7/31 Swingtrades

Per yesterday's post, I had way too many positions. I normally like to hold 3-5 concentrated positions for swingtrades. Looking at the charts last night, I was reminded that the market had 2 monster days and needed a breather. There was too much risk in establishing long positions as most stocks had already made their move. In any case, I spent the morning flushing out the weak positions. SHLD and NIHD were yesterday's losers but today's winners. Maybe I should have waited another day...hahaha!

I'm holding the following:

WM - Nice move on news that Toscafund disclosed a 6% stake. Now, if they would just acquire the other 94% at $10+, I'll be happy. Darwin, you still with me on this one?! I've got some decent paper gains here. One more thrust or break-down and I'll be tempted to take some profits. Moving stop to $4.40 on half and $4.90 on the other half.

WB - Moving stop to 16.90. This one held up pretty well today.

PTR - Moving stop to $133.00

SINA - I re-entered as it has been establishing a decent base at $45.00.
Bought @ 45.58, Aug 35 Calls
Stop @ 49.90

I sold these:

BG
Bought @ 101.05 Aug 95 Calls
Stop @ 98.90, moved up to $99.40
Sold @ 99.40
Loss - $1.50 on Calls

FMCN
Bought @ 29.67, Aug 30 Calls
Stop @ 28.40, moved to 28.30
Sold @ 28.30
Loss - $0.30 on Calls

OLN
Bought @ 30.09, Aug 25 Calls
Stop @ 29.40, moved to 30.00
Sold @ 30.00
Loss - $0.20 on Calls

MOS
Bought @ 131.50, Aug 110 Calls
Stop @ 127.90, trailed the stop to $130.90 as stock closed opening gap
Sold @ 130.90
Loss - $0.70 on Calls

SQM - this one moved nicely in the AM but it was very short-lived.
Bought @ 41.00, Aug 30 Calls
Stop @ 39.90, moved to 41.00
Sold @ 41.00
Loss - $0.20

LEH
Bought @ 18.35, Aug 17.5 Calls
Stop @ 16.90, moved to $17.30
Sold @ 17.30
Loss - $0.50 on Calls

7/31 - Daytrades - MOS, BUCY

MOS - nothing exciting here. I missed the entry at 126.00 yesterday so tried to establish a position today as it traded back down. I was stopped out in the last hour with the entire market tanking.
Bought @ 126.70, Aug 100 Calls
Stop @ 125.90, moved to 126.40 as market weakened
Sold @ 126.40
Loss - $0.50 on Calls

BUCY - I put BUCY on the watchlist last night as the daily chart looked very extended ($15 in 4 days). With energy/commodities weak today, I entered as the stock took out the opening range low.

Bought @ 73.44, Aug 85 Puts
Stop @ 74.50
Sold @ 71.05
Profit - $2.00 on Calls

Dry Bulk Shippers

I'm going to put the dry bulk shippers back on the radar. They've been basing for awhile and as soon as theBaltic Dry Index turns back up, these should take off:


http://www.bloomberg.com/apps/quote?ticker=bdiy&exch=IND&x=15&y=11

7/30 Swingtrades - Too many positions...

It was tough holding onto positions as the Dow traded all the way back down from the morning highs to close the opening gap. I had switched to the 30-min chart to help manage the stops. It looks like the recent fear is being replaced by fundamentals as the old leaders are trading back to relatively fair values. I'm carrying too many positions at this point so will look for exit opportunities tomorrow:

I dumped these losers as they showed no participation during the morning strength:

NIHD
Bought @ 53.52
Stop @ 52.40, moved to 52.90
Sold @ 52.90
Loss - $1.00 on Calls

BIDU - I should probably have had more patience with this one but wanted to move my capital elsewhere.
Bought @ 344.00
Stop @ 339.00, moved to 346.00
Sold @ 346.00
Profit - $2.00 on calls

SHLD
Bought @ 78.14
Stop @ 76.90, moved to 78.90
Sold @ 78.90
Profit - $0.20 on Aug 80 Calls, $0.00 Aug 70 Calls


I'm holding these:

BG - yes, I re-entered AGAIN....
Bought @ 101.05, Aug 95 Calls
Stop @ 98.90

LEH - I rolled the Aug 10 Calls to the Aug 17.5 Calls to help manage risk
Aug 10 Calls
Bought @ 15.63, Pyramid @ 16.58
Sold @ 18.00
Profit - $1.90 & $1.20 on calls

Aug 17.5 Calls
Bought @ 18.35,
Stop @ 16.90

WB - moved stop to 16.40

WM - yesterday's buy is still looking good. I'm moving the stop to $4.20 for half the position and $4.50 for the other half. C'mon $10, almost halfway there!

PTR - moved stop to 132.00

SQM - I was stopped out of this one last week but hopefully the mojo is back in the ferts and this one can pick up some momentum. I'm still a bit gunshy so went with a starter position. I'll pyramid with Aug 45 Calls if it shows strength.

Bought @ 41.00, Aug 30 Calls
Stop @ 39.90


MOS - I took my eye off MOS and it ran past my buy point at $126. I should have put in a buy-stop. I decided to enter late in the day

Bought @ 131.50, Aug 110 Calls
Stop @ 127.90



OLN - the daily chart has been looking real good. Earnings are out so hopefully this will start running.

Bought @ 30.09, Aug 25 Calls
Stop @ 29.40



FMCN - Here's another China stock that may be rebounding. CTRP has stronger fundamentals but I missed the break-out early in the morning so I went with FMCN.

