Ken Roberts Chat

Let's Talk Trading (tm) with Ken Roberts
from February 12, 2002

As we begin this evening’s session, let me state the reason I conduct these monthly chats: to provide you the opportunity to ask questions and pick the brain of a successful, long-time, real-money trader. It’s not the highest and best use of our limited time here together for me to define basic terms and explain introductory principles taught in your TWMPMM Manual. That’s what my Course Counselors are here for... Now is the time for you to use me to help you apply the basics you’re learning and to prepare you for what to expect once you’re out in the market itself (either paper trading or with real money). And if we have some fun along those lines, so much better. Alright... I’ve got a Cohiba Esplendido fired up, here’s our plate of freshly baked ranger cookies, the coffee’s poured, so let’s talk commodities!

larry asks:
Hellow Ken: I have just completed the TWMPMM II course and began to paper trade. I am determined to succeed. My question is "When the first round of options comes close to expiration and you're ready to purchase the second round, do you look for options as far out as possible?"

at 6:03:14 PM
Yes, always go for time. Thanks Larry!

SoccerLover from Canada asks:
Ken, what type of chart formation or action are you looking for in Oats before getting back in?

at 6:05:05 PM
Good question, SoccerLover. I traded Oats' 50% retracement up on its weekly chart. Now I'm waiting for its 50% retracement of that move back down.

ludeman asks:
From Sioux Falls, SD Ken, I love what you have taught me thus far! I own an Oct. Sugar put that is not too far from being in the money. Get out now or do you see Sugar falling some more? Thanks, Ludeman

at 6:07:13 PM
Well, Ludeman, I assume you traded sugar's 50% weekly retracement down, which has already completed. Now I'd be looking for cheap calls . . . .

markmatt asks:
Is it difficult to liquidate a highly profitable option on the day you want to do so, such as the yen option you referenced that increased in value from $12.50 to over $2,000 (it's hard to believe that a buyer is readily available for such an option)?

at 6:09:30 PM
Yes, markmatt. I've never had a problem liquidating my options. And yes, it does make you pause and ask Who's paying this much money for something I bought so cheap?! Usually the answer to that question is someone who's covering losses.

renegade in stmbt asks:
You say never to "sell" an option. Is this just a matter of terminology? Do I need to make sure my broker says "liquidate" when he records my order? Or is the fact that I've already purchased it, someone else originally sold it therefore someone else wrote it, have me protected?

at 6:11:15 PM
Always be as clear as possible -- especially when placing orders with your broker. When you say "sell" regarding an option, that means that you wrote it (which I never do).

Jim from Kalamazoo, MI asks:
Hi, Ken. I have not been able to chat in awhile, but I am back. I was wondering if these puts in the Eurodollar market were too far out of the money. Sept '02 95 put, Dec 02 94.50 put, Mar '03 93.75 put.

at 6:15:21 PM
I'd stay with the 95 put, but no farther out than that. Thanks for joining us again, Jim.

Lizzie asks:
I'm a brand new course member and will be starting paper trading soon. I was looking at a chart of cotton, is it in a channel? Am I seeing it right?

at 6:16:35 PM
Yes, Lizzie, that's a channel!

I Samuel IX asks:
Greetings from the River City, Sacramento. Ken, I want to extend heartfelt thanks for teaching us how to feel the extraordinary treasure of the present moment. Have been trading a few months now, mostly options, but I'm also long 2 March Bean Oil contracts at 16.34, trading without stops. Will switch to July on 2/21 or now?

at 6:18:26 PM
Right, Sanuel. But no later than 2/21 (my rule of thumb is at least a week before FND when you're long).

Ben Buyin Low asks:
Ken: Thanks for all your wisdom. Been away from markets for a while but coincidence brought me back recently. It is UNBELIEVABLE the number of EXTREME markets. I am long Coffee, long 3 Cdn $ contracts and long sugar. Just wanted to say Thanks for your teachings!

at 6:19:13 PM
Way to go, Ben! Thanks for joining us tonight.

