Ah, yes! The benefits of a strategy can be so helpful. In the last post I made, I indicated my interest in acquiring a Put position on JBL. In that post I detailed what my strategy was, and what my reasoning was for making the order. One of those reasons, was that I recognized that a similar set up occurred months ago.
It just so happens that today was a bullish day in the markets and as a result of careful research and careful calculation, I avoided getting involved in a stock on the wrong side of the market. Now there is potential that tomorrow could go bad for JBL, but the point of this post is to illustrate the benefits of setting such orders in place.
Now that I still have that capital available, and the markets have made such interesting movements in a new direction, I am going to apply the same strategy to a different stock. This time it will be FPL.
I will be making a BTO Call order for FPL. Using the same equation as before, I have determined that my next ITM option pick will be about 2.85 per contract share when FPL reaches 55.49. That is my opinion, you can take it or leave it.
Disclaimer: See bottom of page. http://investorsopinion.blogspot.com
Monday, September 28, 2009
Saturday, September 26, 2009
My Next Option Pick
After I made my last post, I looked over my watch list to see if anything had a large percentage move. Low and behold, JBL dropped over 5% Friday. I then did a little technical analysis and this is what I have found.
JBL has had a very good run for the past month. However, in the past few days it has developed more than one indicator that the tide should turn. First, Friday it broke and stayed below the trend-line of lower lows. Second, it has turned down from being overbought in more than three technical indicators. Third, in at least two of those technical indicators, the direction of the trends have been divergent from the trend of the stock. This all indicates very good potential for a Put option.
For all those reasons, I have setup a BTO Put order on a JBL. But this is not my standard order. I actually decided to make a Contingency Order. What exactly is that? It is an order that only executes if a certain contingency is matched first. To make this Contingency Order, I am blending my stock order method with my option order method. Let me explain how this works.
If I were shorting the stock directly, I would sell it after it drops below it's most recent low by 10% of the ATR. (Average Trading Range) In this case, it is 11.49. But since I don't like shorting stocks, it will only be the contingency price that I use. What I need to know now is what the probable option price would be at that contingency price. To do that I do a little math.
I take the absolute value of the Delta (approximate price movement of the option for every $1 movement in the underlying stock) of the option I am attempting to purchase and then multiply that by the difference of the current price less the contingency price of the stock. (i.e. 0.4921*(11.87-11.49)=0.186998) I then take that number (rounded up to the nearest penny) and add it to the option price. (i.e. 1.84+.19=2.03). And that resulting value is my stop-in value. (The stop-in value is the minimum value I am willing to pay for the option.)
Sometimes a rule is set in place by either my brokerage account or by the market-maker, not sure which, that forces me to have to put the order in at a multiple of .05 or .10 cents. JBL is one of those stocks so, I round up to 2.05 as my stop in point. (Maybe I should ignore this side of the order so that I am able to get it at cheaper if available. Hm?) Since I am pretty confident in my math I only added a .05 cent buffer, so my limit price is 2.10. (The limit is the most I am willing to pay.)
You may ask, "why go through all this?" The answer would be that I don't want to buy the Put option if it is going to go up in price. The fact is that the start of this trend-line that was broken on Friday had a similar set-up. However, on the next trading day, the stock didn't drop low enough and it turned into this 26% bull rally to it's current price. I don't want to lose money on what could simply be the same type of pull-back from a little over a month ago. As a precaution, I have to be willing to sacrifice a little more premium to get into the position when it is actually the position that I want to be in. After all, prognosticators don't tell the future. They identify possible futures based on the known past. That is my opinion, you can take it or leave it.
Disclaimer: See bottom of page. http://investorsopinion.blogspot.com
JBL has had a very good run for the past month. However, in the past few days it has developed more than one indicator that the tide should turn. First, Friday it broke and stayed below the trend-line of lower lows. Second, it has turned down from being overbought in more than three technical indicators. Third, in at least two of those technical indicators, the direction of the trends have been divergent from the trend of the stock. This all indicates very good potential for a Put option.
For all those reasons, I have setup a BTO Put order on a JBL. But this is not my standard order. I actually decided to make a Contingency Order. What exactly is that? It is an order that only executes if a certain contingency is matched first. To make this Contingency Order, I am blending my stock order method with my option order method. Let me explain how this works.
If I were shorting the stock directly, I would sell it after it drops below it's most recent low by 10% of the ATR. (Average Trading Range) In this case, it is 11.49. But since I don't like shorting stocks, it will only be the contingency price that I use. What I need to know now is what the probable option price would be at that contingency price. To do that I do a little math.
I take the absolute value of the Delta (approximate price movement of the option for every $1 movement in the underlying stock) of the option I am attempting to purchase and then multiply that by the difference of the current price less the contingency price of the stock. (i.e. 0.4921*(11.87-11.49)=0.186998) I then take that number (rounded up to the nearest penny) and add it to the option price. (i.e. 1.84+.19=2.03). And that resulting value is my stop-in value. (The stop-in value is the minimum value I am willing to pay for the option.)
Sometimes a rule is set in place by either my brokerage account or by the market-maker, not sure which, that forces me to have to put the order in at a multiple of .05 or .10 cents. JBL is one of those stocks so, I round up to 2.05 as my stop in point. (Maybe I should ignore this side of the order so that I am able to get it at cheaper if available. Hm?) Since I am pretty confident in my math I only added a .05 cent buffer, so my limit price is 2.10. (The limit is the most I am willing to pay.)
