Let's Trade Options

I've had an order in for more XLNX Feb15 110 PUT at $1.85, but it doesn't look like it will get hit....it would only drop my average price to $2.52, so not much difference from $2.69....

...I got some guacamole on my crystal ball,,,,anything over a week out looking kinda cloudy....event horizon kind of open....

But no big events on tap and a dovish Fed, decent earnings, seems like a recipe for US equities to grind up.

got a $1.40 tp on it for nominal 10bag..

Good job, TF!! I hope you had a hundred contracts on that puppy!!

thanks, money....actually pulled that off about net 95c this AM. With those bullish trades listed above I had about a +20% January...I am flat now

Out of:

ZION Feb15 48 PUT Up to $1.53 from $0.90

About to bounce off the mid-BB at ~ $47.00, so figured a good time to take profit....

I see you scaling in often money, do you ever scale out? I usually don't, simply because I rarely am shooting more than 20 lots, usually around half that. Grab cash & dash my mo. If I had bigger positions, though, I would scale out in the right scenarios.

I have before, but usually not. I agree with you, just get out when you have a decent profit. I usually have an idea of the stock price I will get out at, typically at an EMA or mid-BB (like ZION and the mid-BB), so when it reaches that, I just close it all and don't look back. When I first started decades ago I wanted to milk every penny out of a trade, and that would wind up costing me a better profit usually, so now if I leave money on the table it doesn't bother me. Less stressful, too. Like buying a computer....you spend all the time doing research on the best model for the best price, buy it and inevitable the next day you find a better deal....so when I get out of a trade (or buy a computer), I don't look back!

Speaking of scaling in, I had a Hail Mary order in for 25 more XLNX @ $1.72 and it got hit! And it was $0.20 less than what I thought it would get today, so that was a pleasant surprise...makes my average at $2.32, so a couple of good down days will make a great trade! Not a 10bag, mind you, but a good trade nonetheless!

If it can close around $110.80 this week, next week should drop it some more. The weekly 5EMA should be around $105 next week, so it should head that direction.

...still see this, I think we will see vol slump pretty hard and some good setups for bullish range-capturing strats - calendars and diagonals. A little further out we could see Brexit trouble bleed on US equities - but that sets up for March, last time I checked.

To catch an uptrend I might play SPX or SPY as I did in January, get in a cheap bull vert to set up defense on some time spreads beyond the vert strikes. That works very well in a trending market.

For clarification, I only scale in on those trades I have very high confidence in they will still go my way after moving against me and I can get in a lot cheaper to drop my average cost. It usually works very well. If I scale in more than twice, the third time number of contracts is usually twice what the first two were.

I seldom scale in when I'm in profit. When it starts moving the direction I am predicting, I just hold what I've got until it reaches my destination, or starts to falter for some reason.

do you use (or move) sl orders to lock in profits? I never do - most of the time my trades are set up to have a max loss = acceptable loss.

No, when I have an open trade, I am usually at my computer or following on my phone, so if I need to close early, I manually close.

Like with ZION: I got out at $1.53....I was expecting to be able to get about $1.60+ with the price at the mid-BB (mid-BB was ~$47.00). When I got out, price of the stock was $47.03, Bid was $1.35 and Ask was $1.59.....Bid hadn't moved for a $0.30 drop, so I started at $1.59 and opened a sell order in $0.01 increments until it was hit at $1.53.....Bid never changed and my orders never showed up on the Ask, only the T&S when it was hit. Doesn't even show up on the high (shows high as $1.48)…..so I most likely would not have been able to get out at the mid-BB price like I did without watching the trade myself (rather than just letting my orders do it for me).

So I normally don't use SL because I like to see what the entire picture is myself and manually control my trades.

Because I buy straight PUTs/CALLS and usually 25-100+ contracts, mine can't be setup like that. I have to be very interactive with the trades.

well, to each his own and whatever makes the most money can't be argued with, I suppose. The beauty of spreads and combos of spreads is they can be set up to be very safe and still offer large returns. I am pretty much trading stress-free since I became a spreader, only sweating sometimes when I have short verts unprotected....