Bought @ 29.67, Aug 30 Calls
Stop @ 28.40

7/30 Daytrades - CRK, CLF

After seeing oil trade up following the EIA report, I switched over to my energy/commodity watchlist. Most of the stocks moved quickly but I found a couple daytrade candidates late in the day:

CRK
Bought @ 64.30, shares
Stop @ 63.50
Sold @ 65.35
Profit - $1.05





CLF - this is probaby a take-home candidate but I traded the shares and didn't want the overnight exposure. BTW, here's a good example of the importance of position-sizing. The narrow trading range prior to the break-out dramatically reduces your risk. With everything rallying today, it was a perfect opportunity to at least double your normal position-size. Did I?! Of course not...I f'n ran out of margineable capital...the downside of options...:)

Bought @ 110.30, shares
Stop @ 109.50
Sold @ 115.00
Profit - $4.70

7/29 Swingtrades - BG, SKF, SHLD, LEH, NIHD, WB, WM, BIDU, PTR

First off, kudos to http://www.thehawaiitrader.com/. He was the lone bull as I scanned my way through the blogs last night. Despite being in daytrading mode, I decided to hold all my purchases today as the market recovered from yesterday's bashing. I established a lot of positions and hope the trend last more than a day:



BG - I sold in the AM as the opening range could not hold. After the recent earnings, the fertilizers probably need to shake out some weak hands before trending. I'm not going to fight the tape and am willing to wait for a better showing.

Re-entered @ 99.17, Aug 95 Calls
Stop @ 98.50
Sold @ 98.50
Loss - $0.70 on calls



SKF - ONH
Bought @ 143.00, Aug 160 Calls,
Stop @ 140.00, moved to 143.00 as morning gap closed
Sold @ 143.00
Loss - $0.80 on calls



SHLD - I re-entered as the stock rebounded off yesterday's close near the daily 15-sma. With 60% short interest, the squeeze is going to come sooner or later.
Bought @ 78.14, Aug 70 & 80 Calls
Stop @ 76.90



LEH - It looked like LEH found support at $15 using the 30-min chart. I haven't had much luck with LEH but the low-risk set-up was too tempting.

Bought @ 15.63, Aug 10 Calls
Pyramid @ 16.58, Aug 10 Calls
Stop @ 15.40



NIHD - This is a pullback set-up following decent earnings. I used the 30-min chart to establish the trend reversal. I also liked that it bounced off previous resistance, now support at 52.00. My entry wasn't great so I started with half my normal position-size

Bought @ 53.52, Aug 45 Call
Stop @ 52.40


WB - Similar to LEH, this was a low-risk entry using the 30-min chart. In hindsight, BAC would have been better as it rebounded over 10%.

Bought @ 14.78, Aug 15 Calls
Stop @ 13.90

WM - I'm still holding the Aug 8 Calls from a couple weeks ago but haven't tracked them here since they're pretty much worthless at this point. However, WM rebounded with the banks and showed a lot of support at $3.80.

Bought @ 4.17, Aug 4 Calls (I went with a large position as the stop is tight. Forget the negative rumors lately. I wish someone would start a positive one on a buyout above $10!!! That would be sweet for these calls.)
Stop @ 3.80


BIDU - Post-earnings set-up. One set-up I like to trade is buying into stocks that trade above the high range established the day earnings were released. For BIDU, this was about $340. I wasn't paying attention when BIDU crossed 340 today so went with a half-position at $344.

Bought @ 344.00, Aug 290 Calls
Stop @ 339.00



PTR - Per my post on 7/23, Chinese stocks have begun perking up. I bought PTR as it traded back down to the 15-SMA. This one tends to gap up and down at the open so I went with OTM calls to help dampen the noise. Hopefully the trend is up from here.

Bought @ 132.26, Aug 135 Calls
Stop @ 130.00

7/28 - Day/Swingtrades

So much for a bounce in the indexes. Nobody wants to buy anything at this point. I thought SOHU's earnings and guidance were great but it was sold. CF and MOS announced record results with upside guidance and there seems to be muted reaction afterhours. Basically, this is still a daytrader's market...if that opening range does not hold, just go short. There will be plenty of time to re-enter strong companies later. Normally, I'd be trading DITM options at this point. However, there is too much volatility day-to-day so I'm going with at-the-money and out-of-the-money options to help dampen the "noise" until a clearer trend develops

SHLD - I got stopped out of my remaining calls @ $79.50. I still want to re-enter at some point as the Nasdaq shows 60% of the float short on this one.

Bought @ 77.00, Aug 80 Call
Stop @ 76.00, moved to 79.50
Sold 1/2 @ 82.80, sold 1/2 @ 79.50
Profit - $2.30 on 1/2 calls, $0.30 on 1/2 calls
...still holding Aug 85 Calls

BG - I got stopped out @ $98.90 but re-entered 10 minutes later as it traded back up. CF and MOS announced great earnings but so did SOHU. If BG doesn't pop in the AM, I'm out.

Bought @ 97.00, Aug 95 Calls
Stop @ 96.00, moved to 98.90
Sold 1/2 @ 100.16, Sold 1/2 @ 98.90
Profit - $1.80 on 1/2 calls, $0.70 on 1/2 calls
Re-entered @ 99.17, Aug 95 Calls

SINA - I tried swinging this one as a sympathy play to SOHU. Obviously, the market was out to punish all the longs today.

Bought @ 46.80, Aug 50 Calls
Stop @ 46.30
Sold @ 46.30
Loss @ $0.30 on Calls

SKF - I took this one at the close as an ONH set-up
Bought @ 43.00, Aug 160 Call

7/28 - 8/1 Watchlist

Aside from energy and financials, I still like the fertilizers (MOS, CF, BG, SQM) if CF and MOS can deliver some decent numbers tomorrow. Per my post last week, SINA, SOHU, PTR and a few other China stocks (FMCN, CTRP) are on the radar. In fact, these monster earnings just came out on Briefing.com:

01:28
SOHU Sohu.com beats by $0.25, beats on revs; guides Q3 EPS above consensus, revs above consensus (82.82 )
Reports Q2 (Jun) earnings of $0.92 per share, excluding non-recurring items, $0.25 better than the First Call consensus of $0.67; revenues rose 161.6% year/year to $102 mln vs the $96.5 mln consensus. Co issues upside guidance for Q3, sees EPS of $1.00-1.05, excluding non-recurring items, vs. $0.71 consensus; sees Q3 revs of $112.0-116.0 mln vs. $106.75 mln consensus.