You may ask, "why go through all this?" The answer would be that I don't want to buy the Put option if it is going to go up in price. The fact is that the start of this trend-line that was broken on Friday had a similar set-up. However, on the next trading day, the stock didn't drop low enough and it turned into this 26% bull rally to it's current price. I don't want to lose money on what could simply be the same type of pull-back from a little over a month ago. As a precaution, I have to be willing to sacrifice a little more premium to get into the position when it is actually the position that I want to be in. After all, prognosticators don't tell the future. They identify possible futures based on the known past. That is my opinion, you can take it or leave it.
Disclaimer: See bottom of page. http://investorsopinion.blogspot.com
Friday, September 25, 2009
"Those That Do Not Hear, Feel."
Whenever I, or one of my siblings, disobeyed our parent's warnings or rules, they would often tell us, "Those that do not hear, feel." To this day, it still comes to mind when I find myself feeling the effects of going against some sort of warning or rule. Friday was one of those days.
While reviewing my last few trades, I have come to realize that I have been going against one of the rules I learned in my options training. That rule would be "Buy Long, Sell Short." Usually this has a figurative meaning in regards to stocks. Let me explain.
To "Buy Long" means you are buying shares of an actual stock with the intent of holding on to it for a 'long' period of time, because you believe it will go up in price. After it has gone up in price you will sell it and pocket the profit. This is how most people understand how to make money in the stock market.
To "Sell Short" means you are selling the shares of a stock that actually belong to the brokerage house for a 'short' period of time, because you believe the price will go down. After it has gone down in price, you will buy back the same number of shares with some of the money that you received for selling them and the brokerage house will have their shares back at no cost to them and a little commission from you. You, however, get to pocket the difference and whatever interest you gained while holding the cash in your brokerage account. The number of people that understand how to make money this way is not so great, and the number that actually succeed at it is even less.
But when it comes to options, to "Buy Long, Sell Short" has a slightly more literal meaning. The meaning has to do with the amount of time that is available until expiration when the in ITM (In-The-Money) options are assigned, and the rest just expire as worthless.
To "Buy Long" means to buy the option with multiple months until expiration. The benefit of this is that the value generally moves in smaller percentages than shorter term options. This allows more time to average out anomalous price movements that go contrary to technical signals. Price movements like the ones that stopped me out recently. (Friday, September 25, 2009 You Win Some, You Lose Some). This is something that I should of remembered back when I made earlier posts. (Thursday, September 10, 2009 Investor's Personal Portfolio Update and Wednesday, July 8, 2009 Back Again, Finally) The negative is that it costs more to get into the position.
To "Sell Short" means to sell the option with the fewest months until expiration. This is something I refereed to in the post I made Wednesday, September 16, 2009 Position Update. The benefit here is that the sooner the stock expires worthless, the sooner you get to sell another one. The negative is that the amount you get to sell it for is not as great as for longer ones. But then again, you don't have as long to wait to see what happens.
I now fully understand the benefit of following this rule and I will try to remember it for my benefit from now on. I hope what I wrote here helps someone else, also. That is my opinion, you can take it or leave it.
Disclaimer: See bottom of page.
While reviewing my last few trades, I have come to realize that I have been going against one of the rules I learned in my options training. That rule would be "Buy Long, Sell Short." Usually this has a figurative meaning in regards to stocks. Let me explain.
To "Buy Long" means you are buying shares of an actual stock with the intent of holding on to it for a 'long' period of time, because you believe it will go up in price. After it has gone up in price you will sell it and pocket the profit. This is how most people understand how to make money in the stock market.
To "Sell Short" means you are selling the shares of a stock that actually belong to the brokerage house for a 'short' period of time, because you believe the price will go down. After it has gone down in price, you will buy back the same number of shares with some of the money that you received for selling them and the brokerage house will have their shares back at no cost to them and a little commission from you. You, however, get to pocket the difference and whatever interest you gained while holding the cash in your brokerage account. The number of people that understand how to make money this way is not so great, and the number that actually succeed at it is even less.
But when it comes to options, to "Buy Long, Sell Short" has a slightly more literal meaning. The meaning has to do with the amount of time that is available until expiration when the in ITM (In-The-Money) options are assigned, and the rest just expire as worthless.
To "Buy Long" means to buy the option with multiple months until expiration. The benefit of this is that the value generally moves in smaller percentages than shorter term options. This allows more time to average out anomalous price movements that go contrary to technical signals. Price movements like the ones that stopped me out recently. (Friday, September 25, 2009 You Win Some, You Lose Some). This is something that I should of remembered back when I made earlier posts. (Thursday, September 10, 2009 Investor's Personal Portfolio Update and Wednesday, July 8, 2009 Back Again, Finally) The negative is that it costs more to get into the position.
To "Sell Short" means to sell the option with the fewest months until expiration. This is something I refereed to in the post I made Wednesday, September 16, 2009 Position Update. The benefit here is that the sooner the stock expires worthless, the sooner you get to sell another one. The negative is that the amount you get to sell it for is not as great as for longer ones. But then again, you don't have as long to wait to see what happens.
I now fully understand the benefit of following this rule and I will try to remember it for my benefit from now on. I hope what I wrote here helps someone else, also. That is my opinion, you can take it or leave it.
