The Non-Timing Trading System by George O. Head

Author:George O. Head
Language: eng
Format: epub
Publisher: Business Expert Press
Published: 2021-02-02T00:00:00+00:00

Use the SPY

The system and all the examples we use are based on using the SPY. The SPY is an ETF (Exchange Traded Fund) that mirrors the S&P 500 at 10 percent of its value. In addition the SPY has options available. This is ideal for the small account. Since the SPY and the S&P 500 encompass a large number of stocks, it provides the necessary diversity.

Also the option chain of the SPY is generally traded in increments of $1.00. This provides the flexibility necessary to control risk. This is especially important if your available capital is less than $5,000.

The SPY also has enormous liquidity, that is, the number of contracts that are open and traded. This will determine the spread between the bid and ask price of the option. If you are using a security without good liquidity then the distance between the bid and ask price will be very large and you will probably be overpaying for the option. In addition it may be difficult to close the position. You may be at the mercy of the market maker.

One final advantage of the SPY is that it provides weekly options. This means that we can get closer to a 90-day and 30-day expiration month.

The Non-Timing Trading System may work with other ETFs as long as they have substantial liquidity, and you are confident that over time their market will go up.

I would be very leery about using The Non-Timing Trading System on individual stocks. The first basic assumption of the system is that over time the market will go up. That cannot be said with any certainty about any given stock. When you’re dealing with the SPY or other ETFs, there are enough stocks involved so that the risk is spread. With an individual stock on the other hand you are subject to bad decisions within the company, external economic forces, competitive environment, governmental regulation, and all of the other things previously mentioned that can affect the price of the stock.

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