Lastly, the momentum is still in biotech. Be careful with earnings announcements but here are few charts that are setting up nicely:

SQNM - Earnings are after the close, 7/30.

ESRX - Earnings are after the close, 7/30...may get some movement before then.

DNA - Lots of mojo here...earnings are out and it's in play:

CELG - Earnings are already out and it could finally be moving out of the recent base:

Are We Moving Higher?

Following any type of reversal, whether stocks or indexes, I like to see a retest back to the moving averages. The psychology behind this move is that traders who nailed the reversal are taking profits so you'll observe the stock or index fall back to the moving average as it consolidates for the next move. If you're bullish, this sets up a low risk entry right at the moving averages. For the Dow, this was a good set-up back on 3/31. We could get the same set-up again as the RSI, MACD and OBV are all increasing.

7/25 Swingtrades - BG, SHLD

BG - Aug 95 Calls, moving stop to $98.90
For those of you that have MBA's, the effecient market theory is BS. It was one of the most impractical theories that were forced upon me in grad school. The markets are ruled by fear, greed and psychology. After reading BG's earnings release last night, it was obvious to me that the fundamentals in fertilizers are still intact. There was no reason for yesterday's drop down to $96+ other than getting dragged down by the entire sector and market. In any case, I was happy to see the rebound this morning and even happier that I re-entered at a terrific price. I used the 1-min chart when I saw BG fade back down to $97 to close the opening gap. I entered as the price crossed over the moving averages. I went with my normal position size but if you look at where there was support, I should have doubled down. With that narrow range right at the 2-day support, I had two face cards and the dealer was showing a six. I sold half the calls @ 100.16 for $1.80 profit on the calls. The stop is getting moved back up to $98.90.

BTW, if this looks too good to be true, let me reassure you that the first hour today was agonizing. After last night's research, I was ready to pounce on the early morning strength. Fortunately, the volume was low and the bid/ask was jumping all over the place. I forced myself to sit tight and let things settle down. Also, I rarely place a trade in the 1st 30 minutes due to the volatility and what is known as "amateur hour"...when the market makers are using overnight orders to manipulate price movement. For instance, they will frontload the overnight market buy orders, only to sell into the strength knowing that the stock will move down once the buy orders are all executed. Anyways, I hope some of you were able to pick up some shares/options at these or close to these levels as well.

SHLD - Aug 80 & 85 Calls, leaving stop at $79.50
Again, SHLD held up pretty well. After missing the opportunity to take profits yesterday, I sold half my Aug 80 Calls. Check out the intraday post for details. Now that I've got profits locked in, I'll keep the stop at $79.50 and will look for opportunities to pyramid on strength next week. Hopefully, this one is setting up for a good run.

7/25 Daytrades - SQM, X, AAPL

Today was one of those days where I should have shut down after 8:00AM and just researched stocks...or better yet, re-enter AMGN. I felt like I was at a casino, going from craps table to craps table chasing easy money that was already made. The House wins again...

SQM - I've been wanting to get back into this one for awhile. I picked off $18 on the last run-up from $40 to $58. I thought the early morning strength in the ferts would spill-over to SQM:

Bought @ 40.10, Aug 30 Calls
Stop @ 39.50
Sold @ 39.50
Loss - $1.00 on calls

X - After SQM, I ran over to the X table...
Bought @ 42.54, Aug 115 Calls
Stop @ 41.00, moved to 42.40
Sold @ 42.40
Loss - $0.20 on calls

AAPL - Lastly, over to the AAPL table before the close
Bought @ 162.15, Aug 135 Calls
Stop @ 161.50, moved to $162.00
Sold @ 162.00
Loss - $0.30 on calls

Quick Trader Thought - Cut short your losers, LET your winners run...

As I'm updating my journal with today's trades, I can't get this thought out of my mind. I'm sure you've all heard it before but it is probably one of the hardest lessons to learn. I'm pretty good at cutting my losers but I tend to take profits too quickly. Yes, a profit is a profit but not when AMGN is printing $61+ f'n dollars afterhours. When I first saw AMGN's chart last month, I was targeting a run-up to $52-54. I picked up $6+ dollars from $45 to $51.50. I sold a couple weeks ago and had every intention of re-entering. Look at the 5, 10 and 15 moving averages. Throughout all the market turmoil, AMGN has been steadily climbing...with no reason to sell. Now we know why..."positive top-line results for denosumab pivotal postmenopausal osteoporosis trial". Crongrats to those holding some AMGN...this pretty chart should become GORGEOUS on Monday!

7/25 - Trade Update

SHLD - Sold 1/2 position Aug 80 Calls
Bought @ 77.98
Stop @ 75.00, moved to 79.50
Sold @ 82.80
Profit - $2.30 on Calls

BG - Re-entered as opening gap closed, sector strength
Bought @ 97.01, Aug 95 Calls
Stop @ 96.00

7/24 Swingtrades - SHLD

SHLD - Aug 80 & 85 Calls

With another bloodbath in the markets, I'm only holding SHLD overnight. It held up very well today and at one point traded close to $84.00. I definitely should have taken partial profits at that point but didn't think the averages would come down so much in the afternoon. In anycase, I'll be moving the stop up to $79.50 giving a little room below today's opening range low (79.99). If I get stopped out, I'll definitely look for a re-entry.