I Samuel IX asks:
Ken, what does it mean and how do you handle it when FND = Cash, instead of a date?

at 6:21:40 PM
"Cash Settled" instead of an actual calendar date means that there is no physical delivery of any commodity in that market. In other words, they won't be dumping tons of anything in your front yard if you stay long beyond FND; it'll just be an accounting entry in your account of any profit or loss. Neat, huh?!

CHaDinTEMPE asks:
Hi Ken i just entered my first REAL trade last thursday when march copper broke above 72.50. I was wonderin what positions u hold in wheat and ur feelings on this market?

at 6:22:14 PM
I'm long!

mrosner asks:
mrosner in Hollywood, Fl. Ken, thank you for all you do. My question: Do you have any suggestions or strategy for getting fills on options when there is very little volume? What tactics do you employ to attract fills when the market is quiet? Again - thanks.

at 6:24:39 PM
I just put my bid out there and wait. (I'm filled on over 80% of my bids.) By the way, I NEVER consider Volume or Open Interest figures.

jack the barber asks:
Hi Ken and gang! I hesitated on pulling the trigger buying some natural gas options last week,now they are getting expensive again.(I'll wait and watch) Gold is going to do a 50% back down eventually,so i'm pricing put options (260 put's to be exact) Go soybeans!!! Thank's for everything Ken!!!

at 6:25:21 PM
Good goin', Jack!

BrianB asks:
Hey Ken: You've said many times that 2 rounds of options is usually sufficient for the market to move. I think you went 3 rounds on the Japanese yen. Many markets are taking longer than 3 rounds - ex. coffee, euroyen, soybeans etc....I know we lose if we get out - have you seen this before? Why are the markets so stubborn to move?

at 6:26:56 PM
Good question, BrianB. I don't think anyone's ever seen the markets like this before. We're in brand new territory now (so many extremes, so slow to move, etc.). But I'll be there when they move!

PACKIT asks:
HI KEN, THANK YOU FOR ALL YOUR HELP AND INFORMATION. I RECENTLY STARTED TRADING WITH REAL MONEY. ABOUT 1/2 IN EURODOLLARS AND 1/2 IN COFFEE. SO, ALL MY MONEY IS TIED UP IN THESE TWO MARKETS. I GOT INTO THESE TWO MARKETS BECAUSE THE EURODOLLARS WERE AT 20 YEAR HIGHS AND COFFEE 20 YEAR LOWS. AT LEAST UNTIL I GOT INTO THE MARKETS. ALTHOUGH I DID NOT HAVE VERY MUCH MONEY, I WANTED TO GET INTO THESE MARKETS BEFORE THEY TOOK OFF. IS THIS APPROACH OK, AS LONG AS I CAN WORK ON MY PATIENCE? Thank you. Packit

at 6:27:58 PM
That's it, Packit. That's the secret. Hang in there!

Bonita Joe asks:
Hi Ken! In a market like rice, where the open interest isn't as high as some of the grains, do you ever go to the weekly chart for a "better" picture of what transpired on the left side of a 12 month chart? The open interest doesn't really show up until the month being traded is at, or near, the front month thus the highs or lows, again on the left side or early months, may be different than what is listed on the chart. Thanks, and go gold and silver! Bonita Joe

at 6:31:21 PM
Yes, Bonita Joe. I believe what you're asking is Do you turn to the weekly chart for a bigger picture of what's going on? And the answer is Yes I do. Rice is gonna rally!

donnie asks:
Hi Ken, I've been doing the OPIP for Eurodollars. I had and have the following Dec 01 (expired) Mar 02 (about to expire) June 02, and Sept 02. I've been trying to get the Dec 02 filled since last Nov. Now it's time to put in orders for Mar 03 because my Mar 02 expire next month. If my Dec and March are not filled, I will be holding in only two months. Is there any chance that no orders will be filled and that I could be reduced to having no options even though I've been putting in orders a month before the others expire? The way things are going they're all going to expire and I'll be back where I started. Thanks, dv

at 6:34:24 PM
Yes, there's always that chance, Donnie, but when a market's not moving (like Eurodollars), typically your orders will get filled. The bottom line is, however, that you ARE in the market.

