Four Point Trader FAQ
Below, you’ll find questions subscribers have asked about Four Point Trader and the best ways to use our strategy.
Q: Do brokers call credit spreads by different names?
A: Most brokers call the option strategy a “vertical spread,” a “vertical call spread,” a “vertical put spread,” a “call spread,” a “put spread,” or simply a “credit spread.”
Q: What should I do if I’m having difficulty getting the options approval level to trade credit spreads from my broker?
A: If for some reason you do have difficulty getting the options approval level to trade with credit spreads, we recommend you open the account with the lowest level of option approval. This level of approval is typically for just buying options. Once the account is open and funded, phone your broker and request the additional approval for trading credit spreads. You can mention that you are familiar with credit spreads as you are using a trading research service that specializes in this options trading strategy.
Another option to get started is to request a virtual or “paper money” trading account that you can use to trade credit spreads. Do that for a month and then call back in to ask for approval again. And if you need help choosing a broker or learning how to place these trades, be sure to read our broker guide and our step-by-step trading guide.
Q: I’m having trouble finding the options you talk about in your alerts on my online broker’s website. What should I do?
A: Depending on which online broker you are using for credit spreads, the options might show up with a slightly different name. For example, the January 20, 2017 options will most likely show up as “Jan17” or “Jan 20 ’17.” These are shortened versions of “January 20, 2017.” When you see something like “JanWk1,” these are the “weekly” options contracts. Please never use these. In Four Point Trader, we only use the monthly options, which are the options that always expire on the third Friday of every month. These are almost always the most liquid options and give us the best opportunity for good premiums and return on investment.
Q: How do I know if I should still put on a trade?
A: The best window for putting on any of my trades is within 36 hours of the trade alert. During this time, there’s typically not much time decay on the options. And as long as there aren’t any major moves in the underlying asset, there are usually a couple of windows to get into the trade.
But to make things even easier for you, we update the Four Point Trader portfolio every day. You’ll find the portfolio on the Bonner & Partners website, in the Four Point Trader section. In the portfolio, under the “Advice” column, we’ll tell you whether a trade is still open, on hold, or closed. So before you put on any trade, make sure to check the portfolio.
We also send out weekly updates on our open positions.
Q: Why isn’t my trade getting filled?
A: With credit spreads, you receive a net credit when you place the trade. As general guidance for setting your limit price for your net credit, use the “midpoint” of the “bid” and the “ask” for the credit spread. So if the “ask” for a credit spread is $1.00 and the bid is $0.80, then the midpoint is $0.90. Placing your limit price at the midpoint usually results in your order getting filled.
Q: If my trade doesn’t get filled the day I place it, should I put it on again?
A: We recommend that subscribers always put in a limit order each day that is good for that day only. Do not put in a good until canceled order.
The best window for putting on any of my trades is within 36 hours of the trade alert. During this time, there’s typically not much time decay on the options. And as long as there aren’t any major moves in the underlying asset, there are usually a couple of windows to get into the trade.
So anyone who did not get their initial orders filled should check the Four Point Trader Portfolio online for advice over the next few days. In the advice column, you’ll see if a trade is a “hold” or if we still recommend getting into the trade by labeling it “open.”