LEH
I sold the Aug 17.5 Calls as the OR low could not hold...should have switched over to puts.
Loss - $0.50

BG
I got a great entry on BG as it closed the opening gap. I daytraded some share as mentioned in a previous post. BG was doing great until rolling over hard in the last 30-minutes. I was stopped out for a $0.70 loss on the calls. I'll be looking for a low-risk re-entry as I really liked the earnings report and believe it will trade back up shortly.

UPDATED, 7/24 - Daytrades MOS, BG, SKF

The stocks on my watchlist were all over the place today. I felt like I was scalping as the trends changed quickly. Here are daytrades I took today:

SKF
I picked up SKF as the market weakened late in the session. I hoped to picked up a few more points but I was trailing the stop using 5-min bars and got stopped out.

Bought @ 126.80, Aug 100 Call

Stop @ 125.80

Sold @ 128.45,

Profit - $1.50 on calls

BG
BG killed their earnings report. It closed the opening gap perfectly so I bought some shares for a daytrade and Aug 95 Calls for a swing.

Here's the BG comment from Briefing.com:
24-Jul-08 06:38 ET In Play Bunge reports Q2 (Jun) results, beats on revs; raises Y08 guidance (99.32 ) : Reports Q2 (Jun) earnings of $5.45 per share, includes gains, charges, may not be comparable to the First Call consensus of $2.27; revenues rose 73.1% year/year to $14.37 bln vs the $13.25 bln consensus. Co raises guidance for FY08, sees EPS of $11.60-11.90, compared to previous guidance of $9.35-9.65, may not be comparable to $9.16 consensus. "Looking to the second half of the year, fertilizer fundamentals should remain strong. While growth in demand for some agricultural products may soften slightly due to the sustained period of high prices, agribusiness margins should be solid. Edible oils should improve from its performance in this quarter."

Bought @ 99.75, shares & Aug 95 Calls
Stop @ 98.90
Sold @ 101.93,
Profit - $2.18 on shares


POT
POT released good earnings so I tried catching a rebound in MOS. When that failed and all the ferts collapsed, I switched to a 1-min chart in search of a reversal. Reversal trades can be profitable if you can catch a low-risk entry. I waited for the MACD to cross-over and for MOS to test the bottom and trade back above the moving averages.

1st Trade

Bought @ 127, Aug 90 Calls (small position)

Stop @ 124.90

Sold @ 124.90

Loss - $2.5 on calls

2nd Trade

Bought @ 116.30, shares

Stop @ 114.90

Sold @ 119.30

Profit - $3.00 on shares

China Stocks

Pre-earnings or pre-olympic run-up? The following stocks are moving back onto my watchlist. SINA and SOHU should move up in sympathy with BIDU's earnings today.

I thought oil was going down? PTR is difficult to trade as you'll need a good stomach to endure the gaps up and down. The key is to keep your position small and pyramid up slowly. I'll wait for a pullback close to 132.

7/23 Swingtrades - BAC, WB, LEH, SHLD

There was a nice follow-through run-up in the financials in the AM. I was not quick enough to catch the top but still made some decent profits off this rally. As I mentioned on a previous post, I still think there is bad news out there but with the government jumping in, high short interest and oil getting obliterated, max pain will be dealt to the shorts for now. Here are my trades today:


BAC - Tried rolling position into Aug 35 calls but sold them out flat as financials weakened
Bought @ 26.97,
Sold @ 33.10
Profit - $3.00 on Aug 30 Calls

WB - Sold a bit early but still a tidy profit
Bought @ 12.90 & 14.90 (luckily, cost was $0.40 both times so I was able to pick up quite a bit)
Sold @ 18.00
Profit - $1.60 on Aug 17.5 Calls

LEH - I bought, sold and bought again. It showing some strength but I may be chasing it too much. I'm holding the Aug 17.5 Calls

SHLD - Per this morning's post, I missed the break-out in SHLD. However, later in the day, it retraced perfectly to the break-out point of $77.00 and rebounded.

Bought @ 77.80, Aug 80 Call (I went with out-of-the-money calls because the stock is volatile and I'm not ready to get shaken out on a $5 swing.

Pyramid @ 80.55, Aug 85 Call

Risk @ 75.00

Another Rally?!

The strength of the market has caught a lot of shorts with their "shorts" down. I'm not going to fight it...just riding the trend. Quick update:
Rolled BAC Aug 30 Calls to Aug 35...hit the $34 target!
Doubled LEH Aug 17.5 Calls @ 20.80
Sold half WB Aug 17.5 Calls...way too early again w/ stock at 18.00
Check out this chart of SHLD. I don't like the company and think Eddie Lampert messed up but boy, after that downward trend, the shorts are covering hard! I'm in on a pullback...probably Aug 80 Calls.

Day-Trading Set-up - CME

I'm a swing-trader at heart but when I started researching trading blogs to learn more about daytrading, I was amazed to see traders like Stewie, Pinoy, Jamie, etc...catching monster moves day-in and day-out. It was hard to believe at first but when I opened my mind to it, I started to see potential set-ups everyday. Each daytrader trades different set-ups but I wanted to highlight CME's move today as to MY perfect candidate. Unfortunately, I DID NOT take this because I was managing my other positions.

1. Pick a stock/sector with some momentum (there must be a catalyst) whether it be strength or weakness - CME announced good earnings today and has been beaten up lately (see chart in 7/17 post). There is probably a high short position.

2. Look for a low-risk set-up (look at my past trades, I'm always looking for a low-risk entry) - CME traded in a narrow range between 343 and 345 for 2 hours.