GW asks:
Ken, Thanks a million ($) for sharing your course with us. I've been a course member for about a year and a half and absolutely love it. My question is this, I've been long Cotton since November and am about to switch from March to May. Do you recommend keeping the same 50% target or using the new one reflected in the May chart?

at 6:36:29 PM
The weekly 50% target remains the same, but always use the front month contract's 50% target as your first (daily) target.

jbrian asks:
jbrian from forks WA Ken, I'm new to commodities, and I have really enjoyed your course.I've been paper trading for about six weeks still learning the formations.When fishing for options is it necessary to wait for a formation to develop? example: Cocoa has made a nice run the last few days, could I purchase a put option at a 1450 strike price? or would this be to risky? Thank you for all your help!

at 6:38:47 PM
That strike is so close to current prices, jbrian; it'll be expensive. I'd price a farther-out strike, closer to the 50% retracement target (like a 1200 put).

JS asks:
It seems like I go through streaks in my trading. some good some bad. Is this normal

at 6:39:15 PM
Yes, JS. EVERYTHING runs in cycles.

BonFon asks:
BonFon, Kansas, I'm ready to order more Charts but I have discovered the online charts. Do you think a paper trader can get along with the online charts? I'm really think this is the "cream of the crop" course. Am looking for success. Thanks very much. A poor Kansas farmer.

at 6:41:49 PM
Thanks, BonFon. Glad you're with us. I like my paper chartbook, but lots and lots of Course Members love using the online charts only. It's really a personal preference -- what works for you.

Msaint in Orlando asks:
Hi, Ken! I got TWMPMM I back in Aug '97, paper traded for three months, and did everything you said to do. When I started trading real money I listened to my broker and lost everything I invested. Now after reading your book probably two dozen times and paper trading for a couple of years I'm ready to give it another go. This time its nothing but tops, bottoms, and channels. Thanks to you and your staff for your help!

at 6:42:36 PM
Glad you didn't give up, Msaint. Ignore that broker!

rodmun asks:
cocoa has had a nice run up until today. do you expect to look for a 50% retracement?

at 6:43:13 PM
I ALWAYS look for a 50% retracement (and ALWAYS hang on until it's made)!

Woolycoo asks:
G'day mate. from Vic. Australia. Great chats! Printed out all the archives and had heaps of questions answered. They're a great resource. No questions for now. Just loitering with intent.Thanks!

at 6:43:52 PM
Thank YOU, Woolycoo! Glad you've joined us.

renegade in stmbt asks:
Is 1 week long enough to form a good 1-2-3 formation, what about a sideways channel? Is 2 weeks enough or should I watch for a longer channel? (I'm looking @ July Coffee, I was stopped out today in May with a $2000.00 loss but still have Sep 150 calls, I just really feel like I need to be in that market, I don't want to be left behind when it heads for it's 50%).

at 6:46:26 PM
That's the right thinking, renegade. Yes, formations can form in one and two weeks, and I'm glad you have those calls.

Big TEX Trader asks:
hey Ken, I loved your Tools of the Trade videos, that was the one that put you over the top. Anyway, since coffee is still dropping, would you buy call options now? Or would you wait until it reaches it's support of around 40 to buy since they will be much cheaper way down there. Oh by the way, I have been with you now for 4 yrs and am slowly making my fortune. I basically trade the swings of the 50% on a daily basis. Thanks guy for everything. Averaging about $10,000 a month.

at 6:48:01 PM
Thanks Big TEX! I'm still buying coffee calls and have orders in for more. No one knows if coffee will drop to 40, so I want to be covered in case it doesn't.

able asks:
ken i am taking your rich mans secret course and i just love it. thanks so much

at 6:48:31 PM
Thank YOU, able.

hendu asks:
Hey Ken, Didn't you just love that late move up in Cotton today? I've been long this market for a while now. Even the fundamentalists are NOW trying to say it's a "bull market" now. Doesn't it make you want to ask them...."what took you so long to realize that?"

at 6:49:00 PM
Yes, they have great hindsight, don't they?!

