When looking at the weekly chart patterns on the $SPX we broke through the January 2009 weekly high of 878 to 888 today but I am not convinced of this bullish breakout on the weeks. If you review the intraday patterns on the $SPX, there is considerable weakness. We are starting the trading day with a gap up in the futures market but by the afternoon there is a pullback back into the 870 range. Below are the charts for the $SPX showing you the weekly breakout and the weakness intraday in making those moves. Please be cautious in your trading when the markets are struggling with these resistance levels. Protect your profits and certainly use options as a hedge.
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The market is having a difficult time establishing a clear direction right now. The DIA is struggling between about $77 and $82 giving us a channel near resistance of the overall bullish trend it's been trying to establish over the last few weeks. Realizing that channels eventually break out, if we don't break and hold above this resistance soon, we may see a return of bearish movement pretty soon. Of course, with all of the uncertainty in the financial sectors and unemployment numbers not showing any improvement, we may find it difficult to maintain bullish positivity. But only the charts will tell.
Just wanted to pass on the successful results of my strangle on APOL!!! Another winner for our earnings season plays!
We're here on Expiration Friday, a day we look at for some extra volatility. We've come into this week with a LOT of uncertainty in the markets. We are slightly up for the week, but we have to be cautious of the fact that we've been advancing for 6 weeks! We aren't even near major resistance, which is about $84 on the DIA and almost $88 on the SPY. We are RIPE for a pullback so be on the lookout.
Happy Trading!!
Angie C.
As we are trading straddles and strangles during this earnings season we must learn the art of patience. According to Wikipedia, patience is the state of endurance under difficult circumstances, which can mean persevering in the face of delay or provocation without becoming annoyed or upset. The key being "delay" in many circumstances. If you have a straddle and/or strangle that did not have the initial large movement needed on the day after the earnings announcment, remember that there is often additional moves in the price of the stock after the announcment. So make sure you have contracts in the appropriate month in relation to the earnings date. Since these are debit trades you must be out of your options in the first week of expiration month or the time value will work against your position.
Enjoy Earnings Season!
Diane Sullivan
Earnings season is here and it is time to research companies for options trades using straddles and strangles. Remember that a long straddle is long 1 call and long 1 put at the same strike price and expiration and on the same stock. A long strangle is long 1 call at a higher strike and long 1 put at a lower strike in the same expiration and on the same stock. You need to be delta neutral by +/- .10. In addition you need to calculate the ideal percentage movement of the stock. You divide the premium of the options into the price of the stock to get this ideal percentage movement. Then research the past eight quarters to verify that the stock has had the volatility to reach this percentage movement. Also be aware that there are stock price movements into earnings, the day of earnings, and continued price movements until options expiration.
The following companies have proven to have the volatility needed in earnings season:
ISRG, GS, VMI, PCLN, MA, FSLR, AMZN.
Do your research on movements and verify your earnings dates multiple times. Remember one or two contracts is certainly enough to have a profitable trade.
Thanks
Diane Sullivan
The market broke down below support today. So are we going to break down completely? Maybe not. Observe that the Short Term (Day) charts on both the DIA & SPY are showing that this pullback doesn't have any volume to support it. As a matter of fact the volume is falling off dramatically. So we could possibly see the market rally and either retest resistance or blow right through it. But I wouldn't trust it, unless I see the volume.
Angie C