Disclaimer: See bottom of page.
You Win Some, You Lose Some
Today I was a victim of a potential fake-out by the market. While on a break at work I logged into my brokerage account to see that I had been stopped out of one position and stopped into another. To prevent too much loss of my principle on my new position, I quickly did the math and set my stop for it, using the execution price as my base price. Next come the details.
The position i was stopped out of was my FPL Put. The price movement of FPL rose above the trend line momentarily today just high enough to cause my stop to trigger, only to close the day under the trend line and low enough that the Put option price would have been acceptable to me. Those are just the breaks. next week I will see if that was truly an effective strategy or not.
The position I was stopped into was my CVX Put I mentioned in my last post. It's price movement moved low enough that I was able to acquire it. However, when I saw it, it had already started to retreat from that price. So I quickly did the math and set my stop order to prevent any excessive loss. After the market's closing bell, I was able to again log into my brokerage account and I am having a little deja vu. CVX also moved enough that my stop was triggered but then reversed enough that it would have been acceptable to me.
Looking at the charts for these two stocks, I see that FPL may simply have been a fake-out and CVX appears to have done the same thing. I will have to wait until next week to see if this was a real reversal or not. These are the kinds of things that make setting a stop frustrating. I keep thinking maybe I should set my option stops according to different standards, but then I have to remind myself that I don't have the capital to experiment so much. So we have to remember, 'you win some, you lose some. Let the winners run, and keep your losses small.' That is my opinion, you can take it or leave it.
Disclaimer: See bottom of page.
The position i was stopped out of was my FPL Put. The price movement of FPL rose above the trend line momentarily today just high enough to cause my stop to trigger, only to close the day under the trend line and low enough that the Put option price would have been acceptable to me. Those are just the breaks. next week I will see if that was truly an effective strategy or not.
The position I was stopped into was my CVX Put I mentioned in my last post. It's price movement moved low enough that I was able to acquire it. However, when I saw it, it had already started to retreat from that price. So I quickly did the math and set my stop order to prevent any excessive loss. After the market's closing bell, I was able to again log into my brokerage account and I am having a little deja vu. CVX also moved enough that my stop was triggered but then reversed enough that it would have been acceptable to me.
Looking at the charts for these two stocks, I see that FPL may simply have been a fake-out and CVX appears to have done the same thing. I will have to wait until next week to see if this was a real reversal or not. These are the kinds of things that make setting a stop frustrating. I keep thinking maybe I should set my option stops according to different standards, but then I have to remind myself that I don't have the capital to experiment so much. So we have to remember, 'you win some, you lose some. Let the winners run, and keep your losses small.' That is my opinion, you can take it or leave it.
Disclaimer: See bottom of page.
Thursday, September 24, 2009
Portfolio Update
Greetings! Today the market didn't do anything extraordinary as it reacted to the housing markets negative news. That news being fewer than expected sales of existing homes in comparison to this time last year.
The majority of the stocks I watch all dropped in value although some started the day higher than desired, FPL being one of them. But no fear, the stop I set for it had enough of a cushion that it didn't execute. At the conclusion of the day, all of my positions are showing a paper profit, even the Call I sold on my NG stock. That's right! NG dropped below the $5 strike price and now the call is cheaper than what I sold it for. If expiration was today, I would still have my stock and the right to sell Calls against it again. But expiration is not for another 23 days, so we will see.
Considering the funds that I have available and the charting that I have done. I am placing an order to buy a Put against CVX. I am expecting a move of about $2-3 dollars. This gives me the potential for a very nice return. That is my opinion, you can take it or leave it.
Disclaimer: See bottom of page.
The majority of the stocks I watch all dropped in value although some started the day higher than desired, FPL being one of them. But no fear, the stop I set for it had enough of a cushion that it didn't execute. At the conclusion of the day, all of my positions are showing a paper profit, even the Call I sold on my NG stock. That's right! NG dropped below the $5 strike price and now the call is cheaper than what I sold it for. If expiration was today, I would still have my stock and the right to sell Calls against it again. But expiration is not for another 23 days, so we will see.
Considering the funds that I have available and the charting that I have done. I am placing an order to buy a Put against CVX. I am expecting a move of about $2-3 dollars. This gives me the potential for a very nice return. That is my opinion, you can take it or leave it.
Disclaimer: See bottom of page.
Wednesday, September 23, 2009
Portfolio Update
This post is a portfolio update with some commentary. To begin, NG traded lower bringing my Covered Call closer to exiting contention for assignment, but that is still 24 days out and anything can happen. As I stated in the previous post I put in Put orders for FTP and ETP. On the first day after posting that the FPL order executed and I am currently showing 20% profit. I still suspect that it will continue to move down from here. ETP is another story.
The Put order for ETP expired on the first day because ETP moved slightly up from the previous days high. However, it's movement was small and actually closed lower than it's open. For that reason, I resubmitted the order with a tighter BTO (Buy-To-Open) range. This decision to tighten the BTO range is based on two reasons. The first is that the market-maker made the asking price cheaper. The second is speculation that despite the closing price being higher, the small movement is an indication to me that there are not enough buyers to prevent it from heading South. Something additional that I noticed is that on this same day that my BTO executed, the stock created a bearish doji whose body is within the body of another bearish candle. If it had been a bullish doji candle I would be second guessing myself just a little. However, a bearish candle within another bearish candle is not indicative of anything significant that I know of.