3. Wait for confirmation (I have the most trouble with this because I get in too early) - CME volume picked up before 12PM PST and the 15-min bar closed above 346...confirmation

4. Pull the trigger and place the trade - CME is expensive so I would have bought the Aug 390 Call with a stop at $345. This would have returned $20 on the calls if sold at the close.

At the end of the day, it is all about risk/reward and managing your stops. When I daytrade, I get stopped out all the time but as long as I keep my losses small, a big move like CME will more than make up for 5-10 small losses.

7/22 Swing Trade - Update

So far so good on my theory with the banks. The dip buying this morning gives me more confidence that these trades will turn a decent profit. Here are my current positions:

BAC
Bought Aug 30 Calls @ $1 w/ stock at $27+, currently bidding $3.65
Doubled position @ $2.05 w/ stock at $30.10, sold today @ $3.50 to lock in $1.45 profits
I'm going to sell the position if the stock gaps open and possibly roll to the Aug 32.5 Calls to manage my risk.

WB
Bought Aug 17.5 Calls @ $0.40 w/ stock at $13, currently bidding $1.40
Doubled position @ $0.40 w/ stock at $15, currently bidding $1.40
I'll be selling the position if the stock gaps open as I'm carrying too many calls on this one...not that I'm complaining so far.

WM
Bought Aug 8 Calls @ $0.26 w/ stock at $5.79, currently bidding $0.37
I'll be selling this position in the AM as well.

LEH
Bougth today Aug 17.5 Calls @ 4.15 w/ stock at 20.42, currently bidding $3.95
I'll take half off if this stock gap opens in the AM.

7/22 Day Trades - GS, ENER, BAC

As expected, the market opened up very weak following yesterday's slew of disappointing tech earnings. However, it wasn't long before buyers came right back in. If you were nimble enough to buy the weakness, you were very handsomelly rewarded at the close. I took the following trades:

BAC - I bought these calls for both a daytrade and swingtrade. Again, a nice narrow range offering a low-risk entry. As you'll see, I anticipated the break-out too early and my daytrade got stopped out. Jamie from Wall St. Warrior likes to enter following a hammer that flushes out the weak hands prior to the break-out. I was the weak hand for this position today...
Bought @ 30.10, Aug 25 Call
Risk @ 29.90
Sold @ 29.90
Loss - $0.30 on the Calls - I was holding 50 Calls thereby leaving $10k+ on the table. Damn, I thought I could catch Trader Stewie with this one! :)

On a brighter note...I also doubled-up on my Aug 30 swing trade position planning to hold overnight but sold on the strength at the close:
Bought @ 30.10, Aug 30 Call
Risk @ 29.90
Sold @ 32.50
Profit - 1.45 on the calls

ENER - A semi-hat-tip to the traders at Wallstreak.com. I entered on the break of the opening range low (66.00) but the stock found support at 65.00 with the reversal hammer so I tightened up my stop and took a loss:
Bought @ 66.00, Aug 85 Put
Risk @ 66.50
Sold @ 66.10
Loss - $0.20 on puts

GS - I found a semi-low risk entry on the break of $183.50:
Bought @ 183.50, Aug 160 Calls
Risk @ 181.90
Sold @ 187.00
Profit - $3.00 on calls

7/22 Swing-trade Update CLR, SQM

I got stopped out in the morning. Back to daytrade mode...



CLR

Bought @ 69.30

Stop @ 67.90, moved to 68.90

Sold @ 68.90

Loss - $0.40





SQM

Bought @ 42.30

Stop @ 41.90

Sold @ 41.90

Loss - $0.40

Trading from Hawaii?!?!

Does this trader really get up at 3AM EVERYDAY?! He must because he racked up serious gains last week and is up 148% YTD. Check it out:


http://www.thehawaiitrader.com/

7/21 Day-Trade CNX

CNX traded in a narrow range and set-up a low-risk bounce off the moving averages...ala Holy Grail. I traded the stock as the DITM premiums were too high. I took partial profits at $86.64 and exited the position at $88.67 at the close.

Bought @ $84.84

Risk @ 84.20 (bottom or narrow range)

Sold 1/2 @ 86.64, sold remaining @ 88.67

Profit - $2.82 on the shares.

7/21 Swing-Trades SQM, CLR

After missing the run-up in MOS this AM, I entered SQM at $42.30 with a stop at $41.90. I bought the stock in the AM due to the wide bid/ask spread, but later added Aug Calls as it crossed 43.00. As you'll see in the chart, I like using the 30-min chart to identify trend reversals. The stock is trading back above the moving averages with RSI, MACD and OBV increasing. It also traded in a narrow range allowing for a low-risk entry.

Using the 30-min chart again, I entered CLR at $69.30 with a stop at $67.90 as oil showed strength in the AM. This is going to be a short trade as the daily chart still shows weakness. I actually bought the stock instead of the options because the Aug 50 Calls were carrying a $1+ premium with $0.50 spread between bid/ask. I was able to buy relatively close to support at $68.00.

AMGN Swingtrade - Buy stock or buy options?

I used my recent AMGN swingtrade to compare stock vs. options. For this example, I will position-size with 500 shares vs 5 Calls. Since last week was options expiration, I actually levered up the week before and bought a few Jul 50 Calls but I have not included those trades in this example for simplicity. Which way would you prefer to trade it...?

Entry @ 45.50 on 6/23

STOCK - Buy 500 shares @ $45.50 with initial stop at $44.50, or $1.00.

