Utilizing Market Comments from Other Traders

Yesterday was a good day for those that did not get shaken out of the market from Monday’s action.  It was probably a bad day for those that got eagerly short in portfolio.  Yesterday can be a good example of letting the overall momentum shift before jumping the gun.  There were some good comments on the stream yesterday from @HCPG:

If you’re looking for a top, wait until you have no more stocks setting up. That’ll likely coincide with any top.

and from @stevenplace:

$SPY potential broadening top. If anything, is indicative of increase in actual market vol stks.co/q1nI

Below is the SPY chart that is referenced in the link:

spy_20130206

I must say that I agree with both of these outlooks.  It is too soon to go overly short as there are still stocks setting up and breaking out as mentioned by @HCPG.  But as @stevenplace mentioned, there will probably be an increase in market volatility.  Personally when I see indices making moves like this at a top I try to think from a behavioral standpoint and right now it is telling me to trade light.  Also, I am not one to eagerly short either but would rather have more cash if the market sold off instead of always being involved.

With that, I am still in the Amazon (AMZN) position that I have posted about here.  I didn’t need to adjust this as yesterday’s action was favorable.  Also yesterday I got back into an Apple (AAPL) long position.  This was mostly due to current price action and a posts to the stream from @OptionsHawk :

AAPL – Liked what I saw this morning, involved at $444 via calls, held 10 year trend support for 2 weeks, looking for 510

AAPL’s IV30 down 40% since earnings and near 6 month low, see that as bullish, less uncertainty

The last comment really got me interested.  With the drop in IV since earnings and 6 months low, the uncertainty was alleviated.  I remember in the past there were several traders calling for 425 and that could be justified by the chart.  But sometimes we don’t always get what we want and I am liking the current action in AAPL.  Yesterday was a good day for AAPL in that it rallied with the markets, something it has really failed to do in this whole market rally.  I decided to put on an Call Broken Wing Butterfly.  I went out to March expiration with 460-480-490 strikes for a debit of 4.25.

aapl_20130206

I choose this strategy because I liked the risk involved and it is a bet that AAPL will at least hit 480  by March expiration.  This also takes advantage of one of those 40-50 point rips that we could see in AAPL and then at that point I believe the low in AAPL will be established.

aapl_20130206aBelow is the risk profile for the AAPL trade based on a 1-lot.  This is a play more on the direction and not so much the greeks as in an income position.  The red dashed lines represent a %5 move with the dashed line in the middle being the current price at 0915 hours 02/06/2013:

aapl_20130206b

2 Responses to “Utilizing Market Comments from Other Traders”

  1. “telling me to trade light”
    “rather have more cash”

    Good points! Couldn’t agree more! What goes up will always come back down even if is for a small correction; but then we won’t know if the correction is small or big until after the fact. So, it pays to be defensive after a strong rally.

  2. Thanks for the comment(s) zen; always appreciate your insight and agree with your thoughts as well.

Comments are closed.

Utilizing Market Comments from Other Traders

Yesterday was a good day for those that did not get shaken out of the market from Monday’s action.  It was probably a bad day for those that got eagerly short in portfolio.  Yesterday can be a good example of letting the overall momentum shift before jumping the gun.  There were some good comments on the stream yesterday from @HCPG:

If you’re looking for a top, wait until you have no more stocks setting up. That’ll likely coincide with any top.

and from @stevenplace:

$SPY potential broadening top. If anything, is indicative of increase in actual market vol stks.co/q1nI

Below is the SPY chart that is referenced in the link:

spy_20130206

I must say that I agree with both of these outlooks.  It is too soon to go overly short as there are still stocks setting up and breaking out as mentioned by @HCPG.  But as @stevenplace mentioned, there will probably be an increase in market volatility.  Personally when I see indices making moves like this at a top I try to think from a behavioral standpoint and right now it is telling me to trade light.  Also, I am not one to eagerly short either but would rather have more cash if the market sold off instead of always being involved.

With that, I am still in the Amazon (AMZN) position that I have posted about here.  I didn’t need to adjust this as yesterday’s action was favorable.  Also yesterday I got back into an Apple (AAPL) long position.  This was mostly due to current price action and a posts to the stream from @OptionsHawk :

AAPL – Liked what I saw this morning, involved at $444 via calls, held 10 year trend support for 2 weeks, looking for 510

AAPL’s IV30 down 40% since earnings and near 6 month low, see that as bullish, less uncertainty

The last comment really got me interested.  With the drop in IV since earnings and 6 months low, the uncertainty was alleviated.  I remember in the past there were several traders calling for 425 and that could be justified by the chart.  But sometimes we don’t always get what we want and I am liking the current action in AAPL.  Yesterday was a good day for AAPL in that it rallied with the markets, something it has really failed to do in this whole market rally.  I decided to put on an Call Broken Wing Butterfly.  I went out to March expiration with 460-480-490 strikes for a debit of 4.25.

aapl_20130206

I choose this strategy because I liked the risk involved and it is a bet that AAPL will at least hit 480  by March expiration.  This also takes advantage of one of those 40-50 point rips that we could see in AAPL and then at that point I believe the low in AAPL will be established.

aapl_20130206aBelow is the risk profile for the AAPL trade based on a 1-lot.  This is a play more on the direction and not so much the greeks as in an income position.  The red dashed lines represent a %5 move with the dashed line in the middle being the current price at 0915 hours 02/06/2013:

aapl_20130206b

2 Responses to “Utilizing Market Comments from Other Traders”

  1. “telling me to trade light”
    “rather have more cash”

    Good points! Couldn’t agree more! What goes up will always come back down even if is for a small correction; but then we won’t know if the correction is small or big until after the fact. So, it pays to be defensive after a strong rally.

  2. Thanks for the comment(s) zen; always appreciate your insight and agree with your thoughts as well.

Comments are closed.