My style works for me, but like I said, my New Year's resolution is to learn spread trading. In a perfect world I will find a type of spread that will work using my extreme overbought/oversold data.....I want the spreads to be as high confidence as my PUTS/CALLS.

For me, the ZION trade was just an easy no-brainer, super safe trade. I've done those type for so long, I have no problem putting 100 contracts on them. To some, it seems like I'm risking $9K, but to me, I'm just using X amount of money to make X amount of money (in this case $6300)....I don't see it as a risk at all.

If I become confident with the spreads as much as I am with my normal trading, I'll certainly put hundreds of contracts on a cheap spread to make 5-10 times!!

well, I see you putting on long call/put trades with 3 weeks of time sometimes - those are scenarios where you could use a time spread to lower your cost basis....if you are targeting a given stock $ value, you could do that with the time spread to have the latter leg of the trade come up to that & the front leg coming off worthless - that would allow you to double (or more) the # of lots you end up with...

The Market Sum |Investopedia

Insight after the bell

By Caleb Silver, Editor in Chief

Thursday's Headlines
1. January ends with best performance since 1987

Markets Close

Dow
24,999.67 -0.06%
S&P
2,704.10 +0.86%
Nasdaq
7,281.74 +1.37%
VIX
16.57 -6.17%
INV Anxiety Index
100.36 Neutral
US 10-Yr Yield
2.635 -2.23%


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Markets Today
Stocks meandered today, coming off of yesterday's Fed-induced rally with no real catalyst to rise or fall - except for tech stocks. The Nasdaq jumped nearly 1.4% today, led by Facebook, which climbed nearly 11% as investors plowed back into the original social network following the company's blowout earnings results announced on Wednesday. As we close out the month, it has been a January to remember.

 

1. The S&P 500, up 7.8%, had its best January performance since 1987, and its biggest monthly gain since October 2015.
2. The DJIA rose 7.17 percent in January, its largest one-month rise since 2015 and biggest January gain in 30 years.
3. Crude oil prices had their best month on record, surging more than 19% after three straight months of losses. Output cuts and the chaos in Venezuela, an original OPEC member, had a lot to do with that performance.

Amazon.com reported earnings after the close today, beating analysts expectations, albeit slightly. Still, the e-commerce giant pulled in $72.4 billion in the fourth quarter and $232.9 billion for the year. That's insane! It was the first time Amazon crossed the $200 billion a year mark for sales, but I guarantee it won't be the last. AWS, Amazon Web Services, its cloud business, is the fastest growing business inside the company. It generated $7.4 billion for the quarter and is growing at 45% a year.

Ready for February?
Given that we are at month's end, we are going to experiment with a look-ahead to February and what to expect for markets and the macro economy. We hope you like it.

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You may not like that chart. Apologies. Neither do I. But history has shown that February can be a cruel month for stocks. According to LPL Financial, markets have basically been flat on average for the month of February, going back 50 years. Only June and September performed worse over that stretch of time. Does that mean it will happen again? Who knows, but we do know that past performance is no guarantee of future returns.

Ryan Detrick, the Senior Market Strategist for LPL puts it this way:

“We like to say that the easy 10% has been made off the lows and the next 10% will be much tougher...Things like Fed policy, China uncertainty, and overall global growth concerns all will play a part in where equity markets go from here.”

We are all familiar with those challenges as they have been front and center for several months. The Fed has pledged patience as of yesterday. China is a big question mark and global growth is still in question. A China/U.S. trade resolution will help the global growth picture since the countries rely heavily on each other and dozens of other countries rely on these two biggest economies in the world playing nicely in the sand box.

(James has more on the key indicators to watch for U.S. Markets in our daily chart, below.)

As for China, the trade negotiations are not the only wildcard. Growth is slowing in China, but it is still smoldering between 6-6.5%. John Jagerson,who pens our Chart Advisor newsletter and is one of our experts on Investing and Trading, points to China's Manufacturing Purchasers Index as a key indicator of China's economic health.