Total Position - 500 shares

Total Cost - $22,750

Total Risk - $500

OPTIONS - Buy 5 Jul 42.5 Calls @ $3.25 with initial stop based on stock at $44.50, or $1.00

Total Position - 5 Jul 42.5 Calls

Total Cost - $1625

Total Risk - $500

Pyramid @ 47.10

STOCK - Buy 500 shares @ 47.10, moved stop to 46.00

Total Position - 1000 shares

Total Cost - $46,300 ($22,750 + $23,550)

Risk - $300 (if stopped out at 46.00, $250 profit on 1st 500 shares, $550 loss on 2nd 500 shares)

OPTIONS - Buy 5 Jul 42.5 Call @ 4.75, moved stop to 46.00

Total Position - 10 Jul 42.5 Calls

Total Cost - $4,000 ($1,625 + $2,375)

Risk - $500 (if stopped out at 46.00, $125 profit on 1st 5 Jul 42.5 Calls, $625 loss on 2nd 5 Jul 42.5 Call)

Sell 1/2 position at $48.80 to lock in profits, Roll Jul 42.5 Call to Jul 47.5 Call, move stop to $46.50

STOCK - Sell 500 shares @ 48.80

Profit - $1650

Current Position - 500 shares

Current Cost - $23,550

Current Risk - $0 (if stopped out at $46.50, $250 loss on remaining 500 shares but $1650 profit already locked in)

OPTIONS - Sell 10 Jul 42.5 Call @ 6.30, Buy 5 Jul 47.5 Call @ 1.65

Profit - $2300 ($1,525 profit on 1st 5 Jul 42.5 Calls, $775 profit on 2nd 5 Jul 42.5 Calls)

Current Position - 5 Jul 47.5 Calls

Current Cost - $825 (5 Jul 47.5 Calls bought @ 1.65)

Current Risk - $0 (if stopped out at $46.50, assume Jul 47.5 Calls still retain extrinsic value at $0.50 resulting in a loss of $575 but $2300 profit already locked in)

Pyramid @ 49.01, move stop to $48.00

STOCK - Buy 1000 shares @ 49.01

Current Position - 1500 shares

Current Cost - $72,560

Current Risk - $0 (if stopped out at $48.00, profit $450 on 500 shares and lose $1010 on 1000 shares, net loss of $560, but $1650 profits already locked in)

OPTIONS - Buy 10 Jul 47.5 Calls @ 1.80

Current Position - 15 Jul 47.5 Calls

Current Cost -$2,625 ($825 on 5 Jul 47.5 Calls, $1,800 on 10 Jul 47.5 Calls)

Current Risk - $0 (assuming there is still time premium on the calls at $48.00, and you can sell the calls for $0.80, you would lose about $1425 on 15 Jul 47.5 Calls but still have $2300 profits already locked in)

Sell entire position @ 51.50

STOCK - Sell 1500 shares @ 51.50

TOTAL Profit - $4690 + $1650 locked in = $6,340

OPTIONS - Sell 15 Jul 47.5 Call

Total Profit - $3375 + $2300 locked in = $5,675

As you can see, with a little slippage, the OPTION profits are lower than the stock. However, at one point it cost me over $70k to carry the stock position while at most, it cost $4k for the options. With options, I was able to participate in the entire move while maintaining cash for other positions. Also notice that I maintained similar risk parameters for both stock and options throughout the entire trade. Managing your risk is crucial whether you're trading stocks or options.

Lastly, you'll often hear that trading options is risky...well, so is trading stocks. If AMGN came out with unexpected clinical trial news before I could exit at $51.50 and the stock dropped to $40, I'd be out nearly $15k on the stock but only $4k on the options. Regardless of your preference, be sure to always position-size according to your capital, place your stops and continuously monitor your risk throughout the trade.

Trading Deep-In-The-Money Options

I was going to write up an explanation on trading deep-in-the-money (DITM) but Steven Gabriel M.D. has already done a great job in his http://www.tradingmarkets.com/ article:


http://www.tradingmarkets.com/.site/community/articles/favorite_strategy/How-I-use-Options-to-Enhance-my-Trading-Performance.cfm


Here are a couple additional points that are critical/specific to my own trading style and set-ups:


Slippage - For many stocks, DITM options are thinly traded. Therefore, there can be a significant spread between the bid and ask...$0.10-$1.00. Mentally, this is one of the biggest hurdles to get over to trade these options. Giving up $0.50-$1.00 on options can mean thousands of dollars if you're trading 10, 20 or 50 calls/puts. If you're scalping a few cents here and there, DITM options make no sense. However, I see this as an acceptable cost to participate in a pending big move. Next point...


Stock Selection - One of the main factors that helped me turn the corner to profitability was to narrow my watchlist down to the strongest (weakest if I'm trading puts) stocks. Based on my set-ups, I'm looking for stocks that can potentially move $5-$10+. Why buy MSFT and wait 3-6 months for a $5 move when AAPL will give it to you within a day or two? If I can participate in a move like this, the slippage becomes easier to accept. Look at the oil, fertilizer, metal and financial stocks this past week. Many of these stocks had $5+ swings EACH day! The challenge is to be on the profitable side of the move and to honor your stops if you're not. Next point...


Stops - Since I am trading options based on the moves of the underlying stock, I need to place my stops based on the stocks. I use http://www.optionsxpress.com/ which allows me to place "contingent" orders based on the stock price. 80% of the time, my stops are set to execute a "market" sell order. When I want out, I just want out. However, occasionally, the bid is priced BELOW the intrinsic value in which case I'll place a limit order. As an example, if the current price of a stock is $45.00 and I'm trying to sell the Aug 40 Call, the bid should at least be $5.00, representing the intrinsic value of the option. On occasion, the market maker may price it at $4.80, which is $0.20 below the intrinsic value in which case I'll place the sell order as a limit at $5.00:


$45.00 stock price - 40 strike price = $5.00 - intrinsic value


I used to trade with TD Ameritrade a few years ago but they had too many technical problems (supposedly still do) and their stops were based on the options. For thinly traded options, this can be a disaster. The stock may have traded $2 below your stop level but if the option has not traded, your stop will not have triggered and you may still be stuck in the trade. It has been a few years and I know many platforms (i.e. Think or Swim, OptionsHouse, etc.) have upgraded their features for options trading but I have had no reason to try them out...yet.


