Trade: Long OPEN...winner

15-SEP-10:
Update...in true trader mentality I decided it was time to get rid of OPEN and take my profits...Sold the contracts today for $9.00 a piece...a profit of $250 per contract....accross all the accounts (9 contracts) that's a profit of $2250..that's more than my wife makes in a month so I am happy with that...I think that's probably a new goal of mine...to make enough on one trade to cover my wife's salary.

This wasn't a homerun but it was a good double... but I have very little faith in this rally at this stage and traders take their profits when they can...OPEN may very well keep running but I am at peace with that. I am trying to think more like a trader and less like an investor...there are multiple opportunities just like OPEN that happen everyday...So I will get on board those and get off board just as quickly.

13-SEP-10:
Decided to enter into a long today despite the market being near the top of its recent range. Some stocks are simply not giving up the goose or (as in OPEN's case) looking like giving up the goose then finding support at key levels and demonstrating retests.

OPEN has been on my side radar for a while because it consistently appears on IBD's Stocks on the Move. While I have missed the ride until this point, today's gap and subsequent sell-off offered a nice opportunity for entry on a very short term basis today.

Today OPEN popped out of the bollinger bands and followed through by confirming in the 2nd hour of trading. Then the fade began and that took us until about 2PM. The hourly chart was showing a %R retest and the 15 minute chart was showing a DMI kiss in the making along with a CCI retest.

I checked this out with more scrutiny because I noticed that the options in the 50-60 strike range had high open interest and the bid/asks were decently tight...also the chart of the option itself was showing a retest on %R as well...

I then watched the action in the underlying itself as it neared the bottom of the day's action...the bid/ask spread was very wide and no business was transacting...within a few minutes they came together and the stock put in a fat green bar on the 15 minute chart.

I pulled the trigger at that point on the October $55 calls for $6.50 each...

A decent target is around $8.80 which is where these options traded earlier today prior to pulling back.

Charts:

1hr:

15 minute:

4hr:

October $55 Call 1hr chart:

General update

So I signed up for some Big Trends services including the Grand Slam Options and the Options Sniper. GS is handled by Bob Lang, and OS is handled by Price Headley. They take different approaches. I am still figuring out Bob Lang's approach but he is incredibly basic in his approach. He uses RSI, MACD, Volume, %R, Bollinger Bands and MAs...Most on standard settings...but he does fire a lot of trades off...so much so that I can't keep up with it all on the blog if I am to trade all these things.

The Sniper service takes an approach based on multiple time frames but mainly the hourly chart to come up with signals etc. However, I have noticed that he deviates from his own "plan" relatively often. I see many stops that simply get ignored, or I see stops not get violated and then him putting out exit orders anyway.

I guess I should blog on these trades if I can because in the end I have a subscription to these services for 3 months. If I decide to go for the whole year they will have to pay for it with trades. So far Bob is doing a better job in this rally than Price...but it's just a matter of luck, they can't both be trading the same stuff and some trades are going to work out some are not...Price has just been on the not working out side. C'est la vie.

Nonetheless I wanted to explain the lack of blog entries lately, I have been trading a lot with these guys just not documenting the trades all on the blog.

I am going to try to get better at that, but because these guys provide nightly emails with the summary of their thinking and include charts most of the time...its a bit superfluous to blog about it.

This is my journal to document trades first and foremost, so if that is done in emails from Bob and Price then I don't need to do it here.

Perhaps the approach I will take is to post when I think they have deviated from the plan. This is easier to do with Price than with Bob because Price is straight forward about what his plan is based on, but I will get to the bottom of Bob's brain as well.

Anyway that's it. I also decided that I am reading a lot of shitty economics lately so get ready for some economic jibberish from me in between all this trading.

Mahalo

Update Trade: BKC Long Calls...loser

3-SEP-10:
I wanted to put down my thoughts on this one more time. You may or may not have looked at this chart since I left this trade (but I will post it after this update anyway).

Remember, I entered this trade for various reasons, but the primary reason was that there had been a massive spike in options volume in the October $20 strike that continued over a few days as the underlying got faded. It had matched technical indicators on the hourly chart.

My main mistake on this was probably my choice of trade. The technicals deteriorated rather quickly and i followed my discipline and exited for a small loss. This was prudent for the next few days...and discipline is discipline.

However, what I should have done is go right along with the whale that was picking up these options in the first place. I shoudl have simply defined my risk differently. Instead of getting a higher delta position and stopping myself out if it reached my risk comfort level. I should have simply picked up the out of the money strike calls and put up money I was willing to loose and then just forget about it.

So instead of buying 10 contracts in the 90 delta strike for $1.15...I could have 1. waited for CCI retest, 2. gone with the October $20 strikes paid about 0.60 each contract and bought only 3 or 4 contracts as a "lottery ticket." Simply said..if this whale is right...then I get to ride with him. If he is wrong...then I loose what I would have lost anyway...