As is current protocol, both my positions have in place a STC (Sell-To-Close) Stop in the event that I am wrong. Unfortunately, for ETP I had to go against my decision to set tighter stops because of the market-makers decision to set the current bid and ask price lower than the closing price. In order to prevent premature execution of the order, I had to set my stop 5 cents lower than the bid. That puts me right at my previous acceptable-loss percentage. Not ideal but we do what we have to do to give the technical analysis the opportunity to work. That is my opinion, you can take it or leave it.
Disclaimer: See bottom of page.
The Put order for ETP expired on the first day because ETP moved slightly up from the previous days high. However, it's movement was small and actually closed lower than it's open. For that reason, I resubmitted the order with a tighter BTO (Buy-To-Open) range. This decision to tighten the BTO range is based on two reasons. The first is that the market-maker made the asking price cheaper. The second is speculation that despite the closing price being higher, the small movement is an indication to me that there are not enough buyers to prevent it from heading South. Something additional that I noticed is that on this same day that my BTO executed, the stock created a bearish doji whose body is within the body of another bearish candle. If it had been a bullish doji candle I would be second guessing myself just a little. However, a bearish candle within another bearish candle is not indicative of anything significant that I know of.
As is current protocol, both my positions have in place a STC (Sell-To-Close) Stop in the event that I am wrong. Unfortunately, for ETP I had to go against my decision to set tighter stops because of the market-makers decision to set the current bid and ask price lower than the closing price. In order to prevent premature execution of the order, I had to set my stop 5 cents lower than the bid. That puts me right at my previous acceptable-loss percentage. Not ideal but we do what we have to do to give the technical analysis the opportunity to work. That is my opinion, you can take it or leave it.
Disclaimer: See bottom of page.
Tuesday, September 22, 2009
Portfolio Update
Mixed results today in the markets Monday. Dow and S&P ended down, while the NASDAQ ended slightly up. As far as my portfolio is concerned, the expected occurred. I got stopped out of two of my positions. But first I will mention my Covered Call on NG.
The Call option I sold on NG gained back value for me today because the value of the underling stock actually dropped below it's previous day's close. However, it still would cause me a loss if I were to buy it back right now. But let's repeat this again, it is very profitable for me already and I don't care if it gets called away from me tomorrow. I will let it continue to play out for the remaining 20+ days left in the contract. Lets see if it drops below $5 or remains above and gets assigned to me. Either would be fine by me. Now on to the straight Calls.
Although CVX ended up still in the green, because it started the day so far down, I was stopped out of my Call option for a little bit of a loss. Even so, CVX still ended lower than the last trading day with some downside still possible. In addition, the oscillations are getting narrower and the secondary indicators are suggesting that the stock is over-bought. This could be a significant pivot point.
Fortunately, I also have some really good news. I was stopped out of my DIS Call option with a nice 62+% gain. Not bad at all for 12 days. For the last few trades that actually gives me a percentage of about 17%. Not extraordinary, but definitely better than any savings account, Bond or CD.
My last post was a detailed prognostication of FPL. It looks like my Bearish prognostication is more likely to come true. I suspect that FPL will become $2 cheaper before moving back up. For that reason I will be setting up for a Put order on it for the next 20+ days. I also am placing a Put order against ETP with the suspicion that it will loose $3 in about the same amount of time. That is my opinion, you can take it or leave it.
Disclaimer: See bottom of page.
The Call option I sold on NG gained back value for me today because the value of the underling stock actually dropped below it's previous day's close. However, it still would cause me a loss if I were to buy it back right now. But let's repeat this again, it is very profitable for me already and I don't care if it gets called away from me tomorrow. I will let it continue to play out for the remaining 20+ days left in the contract. Lets see if it drops below $5 or remains above and gets assigned to me. Either would be fine by me. Now on to the straight Calls.
Although CVX ended up still in the green, because it started the day so far down, I was stopped out of my Call option for a little bit of a loss. Even so, CVX still ended lower than the last trading day with some downside still possible. In addition, the oscillations are getting narrower and the secondary indicators are suggesting that the stock is over-bought. This could be a significant pivot point.
Fortunately, I also have some really good news. I was stopped out of my DIS Call option with a nice 62+% gain. Not bad at all for 12 days. For the last few trades that actually gives me a percentage of about 17%. Not extraordinary, but definitely better than any savings account, Bond or CD.
My last post was a detailed prognostication of FPL. It looks like my Bearish prognostication is more likely to come true. I suspect that FPL will become $2 cheaper before moving back up. For that reason I will be setting up for a Put order on it for the next 20+ days. I also am placing a Put order against ETP with the suspicion that it will loose $3 in about the same amount of time. That is my opinion, you can take it or leave it.
Disclaimer: See bottom of page.
Thursday, September 17, 2009
Detailed Prognostication on FPL
Today was a negligibly negative day in the market. That being the case, not much happened to my positions. So the majority of this post will be about prognosticating one of my favorite stocks, FPL.
