I tried my first popper with options on the air today. The stock was FSLR and it was gapping down due to a downgrade. This stock has a huge ATR already ($10.00). But today FSLR gapped down about $22.00 at the open and we found a nice option, but the spreads were crazy but we took the trade anyways. We started out down a couple hundred out of the gate but the option came back and we were up about $100. I decided to take my paper trade off the table and lock in a little profit but the stock sold off to fast to lock in profit. Instead we took a loss of over $400.00 on the trade. Currently the stock is down over $26.00 so it could have been much worse, but we got out and moved on. This is a hard strategy and using options makes it harder, make sure you paper trade and perfect your skills. Remember when trading options as an active trader you need a high delta and the options can be pretty expensive. Also watch your spreads on the option, that can be the difference between a win and a loss.
Happy Trading,
K
I want to follow up on the previous blog entry example of AGU. With the current market dump, this example is still holding up with Green Wizemen. But again, one must ask "Do I trust these markets?" If your answer is no or you're not sure, this is why you must make sure to implement good money management. If you're in a Diagonal Spread or Covered Call on this type of a trade, you may want to consider moving up your stop based on a contingency order. This will trigger your trade to exit based on the underlying asset price movement. And please, remember, that while you're intention may be a longer term position, there's nothing wrong with taking your profits. As your charts re-establish themselves you can always look for a new entry.
If you're in this type of trade directionally with simply a long call, this is a good week to consider lowering your cost basis by selling a call (writing a call) against your position (creating a Diagonal Spread). Just make sure that you're going far enough Out of the Money to give the underlying stock room to move and still maintain yourself in the long call position. If you don't mind getting called out of your long side, you can look at something closer to At the Money for some better premium. Just remember if the stock blows past the short call strike, you will not get to profit from the additional movement. And still consider having stops in place that are based on the underlying asset price movement or stops that will lock in a desired amount of profit.
Just remember to protect your profits!
Happy Trading!!
Angie C.
February 24th, 2009
NickP
Call this a tip of the day..but if your running CNBC, Web news sources, Guru's message board sources, streaming news sources and watching hours upon hours of post market commentary across 5 different news channels every night..in an attempt to make any sense of this markets moves, I suggest you turn them all off and focus on the very basics of the program. In this environment, less is more. Stick to the charts and the stocks that will shine going forward, they will show their faces now and in the future!
Nick Pirraglia.
No buy, sell, or hold recommendation... but I'll let you know what I've been watching recently. I think this market is ripe for bottom fishing opportunities. Several stocks, as well as sectors, are coming off of some developing support with very good volume. Take the agriculture chemical sector. It's not exactly flying to the upside, but then again market confidence isn't pouring back into the market. But I'm actually drawn to the slower movers right now. With less volatility there's less of a backlash if the market decides to have a volatile day.
Example:
Also, I'm of course coupling these stocks with the covered call strategies (for options this would be a diagonal spread). And this is where the lower volatility is also in my favor. I only favor covered calls on low ATR stocks and the lower the volatility the better so that I'm not immediately called out. And then I can sell another call against my position again next month all while my long position continues to gain value.
The biggest key in all of this is money management. I still don't trust this market. I would be more actively adjusting my stops on this strategy than would normally be called for. So I would be looking to adjust my stops as I move into profitability regularly. In the example above, I would have moved my stop up to break even after the first week once the Short Term chart started to turn around. And in the second swing movement, I would've looked to move the stop up by the Daily ATR again. Locking profits is a large key to being successful.
Happy Trading!!
Angie C.
My favorite light interval has been the 130 minute light for a long time and I have long been a swing trader. I have to say, though, that some recent 'soul searching' has lead me to wonder if I haven't had some recent growth as a trader that I've been fighting and I should consider practicing some slightly modified versions of my usual style of trades to see if I can't find myself in a better fit in this market.
If you don't know, I have found myself to be very comfortable as a swing trader. I like fresh crosses on the day after a few days of retracement following a supportive underlying foundation (you know, the Wizemen). Sound familiar? It's a basic Swing trade. I love the 130 minute light and how it breaks the day down into even parts so that I can see what the intraday movements have been just enough to know which 10 minute entry is good and which one is overextended. But with the recent markets being so 'wishy-washy', I find myself relying much more on the 65 min light with supportive moves on the 10 min light for entries. Same strategy with a slight tweak.
Also, I don't wonder if I don't want to adjust my money management. I wonder if I can look for smaller, quicker gains on smaller moves all the while taking smaller risks (sounds like an active trade, no?). Generally I avoid active trading altogether, but why shouldn't I be able to use my lights to take the smaller moves and capture gains along the way instead of sitting through the whole ride? I think the answer mostly depends on my personality. I don't think I have it in me to take the more active trades, make the quicker decisions, and be disciplined with the necessary follow thru on a faster paced basis.
But I may put it to the test over the next few weeks. I'm currently working on a new Trade Plan and I will write a set of rules for an active/swing hybrid style of trade. If I find that I have some success implementing this trade style, than I may have found that I have evolved as a trader. Worst case scenario, I find that it makes me too nervous and I'd rather have my nerves in tact than make a few extra dollars.
Happy Trading!!
Angie C.
So the new year's barely under way and in order to kill two birds with one stone I've started a new project. I'll be using our new Channel 2 class on Wizetrade TV in HD to write my updated trade plan for 2009. We always talk about how trade plans should occasionally come under revision- with changing markets, changing life circumstances, changing skill levels. Well several of these factors have affected me in the last year and it became apparent as I reviewed my trades for 2008 that I definitely needed to update my trade plan.
Still we're already in February and I haven't done it yet so I'm going back to the drawing board and I figured it would be a good learning tool if we did it as a community- a Wizetrade community. So as a weekly project during "Wizetrade Options 301: Creating a Trade Plan" we are building a trade plan together and I am the 'dummy,' so to speak. Of course, I won't be putting in all of my specific information, but I'll be as honest about myself as I can be without opening up my bank vault. And those of you who know me know that how honest I can be
I'm very excited about this. I was inspired to do this by a trade plan submitted by a customer who obviously really took the time to understand the market they were trading and apply the principles we've been sharing at Wizetrade for years. I hope in turn that others will learn to implement the same principles into their trades. And the key being not to just create this plan, but to use it to create consistency and success!!
Happy Trading!!!
Angie C!
