As was expected in my last post, my position in NG was assigned according to the Call option that I had sold against it. I still have orders in place to buy Call options on T and TLT. But now that I have capital available from the NG assignment, I am setting another order in place.
The new order that I am entering is for V. In the past few days, it has reached a trend line that is the upper side of a channel I identified about a month ago. In these past few days it has been showing resistance against pushing above it. As of Friday, V has put in a Bearish Harami candlestick pattern. This is the first indicator of a price reversal. In addition, the secondary indicators I watch, Stochastic and MACD, are showing V to be in a over-bought condition with properties that indicate the slowing and reversal of upside momentum. I would also like to add that RSI and CMF also indicated a shift in momentum. With an ATR of almost $2 per share and about $4 to the downside in order to reach the bottom side of my identified channel, there is a high profit margin for a Put option.
The order I am putting in for V is as follows. I am making a OTO, One-Triggers-Other, order which is a buy order that will trigger, upon fill, a sell order. The buy order is a stop-limit order of 5.50-5.60, according to the calculations I have been using for the past few orders that I have placed. The second order is my initial sell order, to be triggered once the first is filled, set at a stop of 4.15 which is almost 25% under the buy orders stop price. I will adjust the sell order up as the Put option value rises. Doing this will give me flexibility to see which way the stock really goes. If the stock pulls back the full $4 I am expecting, I should see a profit of about 30% in 7 days. I will then sell it or set a really tight stop and see if any more profit can be had. That is my opinion, you can take it or leave it.
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