I for one will start looking for these types of scenarios a little more closely...the setup here was fairly clear...very high volume in the underlying accompanied by very high volume in the out of the money options.

Anyway here is a chart to enable me to make a shitload of money the next time I see a similar situation...or at the very least...loose the same amount of money.

There are few things more painful than watching a great call fullfill its prophecy WITHOUT being on board and imagining the money you would have made if you were...this is an incredible lesson in matching strategy to the situation and matching risk to reward...but just matching the risk is important enough..

Every trade should begin with the same statement "I am willing to loose X on this trade" I have various ways of making this loss occur and you should always find the way that matches the risk and maximizes the reward at the same time as leaving you in the trade....stay with the trade in this case was more important than the technical breakdown in the stock....because the whales were telegraphing the potential of a takeover...and they were giving you the basic price...If the whale was willing to spend a shitload of money on a strike that was way out of the money...even if it came close to $20 he would profit handsomely.

Anyway its a wonder that the SEC doesn't investigate these types of shenanigans...this was blatantly obvious that someone knew something about this LBO. 

Painful Chart:

27-AUG-10:
This morning BKC violated a retest on CCI. I exited for 0.95 per contract or a loss of 20 cents...$200...I am being very aggressive on defense here on a long that will probably work out...but the market is not really happy looking right now and longs are really hard to justify being in. BKC has a long term down trend in place and fighting that is tough to do.

Anyway I should have waited a little longer to get into this in the first place. Instead of %R retest...I should have waited for a CCI retest. One flaw on this was that DMI difference never went above 30 so that move on Tuesday wasn't confirmed on DMI Diff...so that may have been the thing that should have kept me away. I let the news about the high options volume cloud my judgment on this one...that whale buying calls in October has a longer term time horizon and a lot more money than me...so he wins...

17.25 was support now it is resistance so that's that...had i waited until this morning to enter I would probably still be in this trade and that is a lesson I will probably end up learning with this one...patience and waiting for that CCI retest is the lesson here...when trading the hourly that's what I needed to do.

Chart:

26-AUG-10:
As per last night's post, I noticed that BKC had triggered a buy signal on the hourly...I didn't really look at the news until this morning...from flyonthewall:

Burger King is recently up 44c to $17.33 . BKC October 20 calls have traded 234 times on contract volume of 20,620 contracts, above its open interest of 15,300 contracts. October calls are trading at 50c above its theoretical value of 18c according to Track Data , suggesting traders paying expensive prices on the expectations of an upside move.

Indeed, and the action continues this morning...this time in the September $20 strikes.

Anyway...I waited for a %R retest and got in to the October $17.5 for $1.15 each 10 contracts...Let's see what this whale wants to do with this company.

I am busy with work...post charts later.

Sniper trades

Potential longs using the skills acquired from Options Sniper:
PAY, COST, BKC, PCG, SLV, LO...and a few others

Potential shorts:
STI, ACI, DVN, MEE

there are others but the market is at major support and the bottom of the range...so I dont really like shorts here.

Trade: Short GOOG...Winner!

24-AUG-10:
Update...Sold for a cool $1,000 at $24.50...my target for this option was the lower bollinger on the daily chart (I figure this was a decent level of resistance). This level resided at around $255 level in GOOG.

The hourly chart however, says to hold on...but I hit my target and am happy with the results.

23-AUG-10:
I noticed that one thing that Headley and company focus on is liquid stocks with liquid options. They are now moving on the weekly options. This drastically reduces their universe of stocks and, I think it also increases their odds of success with every trade. Its easier to get out at the price you want if price discovery isn't a problem for the instrument...this has been a problem for me...but looking at shorter time frames you get many more opportunities....so its OK to have a limited universe because there are more bars showing opportunities.

Over the weekend, I viewed two videos that came with my options sniper subscription, which are basically coaching videos (without the sales pitch). In the videos Headley discusses the use of CCI as a primary indicator in these volatile markets, particularly its use when it comes to the hourly chart aggregation period.

Anyway the process is the same as with %R, you get a retest and that bar's high is a stop...etc you know the drill.

Looking through the small universe of stocks that have weekly options, I noticed GOOG had set up nicely last week for a fast move down, and today (right now at the 2PM hour)...we have a retest forming on CCI (and a few other indicators) ADX is still green and strong and %R is also retesting.

Anyway its a pretty good actionable trade if you ask me. Now Headley doesn't like these higher priced stocks because it reduces the # of options you have and also the bid/ask spreads are wider...so he probably wont send an alert about this one...but I am putting what I have learned to practice here.

I pulled the trigger on one GOOG Aug 27 $480 put for $14.50 taxable account only.

Chart: