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.
3. Try using this link: http://stockoftheday.blogspot.com/2005/10/aapl-breakout.html
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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I just sold my AMLN position at $8.95 I felt that the stock is making a double top (or almost that). My profit on that trade was $1248.
Now we have AMZN as a bullish trade. I am looking to buy 10 Jan 45 calls and sell 5 Nov 45 calls. I'll keep you informed
My order filled rather quickly because the ask was $4.75 at the time I entered the trade at a limit price just below at $4.7. By the close, the ask had increased to $4.9. The bid was not quite as low as it appears now ($4.35), it was $4.50 then.
I'd like to post here a question from HK and my reply:
HK SaidL:
Juan, are you not concerned about The high IV of the AMZN Jan 45C ?
Juan Said:
Thanks for the note. In general, I choose CRC's because the short helps to control the IV of the long. If you had not mentioned it, I would not have noticed anything. BUT you are right, a drop in IV will hurt my trade. Let's just hope that the stock rallies strongly enough to avoid a loss. This is an excellent point, and we should look at the IV. For those without Platinum, OptionsXPress offers IV charts that should be looked at before entering this kind of trade.
Now we have 2 factors that may be overlooked when entering PRC's and CRC's
1) The spread between bid and ask (this is an additional cost to the trade) as it happened with RRGB — remember I prefer to trade on stocks with good liquidity.
2) The Skew in implied volatility when entering a trade.
Thanks
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Let's take a second look at that AMZN trade:
The IV of the options I am selling (Nov. 45 calls) is 45.5%. Meanwhile, the IV of the options I am buying (Jan. 45 calls) is 38.1%. One of the reasons I like CRC's is because I am selling front month, that are usually the ones with the highest demand, while options that expire in three or four months have lower volatility. If there is a decline in volatility, I am not going to be hurt, as I would if I had just bought calls (no shorts). As AMZN rallies (or moves sideways) volatility will decline but I will be OK because I have short calls.
My concern when I originally responded to HK's message was that at a glance, I thought that the blue line in the IV chart below represented the Jan 45 call options. Well, that is not the case. The BLUE line represents the Nov. 45 call options while the BLACK curve represents the Jan 45 call options. This means that the trade was actually done as I always intend my CRC's, although this time I entered the trade before verifying the volatility.
The difference between the IV's of both options is >15%. This is called a volatility skew in favor of my shorts. You want to SELL high volatility and BUY low volatility. That is in effect what I have done here... Luckily!
15 comments:
AMLN was an exit for today as well.
And also RHAT. After seeing the late rally for PETM, I wish I had exited that too.
Entered AAPL, still in FDX and DNA.
To be honest, as you have said before, there is then the initial angst of "Perhaps AAPL will retrace further tomorrow, after entering today."
Juan,
Are you not concerned about The high IV of the AMZN Jan 45C ?
hk...
Thanks for the note. In general, I chose CRC's because the short helps to control the IV of the long. If you had not mentioned it, I would not have noticed anything. BUT you are right, a drop in IV will hurt my trade. Let's just hope that the stock rallies strongly enough to avoid a loss. This is an excellent point, and we should look at the IV. For those without Platinum, OptionsXPress offers IV charts that should be looked at before entering this kind of trade.
Now we have 2 factors that may be overlooked when entering PRC's and CRC's
1) The spread between bid and ask (this is an additional cost to the trade) as it happened with RRGB — remember I prefer to trade on stocks with good liquidity.
2) The Skew in implied volatility when entering a trade.
Thanks
I already have the same position in AMZN you took, but I have held it for a while and have a current loss in it. I also have some Jan 37.5 calls in AMZN, residual from a prior trade. I was so pleased to see you took a new position and to see the new chart targets. I found I can drag your charts directly from your blog into Preview on the OSX Dock and can view them there. I'm trying to understand the volatility issue, how to play it. Your comments are clear but I have trouble with the concept. I'll work on this tonight! Thanks.
Oh, by the way, AMZN should have a good Christmas season as should AAPL and that should help these positions, IMO.
AMZN, some observations on this one. Firstly, it looks good on ADX and +DI and -DI are moving together favourably, both from extreme positions. Remember some chartists use this tool too, so if all the indicators are looking good this really be an exceptional good one!
Entry on this. Not it hasn't broken the recent high yet, and notice how the market makers opened it lower yesterday (Monday 17th October 2005) than Fridays close. My guess they will do the same ($44.85) at opening and perhaps a retracement to $44.29 (23.6%) [and less likely $43.82 (38.2%)] during the day. Again, just guess work.
I can see a possible small wedge pattern forming too over the next few days.
Projections in the higher price. Well Juans Elliotician analysis suggests between $55 and $64.
A 23.8% projection forwards to $50.83
A 161% target of $57.09.
Just some thoughts.
Correcting my many grammatical errors and mistakes, I was getting 'excited'.
