http://www.pathometrix.com/Movies/
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HK has suggested a PCCRC or CELG, that qualifies as a high flier. FDA has approved a drug on Dec 28th, and earnings are just arround the corner. Learn how these items have affected IV.
Consider transforming a CRC into a PCCRC
http://www.pathometrix.com/Movies/CELG.mov
Now, here is the IV using the tool from ChartBender.com . Notice the differences in IV between shorts and longs. We want the shorts to be more expensive (high volatility than the longs). This may not be possible, but waiting a little as earnings approaches may change that.
9 comments:
Few people have asked on any good books to read.
Option Volatility and Pricing" By Sheldon Naternberg.
It is a boring read but well worth the effort.
Ulitmately it falls down to expectancy and probability, as long as it is positive we should be good on the system.
I dont have answers to the below questions. Just some thoughts.
1) The system PCCRC or CRC has improper exits. We need to improve that.
2)Currently we have Ratio Spreads for Juan's high fliers. Are their any other way to trade high fliers.
I must certainly welcome discussion on any other system, or ways to improve what I have presented.
I am a strong believer that practice and knowledge is the road to success. The goal being consistent gains.
Take a look at this
http://www.optionetics.com/bbs/topic.asp?topic_id=34804&forum_id=129&Topic_Title=What+is+10%2D30+System%3F&forum_title=Advanced+Trader+%2D+Discussions&M=False&S=True
Varum, I have long given up on trying to find answers from Optionetics. I undertand now that they are a business, and that they do NOT depend on trading or investing to make their money. I began this blog because I felt that we, real traders, can exchange ideas and have a better chance of success. I am fortunate not to have to depend on a job or my trading to live, and I would not recommend that anyone leave their jobs to trade. However, I do believe that is possible to succeed, but obviously, it requires knowledge in a combination of themes, including TA, Fundamental and Technical analysis. Neither of them alone would do. Still, things could go wrong. Here is what I have learned outside of the Optionetics business:
1) Absolve yourself of guilt if things don't go your way. in early 2005, GF suggested 10 trades for the year, by July they have all lost most of the money. So being a "seasoned" trader is no guarantee of success.
2) Knowing item 1 above, feel happy when you have made money and take at least SOME of the table, as the stock moves your way. It feels bad to have left a winner, but it feels worse when a winner turns into a loser.
3) Figure out an approach and stick with it. Take your time to test it using software like platinum and Advanced Get. This is the one thing A.Get excels at. I am done testing my system, so I have no more use for it.
4) Feel free to share your trades with us, whether they are real or fictitious, ask your questions, I hope this blog is not a monolog. I DO want to learn of other systems too.
JUan,
Could CELG be entering a large wave 3?
A possibility to me anyway.
Best Wishes.
Want to give an update on S&P500. Would likely see a pullback before rise above 1286.
Close above 1275.80 ensures the correction is complete. If S&P500 pulls back below 1245 then the Elliot Wave count gets invalidated.
Juan,
Many thanks for your video. I am tracking CELG in order to learn the best time to enter a PCCRC as this is the main difficulty for me in learning how to do a PCCRC trade.
Since the beginning of the year CELG has rallied about 10% resulting in a delta gain if a position was entered at that time.
Yesterday (9Jan06), the April IV rose by about 2% and the Feb IV crossed over the long term one giving a signal to enter the trade. The problem now is the IV/SV ratio has risen above 1 mainly due to a reduction in the SV. Would it be a good time to enter now ? or is it better to wait till the IV/SV goes to below 1. Another idea is to wait till the Feb IV peaks just before earning but will the April IV be too high at that time ?
I have entered the trade in Platinum, in order to find a good spot to enter too.
The long term options continue to have higher IV than the short term ones. What is going to happen, probably, is that there will be a spike before earnings. Again, the whole point is to look for stocks with low volatility, but you need to be able to sell high IV and buy low IV. That may not materialize with CELG.
Why don't you backtest a few PCCRC's if you have Platinum? Look at stocks that spike before earnings, like AAPL and DNA, and see what happens to your trade if you SELL expiring, high IV options just before earnings, and roll them over right after earnings? I have noticed that you do not get much in the way of profits but your cost may be reduced substantially.
I think I may do a clip on this, since I have a PCCRC on AAPL, and I am experimenting with this approach.
Incidentally, the PCCRC on CELG would have been making only $300 in an $8200 investment, so don't feel bad about the lost opportunity, it has not been that great, yet.
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