As an update, NG pulled back a little but is still in contention for assignment in 30 days; CVX also pulled back a little but still contains profit; DIS advanced up a little more (and I did tighten the stop before the open as I was considering in the previous post); and T declined further executing my stop. Unfortunately the sale proceeds of my T option were for a loss and too small to give me much buying power for the immediate future. In addition, after doing the math on it, I have come to the conclusion that I really should keep my stops tighter than what I set them because the gross loss is a lot more than I truly wish to loose. I am thinking it would be wise to also subtract the cost of commissions from the multiple of the percentage I am willing to lose and then reverse calculating the stop point and setting it appropriately.
Now on to FPL. Today, it put in a short-body down day with a long upper shadow, not quite doji like. It's position in relation to the previous day is that of a bearish harami. That is, the body of it's price movement did not travel outside of the open and close of the previous day which was an up day. This is only one point determining future direction. The other indicators I watch, however, are bullish still because they average the previous movement of the stock. Without a change of direction in these indicators, the future movement is uncertain. But there are a few indications of possible movement which I will cover next.
The first indication is the general direction of the next largest trends. The next largest trend of the stock is punctuated by lower highs and lower lows. When we see lower highs and lower lows we describe the stock as having bearish momentum. This momentum needs to be broken before it is officially a bull candidate in my opinion. As of this post, FPL is still riding below a lower high trend line. If it breaks this trend line tomorrow, I would consider it a buy for a short term swing trade ($1 in about 4-6 days). However, if it continues lower, I will assume it has tested and failed this trend line and head toward the trend line of the lower lows. In this case it is a significant drop of about $3-$5 in ten days, which would make it a candidate for a Put Play.
Next we have the trend of the peaks and valleys of the secondary indicators. For example, two of my indicators are the Slow Stochastic and MACD. Only one needs to break it's trend before I officially consider it a bull candidate. However, if the other is contradictory, I will proceed with caution. FPL, as of this post, has broken the MACD trend line that I have identified and the Slow Stochastic trend line is well above it's current position and too flat, in my opinion, to be weighted much in my prognosis. That being said, I am more inclined to believe that the stock will go up. That is my opinion, you can take it or leave it.
Disclaimer: See bottom of page.
As an update, NG pulled back a little but is still in contention for assignment in 30 days; CVX also pulled back a little but still contains profit; DIS advanced up a little more (and I did tighten the stop before the open as I was considering in the previous post); and T declined further executing my stop. Unfortunately the sale proceeds of my T option were for a loss and too small to give me much buying power for the immediate future. In addition, after doing the math on it, I have come to the conclusion that I really should keep my stops tighter than what I set them because the gross loss is a lot more than I truly wish to loose. I am thinking it would be wise to also subtract the cost of commissions from the multiple of the percentage I am willing to lose and then reverse calculating the stop point and setting it appropriately.
Now on to FPL. Today, it put in a short-body down day with a long upper shadow, not quite doji like. It's position in relation to the previous day is that of a bearish harami. That is, the body of it's price movement did not travel outside of the open and close of the previous day which was an up day. This is only one point determining future direction. The other indicators I watch, however, are bullish still because they average the previous movement of the stock. Without a change of direction in these indicators, the future movement is uncertain. But there are a few indications of possible movement which I will cover next.
The first indication is the general direction of the next largest trends. The next largest trend of the stock is punctuated by lower highs and lower lows. When we see lower highs and lower lows we describe the stock as having bearish momentum. This momentum needs to be broken before it is officially a bull candidate in my opinion. As of this post, FPL is still riding below a lower high trend line. If it breaks this trend line tomorrow, I would consider it a buy for a short term swing trade ($1 in about 4-6 days). However, if it continues lower, I will assume it has tested and failed this trend line and head toward the trend line of the lower lows. In this case it is a significant drop of about $3-$5 in ten days, which would make it a candidate for a Put Play.
Next we have the trend of the peaks and valleys of the secondary indicators. For example, two of my indicators are the Slow Stochastic and MACD. Only one needs to break it's trend before I officially consider it a bull candidate. However, if the other is contradictory, I will proceed with caution. FPL, as of this post, has broken the MACD trend line that I have identified and the Slow Stochastic trend line is well above it's current position and too flat, in my opinion, to be weighted much in my prognosis. That being said, I am more inclined to believe that the stock will go up. That is my opinion, you can take it or leave it.
Disclaimer: See bottom of page.
Wednesday, September 16, 2009
Position Update
Wednesday was another day in the market with positive price movement. Because of that I don't have much to say except to provide an update on how my positions are doing, and speculate on what I could be doing if I had the free capital.
Let's start with my NG Covered Call. I probably should have sold the Call option with a shorter time frame, as it continues to rise with 31 days left until expiration. As a result, I am locked into it unless I come up with the cash to buy back the option and I have no desire to buy it back just to sell the stock.
Now let's look at my Bought-To-Open Call positions. Wednesday was a great day for CVX as it rose over 50% to finish swallowing the decline of a few days ago and put in a profit. As a result of that I have tightened it's stop. As for DIS, it only had an okay day. The gains were only meager and it seems to be hitting what I call an inclining resistance line (the top of a trading range). So far the gains have been great and I hope this resistance doesn't hold and more gains continue. However, I can't rely on hopes, so my stop remains in place. I may tighten it before Thursday's open.
As I prognosticated, FPL has done as I expected and has turned up, however, I am without capital to take advantage of it. This is another reason I probably should have sold the September Call on NG instead of the October Call. It's also another reason to tighten the stop on my DIS Call. That is my opinion, you can take it or leave it.
