1. Try clicking on the name of the most recent article in the column on the right. This will remove the "Archives" list.
2. Try right click on the chart itself and open it on a separate window.
I am sorry that I cannot always make the chart small enough to fit neatly on the left column. I want you to be able to see the details I want to point out.
I Hope this helps,
Juan
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Update:
AMZN was exited this morning. I believe my losses were kept to a minimum thanks to yesterday's move to sell short-term calls. Still, this serves to illustrate the risks one faces when holding over earnings. All of you, take this opportunity to check when are the earnings due for each one of the companies you hold positions on. Here is a good site to check:
http://www.earnings.com/highlight.asp?client=cb
This should apply to bullish and bearish positions alike.
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Update:
AMZN is going down strongly after hours. However, the current RET count is not much different than the one I posted at the time I entered the AMZN trade. Just as a reminder, here is the chart:
Clearly, eventhough the RET is a high probability system, we have to accept that all software has its limitations, particularly when the counts are not very regular. Using the Sarmiento System, a stop loss is always indicated. The profit taking before earnings is also a good risk-limiting strategy we should keep in mind. Avoiding earnings is not a bad idea either.
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This Afternoon, AMZN is due to report earnings and we have a bullish position on a stock that is notoriously volatile after earnings. Although AMZN looks quite bullish as it reaches new highs, I would not be surprised if there was some profit taking after hours today. However, I could not be surprised if it did something like GOOG last week. The idea is to stay in the trade while taking some money off the table today. It is as important to our money-making strategy to protect our capital as it is to put it at risk in stocks that meet our criteria.
The good thing about this trade is that the implied volatility of the November options is about 30% higher than the January options, as investors focus in the short-term. Thus, calendarizing the trade some more could be profitable, even if the stock moves higher, as the volatility will drop after earnings are reported.
Here is what to do today: Sell 2 more $45 November calls. This will take some money off the table while leaving a positive delta, in case the stock jumps higher. This is a compromise that reduces risk and takes advantage of Vega (implied volatility) and Theta (time value).
Here are the current standing orders in the account:
20 comments:
Juan,
RE: "Here is what to do today: Sell 2 more $45 November calls. This will take some money off the table while leaving a positive delta, in case the stock jumps higher. This is a compromise that reduces risk and takes advantage of Vega (implied volatility) and Theta (time value)."
I'll watch with interest on this one, as I would not have thought about doing this.
Can't see the attachment though.
http://homepage.mac.com/paperprofit1/.Pictures/Search/Account10.gif
I like the idea of taking money off the table for AMZN. Any particular reason why you choose to sell two instead of three?
Saying goes, Buy on rumour and sell on news.
The resulting risk graph and my own gut feeling. You could take a look at the risk graph and see what you like best. As I said, it is a compromise.
I should have checked in sooner. I have a trade on AMZN and should have also sold more calls. Gonna get killed tomorrow!
Well, here we go again!
No matter how good the story, no matter how promising the chart!, earnings are ALWAYS a wild card.
It looks like my stop-loss will be triggered first thing tomorrow morning. I am going from a small profit to a small loss.
I am sorry for those who had this position, but I am happy to see that the policy of limiting losses is working.
I am no Guru, I am just a trader with good and bad experiences. I hope we can learn together.
Thanks for the interesting experience, Juan. If you are still bullish on AMZN, you can allow the Nov stocks to expire worthless or roll over to Dec for premium.
This is an alternative to selling out.
Thanks Varun
But, remember the rules, I have a stop loss and it WILL get triggered. The bullishness is now completely gone! That is the thing about trading, a piece of news can through every assumption, Elliott wave analysis or TA analysis out the window.
It will be interesting to see what the RET tells me tomorrow, but I pressume is not going to be good. Best to cut your losses and not look back, but rather start looking for good candidates. In facts, I suspect AMZN will give a signal in the other direction. Even then, I'd stay out. Why? because I don't like bargaining with a stock, it tends to cause you to make mistakes.
The other lesson here is that going through earnings with a trade can cause you a lot of pain. IF AMZN had jumped, then I'd duel on those 2 calls I sold this morning.
It is better to focus on the overall performance of the account than on any trade in particular, and accept that there will be periods when the performance will not be all that great. Reducing the risk is what was called for, and I did that.
Let's keep the discipline and see how well we do, OK?
This is a huge selloff considering they beat expectations and should have a good Christmas. Most of their news was good. I'm going to at least wait for a bounce because I'll have a big loss if I close the position here. I entered it a while ago and with all the great move lately just got into profitability, so I'll have a really big loss if I close AMZN this morning.