ENKIVAGGIO asks:
im looking at the monthly wheat chart...i see a channel for about 2 years now...its just a matter of time...are u going to be there when it blasts?

at 6:49:35 PM
Yes, I'm there, Enkivaggio!

goldnboy75 asks:
benny from miami ken i would like to paper trade eurodollars just like in the example in your video of the course, remember the 4 boxes?how can i do that if put options are so expensive now?

at 6:50:11 PM
Just stay with it until they become cheap. Patience pays . . . .

Contango asks:
Ken, good evening! When a commodity you're loaded up on starts a strong move up, do you ever stay in rather than sell at the 50% levels, on the possibility it's a major bull move that could make huge profits?

at 6:51:33 PM
No, Contango, I learned from experience to take profits at the daily 50% and then the weekly 50%. This works best for me. Thanks!

Trips22 asks:
Ken,Thanks for the gems at four star books. Just finished reading "Something you should know". Finally the commodity trading has started to make sense to me. Having fun in Lumbar finally, after riding all the way down.Like you said need confidence and patience. I love this business.

at 6:52:14 PM
Thanks Trips22. There's nothing like experience, is there?!

Rick asks:
Rick here from Richmond, VA Not all markets show a 1-2-3 formation. How do you pick a trade when that's not visible?

at 6:52:42 PM
Fishing with options, Rick. It's a powerful technique.

LMAC asks:
Ken, Thank you for having these chats. I'm doing the OPIP in Coffee and would like to know if there is a (rule of thumb)regarding for example the Dec 150 calls. In the last chat you stated you were going for 55 point calls. Do you have a point in time where you purchase them at a higher point because they did not come down to your asking price within your time frame. My March calls expired worthless and I am looking to purchase further out. I have May, July and Sept. and would like Dec now. I haven't checked for 2003 calls yet. Thanks Again.

at 6:54:56 PM
Good question, LMAC. Yes, I cancelled that December order and am bidding March coffee calls now. Remember: Always go for time. Rarely do I increase my bid because option prices don't drop, but that has occurred occasionally.

corncobb asks:
HI Ken! My March corn contracts are about to hit FND. When do you look to roll out further.(next week and which month?) Also THANKS so much for recommending Guy Finley's latest book.

at 6:57:27 PM
Yes, that's a powerful handbook, isn't it? I'd roll out of March corn before February 21st to either May or July. Thanks for logging on this evening.

Kevin asks:
I have been trying to buy 2 July coffee call options with a strike price of 120.00 at the market price, for 12 trading days that still have not been filled. My question is, is this normal, and if so can this happen when I have options that are showing a proffit, and want to liquidate?

at 7:00:13 PM
If you're bidding an option's market price, Kevin, I don't understand why your order hasn't been filled. (I'd also be pricing farther-out options than July 2002 right now. Go for time . . . .)

ninja asks:
Hi Ken, Stopped by 4 star books and picked up 3 back books/videos. I really enjoyed talking with Dolores? (a.k.a Mother) Her words of wisdom for new traders: DONT LISTEN TO YOUR BROKER, START WITH 1 or 2 CONTRACTS, and DONT BE GREEDY! Best part was this advice was free!!! Neat Lady

at 7:01:09 PM
Thanks, Ninja. Glad you came by. I'll tell Dolores (our Company Grandma) hello for you. Isn't she great?!

JS asks:
What is the dumbest question you have ever been asked

at 7:02:07 PM
The only dumb question is the one that is NOT asked, grasshopper.

CRAIG asks:
Ken, any word on boardroom seminars never have been to one, but can,t wait ! Up 17k since november.

at 7:02:53 PM
Thanks, Craig. Watch for the next Newsletter for upcoming Boardroom information.

wait-m-out asks:
Hi Ken, I've found that the course materials have answered most all my questions and i join the chats just for motivation and encouragement. I did however, want to make some new recipe suggestions to everyone. Hot coffee, iced coffee, coffee cake, coffee soup, coffee syrup, coffee gravy, coffee gumbo.........

at 7:04:24 PM
That's exactly right, wait-m-out. (And don't forget coffee jello!)

ebumper asks:
thanks ken we love commodities, and i find it real helpful to have an attitude of hating it when people(ie brokers) tell me what to do, i love being away from the crowd!

at 7:05:10 PM
That's exactly right, ebumper. (Never saw a statue of a crowd, did you?!)