Disclaimer: See bottom of page.
Let's start with my NG Covered Call. I probably should have sold the Call option with a shorter time frame, as it continues to rise with 31 days left until expiration. As a result, I am locked into it unless I come up with the cash to buy back the option and I have no desire to buy it back just to sell the stock.
Now let's look at my Bought-To-Open Call positions. Wednesday was a great day for CVX as it rose over 50% to finish swallowing the decline of a few days ago and put in a profit. As a result of that I have tightened it's stop. As for DIS, it only had an okay day. The gains were only meager and it seems to be hitting what I call an inclining resistance line (the top of a trading range). So far the gains have been great and I hope this resistance doesn't hold and more gains continue. However, I can't rely on hopes, so my stop remains in place. I may tighten it before Thursday's open.
As I prognosticated, FPL has done as I expected and has turned up, however, I am without capital to take advantage of it. This is another reason I probably should have sold the September Call on NG instead of the October Call. It's also another reason to tighten the stop on my DIS Call. That is my opinion, you can take it or leave it.
Disclaimer: See bottom of page.
Tuesday, September 15, 2009
Flat Day in the Market
Monday was a flat day in the market. As a result of that indicators for my picks are looking interesting, if not grim.
CVX put in a positive day, but it start much lower than the previous day's close. This has dropped the value of my Call option, but still above my exit point. Because of the price movement of the day, it has thrown off technical analytics. When that happens I have curiosity as to whether or not it will repeat itself a second day. For that reason, I am leaving my stop where it is and riding it it out.
DIS put in a negative day, and the technical indicators have begun to follow. This leads me to believe that it will probably continue to decline. To me the prudent move is to tighten my stop to prevent further loss of the profit that the option has produced for me.
T has also put in a negative day, and the technical indicators are also beginning to turn. My investment in it is not much so I will allow my stop to remain as is.
NG put in a positive price movement today, however, it was done under the previous day's close. This may be indicating a reduction in momentum, but it could also just be an anomaly. That being said, NG is still in contention of being called away from me, but that is okay as it has already produced me a profit and my interest in it has declined since it is not a dividend paying stock.
One of my favorite stocks in my watch list is looking good for a Call play again. And that stock is FPL. If tomorrow is another positive day for it and I have some of my capital freed up, I believe I will be investing in it by Wednesday or Thursday. That is my opinion, you can take it or leave it.
Disclaimer: See bottom of page.
CVX put in a positive day, but it start much lower than the previous day's close. This has dropped the value of my Call option, but still above my exit point. Because of the price movement of the day, it has thrown off technical analytics. When that happens I have curiosity as to whether or not it will repeat itself a second day. For that reason, I am leaving my stop where it is and riding it it out.
DIS put in a negative day, and the technical indicators have begun to follow. This leads me to believe that it will probably continue to decline. To me the prudent move is to tighten my stop to prevent further loss of the profit that the option has produced for me.
T has also put in a negative day, and the technical indicators are also beginning to turn. My investment in it is not much so I will allow my stop to remain as is.
NG put in a positive price movement today, however, it was done under the previous day's close. This may be indicating a reduction in momentum, but it could also just be an anomaly. That being said, NG is still in contention of being called away from me, but that is okay as it has already produced me a profit and my interest in it has declined since it is not a dividend paying stock.
One of my favorite stocks in my watch list is looking good for a Call play again. And that stock is FPL. If tomorrow is another positive day for it and I have some of my capital freed up, I believe I will be investing in it by Wednesday or Thursday. That is my opinion, you can take it or leave it.
Disclaimer: See bottom of page.
Friday, September 11, 2009
Market Reversal?
Hello. Today, the market put in a negative close with a narrow price movement. This type of price movement is indicative of a bearish doji candle. This type of candle stick price movement indicates the potential for a bearish reversal. If you are a trader in the market, you would be setting your stops to protect your principle and profits, as well as looking for securities to short. Also, this has caused me to reflect on another potential chart pattern.
Within the past three weeks a blog I follow mentioned something that bears mentioning here. The blog, Options Trading Beginner, had a two part article on what is called a Triple Top Pattern (You may read both articles by clicking on Part 1 and Part 2). This type of pattern, not to be confused with the Head-and-Shoulders pattern I mentioned in the previous post may be occurring in the markets. I personally was hoping for breakout movement, but we don't always get what we hope for. That is why we set stops.
As far as my portfolio is concerned, I am yet closer to breaking even for the year with three more months to go. As expected, my Covered Call position on NG has reached it's $5 strike price, putting it in contention for being called away from me 36 trading days from today. As mentioned in the previous post, I am okay with that as I have become more interested in owning stock that pay dividends, which NG does not, and I have already made a satisfying profit with it.
My Call option on CVX has just turned negative, but not yet at my stop price. If this reversal candle turns out to be a dud, I should again see profitability from it next week. My Call option on DIS, on the other hand, has maintained profitability. Since it has already broken out, I am inclined to believe that it has the potential to continue higher. But, of course, I am no longer the fool, and have a stop in place to protect the profit that I do have.
I also have a new Call order that executed today. This one being on T. Although the price movement today wasn't as powerful as I had hoped for, nor was it as high, it is above the declining trend line I identified in my charting of it. And, as is my current strategy, I have a stop order in to protect the majority of my principle should the prevailing trend of the market drag it down.
