISS] Technical Analysis For Dummies

Welcome to Issue 024 of Masters in Trading Digest.

In today’s FREE MIT Digest, we review the chart we shared the last issue and notice how the S&P 500 Futures trade around big levels.

One of the first lessons I learned in trading:

KISS = Keep it simple stupid

Today, I share the KISS method of Technical Analysis with you and how one trader learned to manage his options position and acquired the confidence that came along with these lessons.

We think you’ll enjoy this one!

Good investing,


[Major Level Alert] Keep Your Trading Super Simple

Monday Chart – 02/07/22

  • Major S&P 500 Futures resistance at 100pd Moving Average:  $4562
  • Major S&P 500 Futures support at 200pd Moving Average:  $4437

Wednesday Chart – 02/09/22

On Monday, we shared two key levels in the /ES Futures that proved reliable.

Yesterday’s low = $4456 (20 points from our support)

Today’s high (as I write) = $4563 (right at our upper support)

What happens next?

This is the million-dollar question, right?  Here’s how I would play it:

The upper support from Monday should be our “Line in the Sand.”

A “line-in-the-sand” is breaking the market down to one important number.  In this case, the 100pd moving average on a daily chart is our “line.”

BIG NUMBER:  $4563

Any trade above is bullish price and bearish volatility

Any trade under is bearish price and bullish volatility.

Lesson: Keep your technical analysis nice and simple.  Discipline and staying true to your practice are more important than trend lines.

FAQ: How Long Should I Hold My Options

This piece was written by Stephen Williams. Steve started trading with Jonathan Rose at the end of 2017. Four years after they met, Steve helps with customer support and assists newer traders with getting comfortable using Masters in Trading Tools in the markets.

These are the questions we hear most often in our Discord Community Chat:

  1. How long should I hold my options?

  2. When do I close my options position?

  3. What’s the price target of this options trade?

This is a challenge that many of us face when getting started trading. The sooner we can figure out how to fix it, the more money (and way more confidence) we can potentially have in the long term.

When I began trading with Jonathan, my confidence was low.  I enjoyed the training but I felt like I needed him (or someone) to be available all-the-time when I had doubts about open positions.

Darn, was I needy? Instead of giving me an answer to my many questions such as “is this a good time to buy?” or “do you think I should lock in profits?”, Jonathan would challenge my questions with the intention of pushing me to think independently.

I realize now that these were lessons I had to learn. Getting an answer would just be a band-aid until the same situation is presented again.

We’re not robots. I am not a robot. This is material I realized that I must learn.

It didn’t take long to learn the importance of trade management in options. Jonathan would always say to me, “Don’t ever give up your optionality; hold your options until expiration.”

I thought, “Don’t ever give up your optionality? What is this guy talking about?!?”

Now that I get it, you should as well. So, here goes:

Once you buy an option, you have many different options on how you can make money with that position. I now understand that you want to hold your options because those have all that good “optionality”.  If you get out of position, you have no risk left but also no reward.

If you trade your options using underlying stock, you are able to keep that optionality that these wonder derivatives give us.

Learn All About Position Management and Optionality (30-minute video)

Let’s take a recent example: $XPOF

On January 3, 2022, Jonathan shared a trade idea to buy the February 17.5 Strike Puts for $0.80 (and hold until expiration). It was a “lock-up” trade that gave us 45 days for this position to work; 45 days of “optionality.”

At the time, $XPOF was trading just shy of $21. Soon, the trade started moving in our favor and members began taking profits or discussing the best ways to take profits.

Some members saw the value of their position double, sold them, and moved on. 

That’s great, but my biggest lesson since working with Jonathan is this:  I paid for 45 days in this trade so how can I take advantage of all this time?

Instead of closing my option for profit, I was patient and bought 500 shares for $14.00. I just locked in a $950 profit. “Locked-in”, the absolute worst thing that can happen to me in this trade is I make $950 (100%+ my initial cost basis).

As an owner of ten $17.5 Puts, I have the right to sell 1000 shares of $XPOF at $17.5 and I just bought 500 shares at $14.

$17.5 – $14.0 = $3.50 x 500 shares = $1750.00.
The cost of the ten Feb 17.5 Strike puts was $800.
The worst thing that can happen in this position is a net gain of $950.

That’s right, if I do absolutely nothing, I am guaranteed to make a minimum of $950, but the market is still open and $XPOF will continue to trade up/down, and since I’ve maintained my optionality, I can participate when it moves.

I now have 34 days to make more money without adding any additional risk.

By purchasing stock, I put myself on both sides of the trade. I am now long stock from $14 so, if $XPOF rallies to $30, I’m making $16 per share (and we’re long 500 shares).

If $XPOF trades down to $4, I still own five 17.5 Strike Puts that will be deep in the money and have an extrinsic value of $13.5.

If the stock moves, I win because we’re on both sides of the trade and that is optionality. Rather than fear “Theta Decay” and make claims like “my options are wasting away,” I can take my time to utilize GTC orders and avoid staring at the screen.

This OPTIONALITY even allows me to trade after market hours (which is a big deal during earnings season).

Don’t just take my word for it, pull up a chart, open an excel sheet and draw out some scenarios to see how this can work for you.


Lock Up Trade

Learn About the Lock-Up Trade Steve Discussed Here

Earnings Season

Earnings Seasons Trade Approach – A Case Study

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The talk this week continues to be about Bonds and the Fed. We will tackle the yield curve in the next issue of MIT Digest.

Keep your feedback coming into  We’re excited to share your feedback along with fantastic suggestions for upcoming issues.

Until then, trade smart and always manage your tail-risk.

Thanks for reading,
Jonathan Rose

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Masters in Trading Digest - Issue 24

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