Rick asks:
Rick from Richmond, VA Thanks Ken for introducing me to Commodities. My first Two trades in futures saw profit. Then went to opitions and lost all profits. Looking to get back in and will be alittle smarter, I hope.

at 7:06:05 PM
Thanks, Rick. It's happened to us all. You WILL be smarter, for experience pays . . . .

carolina trucker asks:
Ken, if you are caught in a market that is moving against you, will you try to ride it out or do you have a certain percentage or amount of money you will lose before you get out. It looks to me like if you have the money and patience you can ride out just about anything. dyoums-columbia, sc

at 7:06:57 PM
Yes, that's right. Remember THE RULE: If you get out, you lose! This is why options are so powerful.

fathog asks:
Ken, once again thanks for all the help. I had to work the last few chats so couldn't make it live, (had to do with the archives) Question, are you still adding more to your coffee positions or once you decide how many to get, then don't add any more?

at 7:07:54 PM
It depends upon your budget, fathog. Personally, as coffee makes new lows, I add more to my position.

Deborah asks:
Hello, Ken, our broker in Chicago told us that he advises against markets in the NY board (pork bellies, OJ, coffee, etc.) because they are illiquid. He cites a potential slippage of up to 100 pts. since they only have about four guys in the pit and a drop can slip right through your stop before it gets bought. Your thoughts, please.

at 7:09:22 PM
(Pork Bellies are traded in Chicago). Here's my advice: Take a look at options.

Buckeye Gal asks:
If you are long on a futurers contract and the FND is a little over two weeks away when is a good time to cash out and switch the contract

at 7:10:10 PM
At least a week before FND if you're long and at least a week before LTD if you're short. Thanks!

Munbassathehun asks:
Ken, do you have a Monthly 50% in gold right now?

at 7:11:40 PM
Yes. It's 560. Go, gold, go!

ML asks:
Hello Ken, it looks like Cotton is in a BIG channel right now, and I am planning on doing a paper trade with a future contract. Here's my question; this market is so low right now that I'm thinking about only trading this channel to the upside. Does this sound like a sensible plan?

at 7:12:20 PM
If you're paper trading, ML, try both. Cotton (like any market) can always go lower . . . .

michael asks:
Michael from Honolulu, Hi ken, I just want to be like Mr. Clement Watt in the Rich Man's secret. Thank you so much for having Four Star books. Who does Clement Watt look like!

at 7:12:51 PM
Thanks, Michael. He resembles Robert Young.

fieldgt asks:
Thanks for all your hard work in this business...each day I learn something new. Especially after reading Guy's new book, "Seekers Guide to Self-Freedom. Have you read thru this yet? WoW!! Learning this business along with other self Truths go hand-in-hand. Thanks!

at 7:13:48 PM
They surely do, don't they? Wish more people would realize that trading has more to do with YOU than the markets! Thanks for joining us tonight.

Allham asks:
Ken...You made a reference in one of your newsletters to pricing call and put options in a market your paper trading. What would be the purpose of pricing puts in a market you expect to go up? I' confused. Thanks for your help.

at 7:15:00 PM
In a market you're considering going long in, you could use put options to hedge that long futures contract. And, of course, you could trade that market from the long side simply using call options.

renegade in stmbt asks:
I've already asked you several questions, I think it's time that I thank you, both for answering them and also for what you are offering people...Freedom. I tried this 3-4 yrs ago and didn't have time to stay on top of it. My husband and I sold our business this summer and when I was trying to figure out what to do I just kept coming back to TWMPMM. I'm trading with real money and plan to make it WORK. Thanks again.

