The Only One Good Thing Related to Facebook $FB

Tue May 22, 2012 10:59pm

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I haven’t been around for many big IPO’s but never have I seen a stock get so much attention such as Facebook. I won’t pretend that I know all the details and how retail got screwed over by the underwriters and how the big/important clients are laughing while starting bonfires with wads of cash. There are many more intellectual and experinced traders that have been on the institutional end and can explain things better. All I do is observe.

From what I have seen this stock gets no repsect. So anticipated and now it is the biggest joke within social media. I have no intention of trading the common but may end up trading options or entering into covered calls, but no outright common stock. With the recent action I remember a comment in a blog post by @RajinCajun Poll Results & Other Notes in which he comments:

“Maybe everybody got it wrong, including myself, when they said Facebook will mark the top of the market, maybe it marks the bottom.
A true costanza market.”

So with the recent action in the market (gauged by the S&P 500), I wanted to look at the price action since the Facebook IPO.

Below is a daily chart since the May 1st high and the selling since.

The other charts below are 30 minute charts of the SPX and Facebook. One thing that I did find interesting too in FB is that the opening range (first 30 minutes) low has held the low everyday in these 3 days it has traded. I expect this one to have continued volume and going forward and a low risk entry would be near/below that low and plan your stop according to your risk. I believe this would be a good entry for a daytrade or swing trade.

With these charts I am just looking at what they are telling and I am not factoring in any news or pending cases that may be coming…just simple charts and data. This stock has too much noise around it for me right now and I will instead at least wait for the options to start trading.

This is just an observation of prices and like @RajinCajun stated, would confirm that this a constanza market. Also I like reading market conspiracy theories and this seemed to fit the bill.

I will say from what I have read from several institutional and market intellects, this story is despising. Its just another reason why people are afraid to put their money in the market; cause when they do they lose on recommendations from their brokers and get to read about their deception. Tread safely.

Feeling A Little Left Out..But Patience Pays

Mon May 21, 2012 11:26pm

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So am I the only one today that is feeling a little left out. I subscribe to a trading and the head trader was calling out good trades and it probably had to be one of the most profitable days that I have seen within the room. But for me…I did nothing. I did not make one trade. Early in the morning I did consider taking the Apple trade with weekly call options, but instead I marked at what price I would have gotten in at and just monitored the trade.

Apple is one stock that if I trade it, it will be for a daytrade or for 2-3 days max. No longer, unless I have an options spread trade on that reduces some risk and lets it move around some without seeing the wild swings of single call or put options. I choose short time periods due to the extreme time decay. So with this specific trade I chose the May 540 Call and would have gotten filled at 7.00. While the option did go negative a little bit from entry it took off from there. Below is a screen capture of the risk graph and profit of $1392.50 (+198%) taken 15 minutes before the close.

Below is a 15 minute chart showing the entry point early in the morning.

So overall I missed out on a nice profit of nearly $1400 trading just one contract. But there are several reasons why I did not take the trade.

As stated, when in AAPL with single call options I look for 1-3 days hold, max. This is due to rapid time decay and the wild swings that AAPL can take. To follow that, I knew that I had other commitments during the day that would take my attention away from the trade and I would not be able to watch it.

Further and one hour into the trading day I made the decision that I will not be active this week, besides a day trade or two. I made this decision knowing that I have a busy personal schedule and if I get over involved here my full attention will not be towards the market nor towards my other commitments. So I will sit back and observe and not feel bad about missing out on some trades I would have otherwise taken. My main goal here is to maintain my mental capital and be ready for when time allows me to fully monitor positions I have on.

I have wrote in a recent blog post on how I am expecting some up and down volatility titled The Markets and Whiskey are More Correlated Than You Think. It basically explains that I am not ready to allocate a lot of capital here as I think the moves will be bigger up and down. The most recent post I like is from @chessNwine and his Stock #Market Recap 05/21/12 {Video}. This has to be one of my favorite recaps as it explains several things to look for and states on more than one occasion that one day does not make a trend….and I couldn’t agree more. I have learned to become more patient (still struggle some) but here I want the market to confirm its move and then I will allocate more capital. I also remember in reading the trading books I have of great traders, not one of them made their money by picking the top or bottom but catch the meat of the trend.

An Addiction I Am Trying To Control

Thu May 17, 2012 1:57am

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What can I say, I think I am an addict. It is hard to sit at the computer and not be tempted to trade something. This is a bad habit of mine that I am finding hard to cure. It’s like taking a recovering alcoholic to the local watering hole and setting a Shirley Temple in front of them while you’re drinking and enjoying the finest craft beers this fine country offers.