What I am doing now is, doing my due diligence in finding securities in my watchlist that I could set Puts against as my capital becomes free if this market decides to turn south. I've been told that is what a wise investor does. That is my opinion, you can take it or leave it.
Disclaimer: See bottom of page.
Within the past three weeks a blog I follow mentioned something that bears mentioning here. The blog, Options Trading Beginner, had a two part article on what is called a Triple Top Pattern (You may read both articles by clicking on Part 1 and Part 2). This type of pattern, not to be confused with the Head-and-Shoulders pattern I mentioned in the previous post may be occurring in the markets. I personally was hoping for breakout movement, but we don't always get what we hope for. That is why we set stops.
As far as my portfolio is concerned, I am yet closer to breaking even for the year with three more months to go. As expected, my Covered Call position on NG has reached it's $5 strike price, putting it in contention for being called away from me 36 trading days from today. As mentioned in the previous post, I am okay with that as I have become more interested in owning stock that pay dividends, which NG does not, and I have already made a satisfying profit with it.
My Call option on CVX has just turned negative, but not yet at my stop price. If this reversal candle turns out to be a dud, I should again see profitability from it next week. My Call option on DIS, on the other hand, has maintained profitability. Since it has already broken out, I am inclined to believe that it has the potential to continue higher. But, of course, I am no longer the fool, and have a stop in place to protect the profit that I do have.
I also have a new Call order that executed today. This one being on T. Although the price movement today wasn't as powerful as I had hoped for, nor was it as high, it is above the declining trend line I identified in my charting of it. And, as is my current strategy, I have a stop order in to protect the majority of my principle should the prevailing trend of the market drag it down.
What I am doing now is, doing my due diligence in finding securities in my watchlist that I could set Puts against as my capital becomes free if this market decides to turn south. I've been told that is what a wise investor does. That is my opinion, you can take it or leave it.
Disclaimer: See bottom of page.
Thursday, September 10, 2009
Investor's Personal Portfolio Update
Greetings, followers. Once again, life got in the way of my posting on a regular basis. Which may be a good thing considering what I was thinking about posting a few days ago. I will get into that and the changes I made to my portfolio as you read on.
If I had posted a few days ago, you would have read that my opinion would have been that investors should be watching the four major indices for a stock charting pattern known as a Head-and-Shoulders. A Head-and-Shoulders is when a stock chart is made of three highs and two lows, where the second high is obviously higher than the first and third high. The fortunate thing is that this did not happen. In fact, a few days later the second high was exceeded by the price movements of yesterday (for the Dow) and today (for the NASDAQ, S&P 500, and Russell 2000). But if you are an active investor like myself, you know better than to take your eyes off the market for more than a few days at a time.
Now, as far my portfolio is concerned, I mention in my last post that I thought NG was going to go up and that would mean that my stop on my PUT would most likely be executed. I am actually glad it did because NG had a monster of a day. It almost moved an entire buck, and since then has maintained this relatively higher value. If I did not have that stop in place, I would have been in major losses right now. But as a result I had capital available to make my current selections.
Before I tell you about my current selections, let me tell you what else I did with NG position. I analyzed NG to see if I believed it had a chance of continuing past it's next strike price in it's option chain ($5). I noticed that strike price was a point of resistance previously and NG still hasn't reported the potential for profit this year, so I sold $5 OCT09 CALLS against my stock. I did this for two reasons. The first because I want the additional capital I get for the premium that is paid for the CALLs. The second reason is that I don't care if the stock gets called away from me since I am profitable with NG at any price above $3.10 and I am becoming more interested in restricting my stock ownership to stocks with a dividend.
Since I sold the calls, NG has been bouncing against resistance everyday and has announced that earnings will be reported in October before the market opens. I still don't have much interest in holding on to the stock long term so I will leave the CALLs in place.
My current selections now include CALLs on CVX and DIS. Both are short term with expiration in October. My reasons for buying them are as follows. First, they are part of what makes up the Dow, and as mentioned above the Dow has challenged and beat it's second high in that potential Head-and-Shoulders charting pattern. Second, they are both coming off oversold levels meaning there is significant upward gain that I can take advantage of. Third, I want to own the stock, but since I don't have the capital to buy them in quantities that I would like, options are the next best thing and the growth potential for these stocks are sweet. I have put in place stop orders that are GTC (Good-Til-Cancelled) in order to protect my gains on my DIS CALL and the majority of my principle on my CVX CALL (majority because my willingness to lose is larger than the current profits on that position).
As a result of the past two days, I am in the green for all of my current positions. However, as a result of my initially flawed options strategy, I have realized a loss this year that my current unrealized profits only cover 75%. I have come to the conclusion that I was not setting proper stops and buying a lot of OTM options when I should have been buying a smaller amount of ITM options. The reasons being that the stops are easier to set and the exponential rewards are more immediate with ITM options even though the quantity of the position will be significantly less. So goes the school of hard knocks.
In addition to these current positions I have an order in place for a CALL on T. My reason being that, depending on your opinion of anomalous price movements, I see either a Double-Bottom or a Cup-and-Handle break-out price set-up. This means that there is a chance for some large advancements in price until the next resistance level if it breaks through the current one. So my CALL order is set as a stop limit that starts a little above the current ASK and has a tight range.