AMZN is an amazing experience. But I am sure it will come back to us. **Smiles**
NFLX has just made a move downwards.
AMZN
My answer to this issue.
Current trade +4 AMZN $45 Calls
-2 AMZN $45 Calls
Loss on opening of $500
I think it will go up. My solution;
+2 AMZN $40 Calls
-1 AMZN $40 Call
I am trading the fibonacci... **Smiles**
AMZN
I shall try again with typing in the expiration months. My answer to this issue.
Current trade +4 AMZN Jan06 $45 Calls, -2 AMZN Nov05 $45 Calls
Loss on opening of $500
I think it will go up. My solution;
+2 AMZN Jan06 $40 Calls
-1 AMZN Nov05 $40 Call
I am trading the fibonacci... **Smiles**
Just so you know, AMZN has now triggered my system on the bearish side.
We have a distinct double top. Two peaks separated by 3 months. This is very bearish in my view.
I hope you do OK, but to me AMZN is a sell now.
Juan,
RE: "I hope you do OK, but to me AMZN is a sell now."
Thanks. But $40 is a 50% fibonacci retracement line. From this previous move up. Then a 38.2% fibonacci back up from this drop of $42.57.
That is how I am going to try and work myself out of this trade.
What I have also done is buy back the sold $45 Calls.
I've watched it all day and I think that 40 seems to be holding. I'm placing an order to buy back my Nov 45 calls at .15. If I get that, when the stock moves up again, I can sell the same calls for more money. Of course, if the stock isn't above 45 by November expiration I wouldn't have had to buy them back at all; they'd expire worthless, but this will give me the optioon of selling them again against the long Jan 45 position.
Just so we are clear about these issues now, I want to state my opinions on buying back shorts, and "adjusting" trades.
I think it is quite legitimate to SELL more short-term calls as a form of profit taking like I did yesterday. I could sell more GDT puts if I see it overextend to the downside in the short-term.
I disagree with covering shorts or even rolling them over once the contingency stop-loss has been triggered. I exited AMZN this morning, but my account has already recovered thanks to the workings of my other trades. I have gotten over AMZN both psychologically and financially. I see that you guys are trying to bargain with a position that is not likely to get any better. I want to enphazise here the importance of the stop-loss in my trading strategy.
AMZN has retraced 50% from the July lows but more than 100% from the Sept. lows... In fact that support has been violated. I would only consider reentry on the bullish side when AMZN goes UP again >5% with >2x normal volume.
The argument that AMZN is at the 50% retracement from Jul would only be good if the oscillators were pointing up! if fact the opposite is the case. So, this is NOT by any means a good pullback set up, by the Sarmiento System.
I hate to be brutally honest, but this should serve as a lesson for all of us: You are in for some pain. Covering the short-term calls you just erased your safety net.
I know I screwed up. I bought back the calls at .20 since they wouldn't fill the order at .15 and then the stock violated 40 to the downside! So maybe it will go down further. One thing I don't understand is this: how can the shorts be a safety net once the stock is down so far that they are worth nearly nothing? If AMAZON goes down to 30 then they still can't go down more than .20 more. No matter how much further the stock drops these shorts don't become worth more to me, but if the stock goes up, they become worth less to me, offset the value of the stock gains on a 50% BASIS since I had half the quantity short as long.
Seems to me that once they become worth so little their value has already paid off for me. If the stock goes down more I'd only have gained a small amount more, but now that I've closed them, if the stock goes UP, I can sell them again, make more money on the long position through instituting that hedge again. Say the stock goes back to around 45 again, I could sell them for a few dollars a share again, and that would help cutting the overall loss, or help increase the ultimate gain, depending on how it goes.
I see your point clearly that AMZN has not yet bottomed. I can't disagree with that since it did violate 40! And I agree we should see it starting to go up again before we can pronounce it has bottomed. I did jump the gun on this, assuming it would have to bottom around here, which of course it doesn't have to do at all!
accountholder,
RE: "I know I screwed up. I bought back the calls at .20 since they wouldn't fill the order at .15 and then the stock violated 40 to the downside!"
That means I must have done too!! **Smiles**
Remember I have bought a Call Calendar Ratio at the $40 strike too. But I really don't care. The fact is I have made on my other trades today, which has meant I am about $350 down overall. The current cost of the AMZN experience is currently $700. But it could come back... **Smiles**
fortiude: AMZN: Yes it could come back and I expect it will. The questions are when and how far? After all, we're keyed to January expiration and I personally would need it to make near 50 at least before that time. It's still going down. I'm thinking now the bottom should be around 38.50 or so. Now, I'm just going to be waiting it out. Where do you live, by the way?
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