Option Selection - Steven's article sums up my own option selection pretty well. I also look to trade DITM options where the premium is less than $1 above the intrinsic value. However, because I am swingtrading within a short period, I ALWAYS trade the front-month options. Also, because I focus on momentum stocks, I have found that there is too much risk and premium to go 1+ months out on the options. Worst case, if the stock is trending well and I want to stay in the trade, I'll roll the options into the next month on expiration week. As I mentioned previously, on expiration week, I transition to at-the-money (ATM) options and lever up. The key here is to maintain your risk level or tighten up your stops so you don't end up losing more on the trade if it goes against you.


When it comes to options, there are tons of literature that talk about option pricing (Black Scholes, volatility, alpha, gamma, etc.) and option set-ups (calendar spreads, bull spread, straddles, etc.). Yes, it can all be very complicated but I have learned to keep it very simple. I'll place the occasional straddle/strangle or bull spread to manage risk. However, at the end of the day, I'm just looking for a strong stock with a potential trend and a low-risk/high-reward set-up for entry. Once that is identified, DITM options just become a vehicle for participating in the price movement.

7/18 - Swing Trades...banks, banks and more banks

Now that Options Expiration is over, I'll be back to trading low-risk setups with deep-in-the-money options for the next few weeks.

I did pick up a few banks ahead of earnings next week, though. I don't hold anything into earnings unless I'm trading straddles/strangles or have risk capital I'm prepared to lose completely. In this case, it is the latter as I made some decent profits this week and think that a couple good reports may spur more short-covering next week. I also think the government has made it clear this week that they will throw everything they can at the financial crisis to prevent anything like the savings & loan debacle of the 1980's. There are 4 weeks until these options expire so even with a bad report, I should be able to get back half the cost of the options.



BAC - Earnings are on Monday, 7/21. Based on the chart below, IF BAC announces decent earnings, it may trade back to the break-down level last month of $34. I went with the Aug 30 Calls which were only $1. Buying the Aug 25 Puts for a strangle probably would have been a safer play but I like the movement and volume the past couple days and I don't want to bet against my own bank. :)

WM - Earnings are 7/22, after the market closes. I went with the Aug 8 Calls which were trading at $0.26.

WB - Earnings are 7/22, before the market opens. Here, I went with the Aug 17.5 Calls which were trading at $0.40.

7/18 GOOG & BIDU Strangles

As I mentioned on http://www.wallstreak.com yesterday, I traded strangles on GOOG and BIDU in anticipation of GOOG's earnings. Both opened lower but not low enough for my positions. I made an intraday trade on GOOG Puts to offset the losses but chalk one up for the market makers on this one. Here are the results:

GOOG
Bought - GOOG 570 Call @ $6.00 and GOOG 490 Put @ $5.10
Sold 570 Call @ $10.00, Profit - $4.90
Sold 490 Put @ $0.00 (let these expire), Loss - $6.00

Bought - GOOG 580 Put @ $1.35 in the AM
Sold 580 Put @ $3.50, Profit $2.15

BIDU
Bought - 310 Call @ $3.46 and 290 Put @ $2.39
Sold 310 Call @ $0.00 (let these expire), Loss - $3.46
Sold 290 Put @ $0.00 (let these expire), Loss - $2.39

7/18 PCX Day-trade

After missing yesterday's move in PCX, I had it up on the radar all morning. I entered Jul 115 Puts after the double-top formed.

Bought @ $116.00, Jul 115 Puts
Risk @ $117.00
Sold @ $109.00, yesterday's low of $108.00 was the target.
Profit - $4.00 on Puts

7/17 ONXX Swing Trade Update

I booked some profits on ONXX at 42.50, sold half my position of Jul 40 Calls. The stock is still trading above the 15-SMA (blue line) and volume increased at the close. I will close these out at the open if the stock gaps up as the options expire tomorrow afternoon.

7/18 UPDATE: Sold remaing calls @ 42.00

Options Expiration Set-up Explained

For non-option traders, options expire every 3rd Friday of each month. As expiration nears, premiums dry up until you're left with only the intrinsic value for the options. While some traders reduce their activity on options expiration week due to the volatility, I embrace it by placing more trades. As the premium dries up, I can use options to trade high-priced momentum stocks with absolutely minimal risk. Take the BAC trade detailed previously. If I have $100k and I normally risk 1%, or $1k (this is just an example, everyone should have his/her own risk parameters based on position-sizing of their capital) on each trade, I would have bought 1000 shares @ $21.50 with a stop at $20.50. Instead, taking that same $1000, I would buy Jul 22.5 Calls which were trading at $0.35 per call, yesterday. Now, I'm controlling 30 Call options, equivalent to 3000 shares, yet my risk is still $1000...now that's leverage! Yes, there is a risk that BAC trades at $21.50 through Friday and the options expire worthless. However, if you have the right set-up and can anticipate a big move, the reward MORE than justifies the risk. Given the BAC's closing price and increasing volume, the probability for a gap-open was high. When I place these trades, I never know if I will be to pick up $0.50, $2.00 or lose it all. However, occasionally, I've hit the homerun and have been able to catch a $5-10 move.