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Here's John's take on China:
"...For investors focused on China, January’s manufacturing data was less-bad than expected but still in contraction territory. In order to avoid another economic debacle like the market experienced in 2015, Chinese economic data needs to improve. As you can see in the chart, the Manufacturing Purchasing Managers Index (PMI) for China has been in decline for months now. PMI readings below 50 indicate contraction. Because of the holiday, the next industrial production data is unscheduled, and PMI won’t be out again until the end of February. Signs of recovery or weakness in China’s trade balance, industrial production, or PMI numbers will be a key for understanding the potential for a repeat of 2015 so investors must stay alert for unexpected news. "

Caleb here - It's already hard to get good data out of China, but this month will be even more difficult given the holidays. Given that the trade negotiations are ongoing throughout the month, the pressure might be on Beijing to get a deal in place to avoid more contraction in manufacturing and slower growth than the 6-6.5% expected. Everything is connected.

Europe-Brexit
Europe is complicated. The biggest single issue facing the continent and the EU is Brexit. With the March 29th deadline fast approaching for the U.K. to formally leave the EU, Prime Minister Theresa May, a leading proponent of Brexit, is hanging on to her post by a thread. She has survived two ‘no confidence’ votes in British Parliament, cabinet defections, complicated demands from the EU and Northern Ireland and public discord. An opposition party in Parliament tried and failed to postpone the March 29th exit date, so that is still the day to circle on the calendar.

Happy February!

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Chart to Watch for February: S&P 500

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As you may have heard by now, the S&P 500 just had its best January since 1987. While this is a major feat by any measure, the starting point for January's rally was exceptionally low - more than 15% below September's all-time high. As of January's market close on Thursday, the index is now only around 8% below that September high. The big question now is, will stocks continue their momentum into February, or could we see a near-term ceiling on gains?

A quick look at the S&P 500 (SPX) daily chart above tells the whole story of December's sharp plunge and January's equally sharp rebound. As we look towards February, this rebound has just reached up to approach a relatively strong resistance point around the 2710-2715 price area, which is right around the 100-day moving average and a key 61.8% Fibonacci level (measured from September's all-time high down to the late December low).

Will February's market have enough juice to break through resistance and extend the rebound further? Strong corporate earnings and an increasingly dovish and accommodative Federal Reserve have been the primary drivers of the market rally in January. These are both strong fundamental drivers, but upside technical resistance is also strong. In February, the market move to watch will be whether or not the S&P 500 can surmount this resistance and potentially set the stage for a sustained move back up to resume the long-term bull trend. Or, a much less appealing scenario would be a February turn back down at or near resistance towards bear market territory once again.

Everything I looked at tonight has a short term downward bias indicated...no extreme oversolds to be found.

So I'm gonna throw something predictions out there :

1. Looking at the DJIA, I expect a drop in the next few days to around the 24600 area with a probable spike down to 24500. The 10EMA on the Daily chart is around 24600 with the mid-BB on the Daily chart, the mid-BB on the Weekly chart, and both the 5EMA and the 10EMA on the Weekly chart all being right at 24500...that kind of convergence on different time frames has, in my experience, shown to be a pretty powerful price magnet.

That being said, unless we get some super good news pre-market from Exxon, Chevron, Sony, or CIGNA tomorrow , the following options should be good for some quick money:

1. NUE Feb15 62 PUT @ $1.55 or less
2. RCL Feb15 119 PUT @ $2.00 or less
3. BXP is right at a triple top and indicating extremely overbought. When price gets up to around $132.60, a good play should be BXP Feb15 130 PUT @ $0.95 or better

Naturally, if futures indicate an up opening or one of these shoots up for some reason pre-market, no orders will be made prior to market opening, and watching to get in at a better price.

Yeah, that's what I am looking at right now. It is a big paradigm shift to plan to hold until expiration!.....But like you said, could be very profitable....