That is my opinion, you can take it or leave it. Disclaimer: See bottom of page.
If I had posted a few days ago, you would have read that my opinion would have been that investors should be watching the four major indices for a stock charting pattern known as a Head-and-Shoulders. A Head-and-Shoulders is when a stock chart is made of three highs and two lows, where the second high is obviously higher than the first and third high. The fortunate thing is that this did not happen. In fact, a few days later the second high was exceeded by the price movements of yesterday (for the Dow) and today (for the NASDAQ, S&P 500, and Russell 2000). But if you are an active investor like myself, you know better than to take your eyes off the market for more than a few days at a time.
Now, as far my portfolio is concerned, I mention in my last post that I thought NG was going to go up and that would mean that my stop on my PUT would most likely be executed. I am actually glad it did because NG had a monster of a day. It almost moved an entire buck, and since then has maintained this relatively higher value. If I did not have that stop in place, I would have been in major losses right now. But as a result I had capital available to make my current selections.
Before I tell you about my current selections, let me tell you what else I did with NG position. I analyzed NG to see if I believed it had a chance of continuing past it's next strike price in it's option chain ($5). I noticed that strike price was a point of resistance previously and NG still hasn't reported the potential for profit this year, so I sold $5 OCT09 CALLS against my stock. I did this for two reasons. The first because I want the additional capital I get for the premium that is paid for the CALLs. The second reason is that I don't care if the stock gets called away from me since I am profitable with NG at any price above $3.10 and I am becoming more interested in restricting my stock ownership to stocks with a dividend.
Since I sold the calls, NG has been bouncing against resistance everyday and has announced that earnings will be reported in October before the market opens. I still don't have much interest in holding on to the stock long term so I will leave the CALLs in place.
My current selections now include CALLs on CVX and DIS. Both are short term with expiration in October. My reasons for buying them are as follows. First, they are part of what makes up the Dow, and as mentioned above the Dow has challenged and beat it's second high in that potential Head-and-Shoulders charting pattern. Second, they are both coming off oversold levels meaning there is significant upward gain that I can take advantage of. Third, I want to own the stock, but since I don't have the capital to buy them in quantities that I would like, options are the next best thing and the growth potential for these stocks are sweet. I have put in place stop orders that are GTC (Good-Til-Cancelled) in order to protect my gains on my DIS CALL and the majority of my principle on my CVX CALL (majority because my willingness to lose is larger than the current profits on that position).
As a result of the past two days, I am in the green for all of my current positions. However, as a result of my initially flawed options strategy, I have realized a loss this year that my current unrealized profits only cover 75%. I have come to the conclusion that I was not setting proper stops and buying a lot of OTM options when I should have been buying a smaller amount of ITM options. The reasons being that the stops are easier to set and the exponential rewards are more immediate with ITM options even though the quantity of the position will be significantly less. So goes the school of hard knocks.
In addition to these current positions I have an order in place for a CALL on T. My reason being that, depending on your opinion of anomalous price movements, I see either a Double-Bottom or a Cup-and-Handle break-out price set-up. This means that there is a chance for some large advancements in price until the next resistance level if it breaks through the current one. So my CALL order is set as a stop limit that starts a little above the current ASK and has a tight range.
That is my opinion, you can take it or leave it. Disclaimer: See bottom of page.
Tuesday, September 1, 2009
Never Take Your Eyes Off The Market
A few posts back, I voiced that my opinion of the market had changed. Today, just look at what happened. Today the the market indices took a hit that was relatively stronger than usual. In each, they nearly reached their most recent support levels of a couple weeks ago when I had voiced my change of opinion. So what does this say?
It says to me, "don't take your eyes off the market." It is still important to keep a discerning eye on the market. If you recently got into the market, you want to take some time to identify some stops and prepare to bail out. It is particularly important if your stock picks follow a market index. If the index brakes through that previously created support level, it has a better than 50% chance of plummeting. This is not to be a naysayer about the economy, put it is a word of caution to any who are in the market.
I personally had a stop on an ODP CALL that was executed today. Not to happy about it, but as Kevin O'Leary, an investor on abc's Shark Tank, puts it, "Money doesn't have a soul. It doesn't care about you." So what do we do? We swallow our pride on that bad choice and look for the next good one. I am actually thinking that if the market does slip as it is indicating, NG will probably switch directions. In which case, I will lose on the PUT I have on it as well. But the good news is that the stock should rise.
That is my opinion, you can take it or leave it.
Disclaimer: See bottom of page.
It says to me, "don't take your eyes off the market." It is still important to keep a discerning eye on the market. If you recently got into the market, you want to take some time to identify some stops and prepare to bail out. It is particularly important if your stock picks follow a market index. If the index brakes through that previously created support level, it has a better than 50% chance of plummeting. This is not to be a naysayer about the economy, put it is a word of caution to any who are in the market.
I personally had a stop on an ODP CALL that was executed today. Not to happy about it, but as Kevin O'Leary, an investor on abc's Shark Tank, puts it, "Money doesn't have a soul. It doesn't care about you." So what do we do? We swallow our pride on that bad choice and look for the next good one. I am actually thinking that if the market does slip as it is indicating, NG will probably switch directions. In which case, I will lose on the PUT I have on it as well. But the good news is that the stock should rise.
That is my opinion, you can take it or leave it.
Disclaimer: See bottom of page.
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