I purchased shares of $ADHD at $14.40. I passed on this stock at $10 a few weeks ago, but like the recent pause in this price hike. This trade is easy to manage.
I also booked nearly 300% on my $AAPL calls, and purchased Sep 27 calls in TZA this morning as a hedge.
Last but not least, I have a small flyer in BIDU here, waiting to see if it gets any traction up at $140.
OA
Comments »
We’ve been very fortunate to have had a decent market to trade this summer. Individual stocks moved a tremendous amount the last few months, and offered up some pretty significant opportunities along the way. I don’t recall a summer over the last 5 years being as profitable as this one has been, but that might be independent to me.
As I mentioned a shift in focus over the next couple weeks to a certain type of stock, I want to quickly address a strategy that would work well in this current environment, and that is diagonal spreads.
This strategy will work for those of you sitting on longer dated calls that are stagnant, or slowly decaying in value. Treat them like a covered call and sell a shorter dated (preferably front month or weekly upside call) against the long call you already own. This will put a credit to your account that you will realize at expiration. For longer dated options and stocks that have hit a flat spell, it’s a great way to offset premium decay and still have a directional bias on the underlying stock.
In the short term, the risk is limiting upside. However, if you are confident the stock isn’t going to move any time soon, you might as well lower your basis by legging into a diagonal spread.
OA
Comments »
Going back to 2009, August is the one month of the year where I will usually trade the least amount of options. There are two main reasons for this. First, August is usually one of the least volatile months of the year. Since directional options strategies require movement, this is one of the worst months of the year to trade directional option strategies, with the exception of diagonal spreads.
Second, the stuff that is usually outperforming this time of the year, over the last several years are the types of stocks that “float.” These are stocks that are generally low priced, low float, terrible fundamentals, and belong to some of the least desirable industry groups.
Ragin does a great job of locating these stocks each day, and as you’ve noticed, the stocks on his lists are capable of generating double digit percentage returns each day. Not all of these stocks are optionable, but at the end of the day, when the S&P is fluctuating in a 3 point range, these are the types of stocks that are posting the best day to day returns, which make them the only thing really worth trading each week.
The key to trading these types of stocks is to find a high number of set-ups. On my watchlist, I listed roughly 15 that I am tracking this week. I try to set price alerts in each name, so I am notified when one of the stocks perks up. Either that, or watch a grid of them on an intra-day time frame, on a dedicated monitor.
In case you missed the set-ups, here is the list.
I’m adding a few more on my radar this week as well:
Each weekend, I spend several hours running various scans…thumbing through several thousand charts. The objective: find the set-ups that offer up the entire package for the upcoming week.
What I mean by entire package, is based solely on preferences and biases I have developed over my career. Everyone’s package is different than mine. However, mine is far superior.
For technicians, a great set-up has certain characteristics, but none more important than an actionable entry point, and a definitive measure of risk. This means you can visually identify the path of least resistance for prices, and a level in price in which prices should not move. Should prices move to this level, it would ultimately mean you are wrong, and would trigger a close of the position.
A few other aspects of defining a great set-up are:
Volatility. I prefer trading in stocks that move. Since I trade in options, the more the stock moves, the more money I make. When I look at the average price swing of a stock, I refuse to trade in anything that doesn’t move at least 10% from a swing high, to a swing low.
Another aspect of volatility that I prefer, is recent volatility. I prefer to see a traditionally volatile stock in a holding pattern. Consolidation is typically indicative of prices that are getting ready to “pop.” As you know, I prefer to find stocks before they “pop.”
Liquidity. I prefer liquid stocks, and most definitely liquid options. These can be parameters built into a scan.
Other considerations will ultimately depend on where the market is within its current cycle of risk. Depending on the market’s risk appetite, I might want to find stocks with high short interest. I might want stocks in a particular sector or industry group. I might even find that stocks under a certain price level, with bad fundamentals are the flavor of the week.
Scanning and trade planning are something we will be spending a lot of time on in the near future. While it seems that many here are capable of banking coin, post market prep work and understanding how to locate potent trade set-ups are an invaluable skill that separate most market participants from good to great at this sport.
Speaking of locating potent trade set-ups, this is what I’ve come up with this weekend. Enjoy.
For the Weekly Watchlist, CLICK HERE
Comments »
Closing transactions thus far this week. Lots of work for little reward.
Options
Closed SHLD – 70% (-.89)
Closed DDD – 58% (-.35)
Closed RKUS – 82% (-.70)
Closed CLF + 125% (+.31)
Closed GRPN + 206% (+1.32)
Stocks
Closed CHCI – 5% (-.16)
Closed NDLS + 3% (+1.36)
Closed UNXL + 18% (+2.45)
Closed LITB + 12% (+1.96)
My saving grace here is position sizing for total loss on OTM options, but trying to avoid max loss when applicable.
I still have a few August positions to work my way out of, and a considerable amount of stock positions on. Will use the remainder of the month to reposition my efforts into some new blood.
Off to go do something “happy” and “uplifting.”
ROFL.
Comments »