at 7:21:40 PM
That's the spirit, renegade! Glad you found The World's One Perfect Business too!

southwest asks:
Southwest from Las Vegas, Ken, If I want to buy calls on coffee now, is it best to buy calls for each month... March, May, July, September and December. If there is a lack of funds to buy all months, which month is best to get the maximum benefit of volatility if ( I mean WHEN ) coffee takes off? Thanks.

at 7:22:38 PM
Go for time, Southwest. You can price options as far out as March 2003 now . . . .

larry asks:
Ken: "What do you trade more in -- options or futures; and why? John Deere

at 7:25:28 PM
I trade more futures contracts than options, larry. But it's just a personal preference. I know big, big traders who won't touch futures; they ONLY trade options. Paper trade both and determine which YOU prefer. (How did you decide upon the green-and-yellow color scheme for your tractors?)

hendu asks:
Ken, do you ever pyramid contracts as prices rise or do you just buy them all up when you enter a market or if it keeps dropping by adding more?

at 7:26:24 PM
I build that broad-based pyramid, hendu, and never add as prices rise.

Lady Jane asks:
HiKen: This is my first visit to the chat room. Will begin paper trading this week. Much of the vocabulary used on this chat room I don't understand. Hope time will shed some light. Have enjoyed the course thus far and am looking forward to some real experience.

at 7:27:19 PM
Thanks Lady Jane. Glad you're with us. Don't get intimidated with the vocabulary. It won't be long before you're talkin' commodities like a champ!

Florida trader asks:
Is this Radical Jack or Radidal Ken? Saw Billy Ray Cyrus's movie this past week and heard your voice and couldn't believe my eyes. Is this a cameo or should we look for more sightings? Long in coffee in more than one way!!! Thanks for your continued help!!!!

at 7:28:41 PM
Thanks Florida Trader! Glad you caught my movie. Yep, Hollywood should be calling real soon now . . . .

Eileen asks:
Ken, Hi! I've been away for a while and am just coming back. Planning to do the options course over the next few weeks. I am so happy that you are still here and going strong!

at 7:29:46 PM
Thanks, Eileen. Glad you're here too!

lawrence bartz asks:
BIG L ASKS AM I IN ?

at 7:30:09 PM
Yes you are, Big L. And welcome!

Jes-startin asks:
Jes start'in from Calgary Alberta. this is in regards to Deborah's question a few minutes ago. Do you not recommend buying anything from the NY exchange? You weren't too clear on that one. Thanks.

at 7:31:05 PM
No, Jes-startin, I trade 'em all.

RandyMan asks:
Ken, I'm a returning student... I'm really excited about the extreme markets right now! Something I'm a little confused on, how far out do you look for options in general?

at 7:31:44 PM
As far out as available (which is different from market to market). Go for the time!

CRAIG asks:
Ken, Thanks for all your wisdom. Do you watch the front month as the basis for decisions all the way till it expires ?

at 7:32:22 PM
Yes. The front month is the driver; all the farther-out contract months are passengers.

Joan of San Diego asks:
I've been pricing a lot of options lately and they are in the $300 to $400 range (Dec options). It is a far cry from the $50 to $100 I've been looking for. The Sept and Oct are more reasonable. How do you judge the price versus time equation?

at 7:33:29 PM
Bid half of those $300 and $400 options and then wait for that market to come to you. Don't sacrifice time . . . .

Lizzie asks:
Since the markets are slow is this a good time to start paper trading? or should I wait until things pick up?

at 7:33:58 PM
NOW is always a good time. Get started!

Well that's it for another month. Here are my favorite web sites if you're interested: www.guyfinley.com ; www.LP.org ; www.uschartco.com ; www.fourstarbooks.com. My next chat will be Tuesday, March 12. Also remember Matt's stock and commodity chat next Tuesday, March 26. And join Guy Finley's monthly chats the first Thursday of every month at 6:30 PM Pacific Time. (And visit his site at any time to read inspiring quotes and sign up to receive a free spirit-lifting weekly Key Lesson by e-mail.) As always: Use these newfound powers only for Good. Good night!

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