I came into Wednesday with no positions as I closed them all on Tuesday as found in my recent post titled “The Markets and Whiskey are More Correlated Than You Think”. I closed them due to the uneasy feeling of the current environment. I feared the market in both ways as a rip would kill my short delta positions and carnage would kill my long delta positions, either way I expected volatility either way and didn’t want to screw up my mind with wild swings in my P/L. Well Wednesday didn’t disappoint as the familiar morning run followed by selling. But instead of sitting there watching, I felt like I had to do something…and I did.

I put the following positions on:

SPX – May 1310/1305 Bull Put Spread
/ZB – June 147/148 Bear Call Spread
RUT – June 740/780/820 Iron Butterfly

So where do I sit now, I’m down on the /ZB and SPX option trades and positive on the RUT Iron Butterfly, but losses are exceeding gains. Around 1:30 EST I sat at my desk wondering why the hell did I have to get into these. While they compromise a small position of my holdings and I’m waiting for the turn to bull up, I still didn’t need to get into these and I could go into tomorrow with peace of mind.

Even with the futures trading nicely right now (+7.75 in the /ES) I still go into tomorrow with some uneasiness with the SPX trade that expires Friday morning. The market is series of unknowns that the trader controls with risk management. I need to learn to just stay out sometimes no matter how good setups are and take a break, as one has to remember your health is ultimately affected as well.

The Markets and Whiskey are More Correlated Than You Think

Tue May 15, 2012 11:45pm

669 views

So given the title of the blog post, what do they have in common? From my experience if they are taken fast one is to end up in disorder and confusion. Patience is the key to both the market and drinking whiskey. For example, if you play the market fast constantly being in it and not willing to reduce some risk, I am quite certain you will end up with a blown account. I know this from experience as I have blown up three separate accounts before getting my act together and looking at risk instead of constantly reading technical analysis and options strategy books. Please if you are beginning trading, focus first on risk. Another experience that relates is with whiskey. When I was younger I was all about the shots and reaching that messed up state at a rapid rate, only to wake up the next morning miserable and wondering what the hell happened. Nowadays when I drink my whiskey I enjoy the finer stuff (favorites including Jameson 12 year & Jack Daniels Single Barrel) and just sit back relax and sip on the finer stuff in life.

So how does this all relate to trading? Recently the market has me concerned. Going into today I had mostly exposure to the long side that utilized a small portion of my account. But today’s action action had me a bit worried as shorts did not run and buyers did not really step in. This morning watching the futures, the market looked great but when the action/volume came in, it told me to step aside as the bears are still awake and ready to kill any rally attempt. When the market looks like this I believe that a trader should not look at support unless they are willing to average in, instead wait for conformation to either side and step aside and let the others get chopped. I am not saying don’t trade, but if you do, trade small with expectation of lower prices and utilizing those stops or averaging down for longer term holdings. Case in point is a post by @RaginCajun http://ibankcoin.com/rcblog/2012/05/15/bulls-are-weak/ , and from there “After sitting on my hands for a few days, I decided to try a few longs. I was quickly stopped out of $WYNN after trying to catch a falling knife, but got a great add on my $YELP shares. ”

Below is aq snapshot of my positions at end of day.

From the screenshot and going into today I was long deltas in: BIDU, PCLN, & UA and short deltas in CRM, with long day trade in AAPL. The table refelcts the results:

Symbol	Date In	Date Out	Price In	Price Out	% Gain/Loss on Risk
AAPL	5/15	5/15	3.80	4.80	26.32%
BIDU	5/11	5/15	1.85	1.72	-7.03%
CRM	5/11	5/15	2.29	2.40	4.80%
PCLN	5/14	5/15	1.12	0.79	8.51%
UA	5/10	5/15	4.00	4.40	10.00%

This table is meant to show that I did have some positions on but for reasons of today’s actions in the market I started to get a little worried and reduce some risk and say thanks for the gains so far and go into tomorrow with a clear mind or not trade at all and let things work out for themselves. There is no need to be a hero and try to guess the bottom as this proved to kill some poeple that saw that hammer back in August 2011:

As you can see this hammer looked awesome as it undercut the previous days lows and saw buying coming (the tail) after what appeared to be a capitulation day. Needless to say we can see what happened next as commodities got liquidated, much like todays action.

So from this all I can say is be careful and don’t load up. Take it easy and exercise that patience and let market play out and wait for some evidence of buyers to show up. As quoted from @chessNwine “We are in a short-term downtrend within the context of a bull market correction, until proven otherwise. Aggressive traders have by and large been chopped to pieces in this environment. You simply must protect your capital and confidence here so that you can be properly positioned to benefit from the next trending period in the market.”….and I couldn’t agree more.

Like a fine whiskey, don’t take shots and end up puking and waking up the next day wondering what the hell happened. Sit back enjoy yourself and watch things prove themselves, sip on that whiskey and enjoy the fine points of the oak and wood-char and relax and be patient!