Summary:

1. Identify a momentum stock poised for an explosive move (industry break-out/break-down, earnings, news).

2. Buy calls/puts 1 strike away from the price of the underlying stock.

3. POSITION-SIZE based on your normal risk parameters. If you normally risk $1k, buy $1k worth of calls/puts.

4. Place the trade


I did NOT take the trade below but it illustrates the opportunites with options on expiration week. PCX has been on my radar but the volatility has been high as well as the price of the options. IF I could have forseen PCX's weakness today, the Jul 220 Puts were trading for below $1.00. Throughout the day, while I was fooling around with BS stocks like BIDU, I missed 4 low-risk set-ups to buy PCX puts. Yes, this is all 20/20 hindsight but if you look at today's trading range, someone bought/sold the Jul 220 puts for $0.65 and potentially made a killing as they traded up to $11.45 during the day!


Keep this set-up in mind for next month as it could be a profitable piece of your trading arsenal!

7/17 Day-Trades

It was a very busy day. As expected, with the help of JPM earnings, short covering in financials carried into the open. Unfortunately for me, I woke up right at the market open so was frantically getting the trading platform up on the screens. As it turned out, all my overnight postions gapped open. However, by the time I made my way through selling the positions, I had left about $8k on the table. Luckily, I started with BAC which was my largest position in terms of contracts...it also gapped up the most. Lesson for today will be to use automated trailing stops on these ONH set-ups.

BAC - Switched to the 1-min chart at the open and sold on weakness
Bought @ $21.50, Jul 22.5 Calls ($0.36 cost...very cheap, minimal risk)
Risk @ $0.00
Sold @ $25.50
Profit - $2.70 on calls
Re-entered after break of consolidation
Bought @ $24.50
Risk @ $23.90
Sold @ $26.00
Profit - $1.50 on calls

FNM
Bought @ $9.50, Jul 10 Calls
Risk - @ $0.00
Sold @ $11.50 (yes, very shitty when you look at that highs on the chart)
Profit - $1.30 on calls

LEH - I had too many positions to sell. By the time I got to this, it had already come down. I will use automatic trailing stops next time.
Bought @ $16.50, Jul 17.5 Calls
Risk @ $0.00
Sold @ $17.50
Profit - $0.50 on calls

WFC - I had rolled my profits yesterday from Jul 25 Calls to Jul 27.5 Calls. I was much more liberal with these and placed stops on them last night. Again, trailing stops would have been better.
Bought @ $27.00
Risk @ $0.00
Sold @ $26.40
Loss - $0.15 on calls

OIH - Energy stocks were weak after the surprise build in natural gas. I went with OIH as most other stocks had already begun the move down.
Bought @ $199.50, Jul 195 Puts
Risk @ $200.10,
Sold @ $195.00
Profit - $1.50 on puts

BIDU - Another false break-out. I need to stop chasing this one.
Bought @ $305.00, Jul 270 Call
Risk @ $303.00, moved to 303.90
Sold @ $303.90
Loss - $1.10 on Calls

7/17 Set-ups

DRYS - looks to be trending back up...rising RSI, MACD and OBV. I'll swing this one above 80 or on pullbacks. Earnings on 8/21.

BRCM - I was too busy trading and missed the entry on BRCM. It closed above resistance and may be ready to take off if the market cooperates. I like the nice consolidation and channel over the past few months. Earnings on 7/22.

ISRG - I'm adding this back to the momentum list for daytrades. It's a high-flyer with earnings on 7/22.

ICE - has really been beaten down. If short covering persists, there will be plenty of opportunities to pick up cheap at-the-money options for daytrading with options expiration in a couple of days. Earnings on 8/4.

CME - same logic as for ICE. Earnings on 7/22.

Over Night Hold Set-up

http://theimpatienttrader.blogspot.com/2008/07/over-night-holds-onh-explained.html

Fellow trader, Stewie, posted a great explanation on overnight holds. I'm using a version of this for FNM, LEH, WFC and BAC calls, except I'm prepared to let the options expire worthless since they were so cheap. Rereading Stewie's explanation, I think I should have held off on FNM. We'll see...

7/16 Day/Swing Trades

Today was an excellent day to take advantage of options expiration on Friday. As expiration nears, option premiums dry up resulting in a lot of low-risk set-ups. The big news today was Wells Fargo beating earnings estimates and RAISING the dividend. Given the fear and weakness in the financials lately, I instantly knew that this could lead to some serious short-covering in the financials...the theory being maybe the capital markets aren't as bad as everyone thinks. That's the theory. I personally think things will be getting worse but that won't prevent me from taking advantage of the market fear and greed. In addition to the trades below, I'm holding LEH 17.5 Calls, FNM 10 Calls, WFC 27.5 Calls and BAC 22.5 Calls. These are all overnight holds in case the short-covering in financials spills into the AM.

WFC
WFC I pulled up the option chain at the open and saw the July 25's asking $0.45. Would I risk $0.45 for WFC to get to $25.45 by Friday...hell yeah! I'm in. Again, this takes advantage of the low premium prior to expiration. Worst case, I lose $0.45 per call, well within my usual $1.00 stop parameter.

Bought Jul 25 Calls w/ stock at $24.50
Stop @ $0
Sold @ 27.00
Profit - $1.75 on Calls
Still holding Jul 27.5 Calls for further short squeeze

BIDU
I should have placed a more liberal stop. I got stopped out before it ran...

Bought @ 291.00 w/ Jul 240 Calls

Stop @ $289.90, moved to $292.90

Sold @ 292.90

Profit - $1.30 on Calls

OIH

Unsuccessfully chased drop in oil...

Bought @ 197.80 w/ Jul 210 Puts

Stop @ 198.50, moved to 198.30

Sold @ 198.30

Loss - $0.50 on Puts

ONXX Swingtrade
As I mentioned in a previous post, biotech has been the hot sector. ONXX had resistance at $40.00 which it broke today. I'm not thrilled with the volume today but it held up fine into the close so I'll keep evaluating my stop levels over the next couple of days.

Bought @ 40.88
Stop @ 40.50

Still holding...