For AMZN, some observations on this one. Firstly, it looks good on ADX. Also +DI and -DI are moving together favourably, both from extreme positions. Remember some chartists use this tool too, so if all the indicators are looking good, this really could be an exceptional good one to follow!
Entry on this. Note it hasn't broken the recent (almost double top) high yet, and notice how the market makers opened it lower yesterday (Monday 17th October 2005) than Fridays close. My guess they will do the same ($44.85) at opening and perhaps a retracement to $44.29 (23.6%) [and less likely $43.82 (38.2%)] during the day. Again, just guess work.
I can see a possible small wedge pattern forming too over the next few days. An early sign of an explosive move...
Projections in the higher price. Well Juans Elliotician analysis suggests between $55 and $64.
A 23.8% projection forwards to $50.83
A 161% target of $57.09.
Just some thoughts.
Juan,
Your opinion on BP (British Petroleum) would be interesting.
There has been a retracement to a good support line some days ago and it looks as if it is getting ready to recover up to the previous high resistance levels. An opinion sought on your Elliotician Prjection. Thanks again.
Accountholder:
– I also use Mac OSX. If you have Safari, you can "control-click" any image and save it for future use.
– I like AMZN here, I think it will break out from resistance at $47. AMZN triggered my system back in July, but it has been range bound since then. This is an example on how a stock that triggered my system should not be abandoned, but should be kept in a list. I urge you to question all asumptions and place a contingency stop loss to control your losses and maximize your gains. You can always go back to a position you like, even if you are triggered out by the contingency order, and don't limit yourself to stocks you"like". Try to be objective about it.
– If understand you have held the AMZN position for quite a while, rolling over the shorts would have controlled your losses due to the stagnant behaviour AMZN has exhibited since July. But now, you are about to get out of the "house of pain".
Fortitude:
– it is good that you look at the ADX, which has come features common to oscillators I use like the Refined Elliott Oscillator, the Stochastics and the MACD. I think they should be used as entry or exit signals.
– I don't depend on the projections from RET. This may change as the preferred count of today may be different tomorrow. This is why I act with caution and take profits at the first sign of weakness.
- Did BP triggered my system? was there a fundamental catalyst? It would be nice if you could contribute your thoughts on BP too (fundamentally speaking).
Juan
accountholder:
About volatility — Let me put it in simple terms and see if I can make it clear then. Did you ever see "Trading Places" with Eddy Murphy and Dan Aykroyd?
http://www.fast-rewind.com/
These two traders are in the pits trading "Frozen Concentrated Orange Juice". They are SELLING when everyone is buying and buying when everyone is selling. When people are yelling and screeming, volatility is high. At the peaks or lows, volatility is low as indecision sets in. BUT they are all focused on the earliest contracts, they are not trading long-term, they are trading short-term.
When you sell the front month, and volatility is high, you are selling expensive stuff. Volatile options ARE expensive options. BUT you can take a bullish position on a stock without trying to rush in with the crowd. Instead, you let them fight for the options you are sellling while you BUY the forgotten ones some months out. As far as you are concerned, you are still bullish because you have more longs than shorts, but you have filtered out the effect of volatility. Sometimes, for reasons we cannot always explain, it is the front month that is the expensive one. This is called Volatility skew and you have to watch out for that. The best thing to do is to look at the volatility chart for the front and back month. OptionsXPress people can explain to you how to do that in thier web site. It is worth doing!
Juan
Take a look at Georgia Gulf Corp GGC. It meets your criteria. It breaks above a reversed head and shoulder pattern today on high volume. Catalyst - On of its competitor's plant was taken out of commission for at least a year. The stock has been on the decline for many months.
HK, do you think that this is a strong catalyst? are you familiar enough with the industry of plastics?
The TA looks great, IMHO.
I am not at all familiar with the industry. Just found the info from the news. Further research revealed that it was highlighted by Jim Cramer yesterday. That could be the trigger for today's gap. See link below:
http://www.thestreet.com/_yahoo/funds/madmoneywrap/10247738.html?cm_ven=YAHOO&cm_cat=FREE&cm_ite=NA
They will be reporting earning on 27th of this month.
HK,
I entered at the slow yesterday;
+2 FEB06 $25 Call @ $3.10
-1 Nov05 $25 Call @ $1.70
Total Debit of $4.50
Just one position of that combination. Your thinking seems sound and it is worth entering, the main reason being that there is an earnings report due too.
GDT.
I would expect a further fall today. Initially I thought it had promise of a retracement. It could, but there was very little pull back from yesterdays decline. Where is the support level for this one? $62 or $59 perhaps and I have just looked a previous recent levels over the last two years. There may be a tracement at some point, that is where I will enter. It could happen today, as the curve down was leveling out.
It is a potential merger collapse, FDA investigation, product recalls, deaths, etc, etc. Bad news indeed. Looks an ideal candidate.
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