In this video I describe the selection and entry of a PCCRC using the TOS platform without having to have a subscription to platinum.
The stock in Question is JOYG
http://pathometrix.com/Movies/JOYG.mov
Warning: this is a large video, so it may take long to load completely. Be sure to follow the progress bar in Quicktime. It is best to let is load completely before watching.
I understand the dificulty with this video. I know where my errors where. I appologize. I am waiting for a good candidate (like JOYG) to slow up, so tha I can repeat the video, perhaps in smaller portions.
In the meantime, those of you who are looking for a replacement for Platinum, take a look at this alternative (this is not a recommendation, since I have not used it myself):
http://www.deltaneutral.com/Products/screenshots.html
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21 comments:
Juan, this is a huge file...I hope I can get to it in due time. Dan
I'm sorry Dan. The problem has to do with the resolution of TOS, as it uses the smallest font possible, to fit a lot of information in one screen.
In it I demonstrate how I entered a trade on JOYG real time yesterday. I am going to have to split the video in portions, so try if you will, if not, then be patient, until I locate another opportunity.
Hopefully I can make them smaller.
I am considering putting all videos I have made into a video disk for sale.
Juan,
It takes few hours to get to your video, as it is over 1,000 MB. The sound is not the best but it's good enough to get what you want to say.
I am impressed with how fast you learned to navigate on TOS platform, and to get familiar with Profit Charts. Did you got it yourself or used one of their online help people?
Yes, this may be turned into an educational company. Dan
Juan,
Somehow Platinum seems to have a nicer chart on the IV for different months, the one that shows in color lines the IV for front month with red, then green, etc.
Is this a particular feature of Platinum only? Dan
Juan,
On Analysis tab in TOS you have Volatility Analysis window. Have you ever looked at that?
What that can do is show you month by month where the front month IV is in cmparison with any other month.
For instance, for CIEN, the front month IV is much higher than OCT IV for options that are OTM, like 22.5 and 45 strike.
The ATM IV for the front month is below (lower) that the ATM IV for OCT 07.
Take a look and see if you like it. Dan
Hi Dan
I have enough video material and ideas to develop my own DVD for distribution among traders. I have found it somewhat limiting to make videos that must necesarily be low resolution and short duration.
I don't think of myself as a B (Business) but as an I (Investor) who would like to share knowledge and have others compare notes and suggest alternatives.
If I was to chart thousands of dollars, I would have to justify such expense, and start promising unrealistic results. That is unethical in my mind. I therefore would prepare the DVD and chart a reasonable amount for my effort, while still continue to publish this blog.
There were several technical problems with the last video and they have been corrected already, so I will produce the best quality I can make, accent and studdering included (hehehe). I will advertise properly when the videos are ready.
Hi,
I appreciate your effort. Can you send me the link for the last few video with better quality?
Happy Trading
Hi Happy, I am waiting for another good candidate in order to repeat the video. I am also considering creating a video disk with the material in question.
Juan,
NFX
Take a look at NFX, I like it, although the stock moves up and down a lot, it's at it's peak right now.
The IV/SV ratio is below 1, just hit the bottom.
I see a PCCRC at 50, June/Sept 07. The IV for June options is higher than the IV for the next months.
WMT and BIG
Like the IV/SV ratiom wekk below 1.
dan
Juan,
I've seen few other stocks with a well below 1 Iv/SV ratio:
AAPL
XOM
DJ
WLP
CIEN
SWY
Dan
I would not be selling June options at this point, I would be rolling them over (those that I have open) by the end of this week.
This means that if you did the Jul/Sep, you'd only have Aug in between. I am more likely to do the Jul/Dec in this case, since there is no Oct. or Nov.
The IV/SV in the three stocks (WMT, BIG and NFX) look just fine.
NFX has recently jumped in volatility and it may well continue on. You'd be selling high IV and buy moderate IV. The same could be said of WMT.
BIG IV is long-term is declining.
Be sure that there is a fundamental reason for you to enter any of this trades. My inclination would be to be patient to look for stock that jump >10%. Otherwise you could simply go long calls as described in my basic blog:
http://stockofthedayii.blogspot.com/
There is also the high flier strategy, which includes stocks with the highest % gain in the last 90 days. In those, it is extremely critical that you look at historical IV as well as IV/SV ratio.
Remember my 3 reasons for a PCCRC:
1. High fliers (high increase in stock price in the last 90 days).
2. IV skew, where front month IV is much higher than the back month options.
3. Post-earnings jump.
Can we use Ivolatility for IV and SV instead?
http://www.ivolatility.com/options.j?ticker=GOOG:NASDAQ&R=1&period=12&chart=2&vct=
Hei Happy, Good find.
It looks like the IV and HV are there.
The HV is calculate over a few days, I prefer only a day or two, particularly after a 10% jump, you'd have to assume that HV is high.
This becomes an issue when picking high fliers, I think, since there is no immediate reason why HV should be high and IV low, then you need to be selective with a low IV/SV ratio and always sell high IV and buy low IV.
Both IB and TOS will give you the exact IV for the options you indetnd to buy/sell
Juan,
You can form PCCRC position in TOS easier than you showed in video.
Holding Ctrl just click twice on longs ASK and then once on shorts BID.
hi
I will buy a "double diagonal calender" and then change the quantity and month accordingly.
anyway, it is much easier for TOS than OX. If we have OX account, can we get the IV/SV ratio?
Dave said...
Juan, You can form PCCRC position in TOS easier than you showed in video. Holding Ctrl just click twice on longs ASK and then once on shorts BID.
I have verified that this is indeed correct. I suppose you save a few clicks by doing this. You can also choose to buy different strike prices using this technique. Thanks Dave.
Happy Trade said...
hi
I will buy a "double diagonal calender" and then change the quantity and month accordingly.
anyway, it is much easier for TOS than OX. If we have OX account, can we get the IV/SV ratio?
Juan said....
Happy, I closed my OX accounts largely because of the inability to place a PCCRC in one ticket. Further, they would charge me two ticket commissions to complete the trade.
I don't believe that they have IV/SV ratio.
You could probably negotiate the ticket fee with TOS. Interactive broker does not have ticket fees, just a .75/contract charge.
I have found that TOS has better fills, so the higher comissions with TOS may be justified, although it is hard to tell for sure.
Juan,
I was not aware of your Post Earning Jump approach until recently. Does it result in a better candidate than the High Flyer approach ?
HK
hk, I stand by all of my posts past and present, but I also reserve the right to adjust my trading approach.
The reason I decided to start trading the post Earnings jump was the fact that the IV/SV ratio is quite low and tends to increase days or weeks after the initial decline post earnings.
One of the conditions that MUST be met in the High Flier strategy is the low IV/SV ratio, and the low IV. I have also come to understand that if the IV is below 40%, you are not so likely to get a volatility crush.
In addition, with the post-earnings jump, I can select stocks with extraordinarily good earnings or (better yet), increase revenue or earnings guidance that may come after earnings. This is usually the explanation for the eanings jump. Further, it tends to create a momentum in the stock price that is carried forward in the months to come.
Now you may say, why not just buy calls: because you are at the mercy of a sideways motion that may come for the next two weeks following earnings.
You may say, why not trade a CRC, instead of a PCCRC? because the PCCRC could have bigger Delta gains for the same risk. You go and experiement and form your own opinions. Be sure to report back on your own paper trading or back testing. I am positive you have much to contribute to this discussion.
Having said all that, do not abandon the high flier strategy. I still regularly trade AAPL, GOOG and RIMM. In such cases, I believe that the PCCRC is the only safe way to make large bets with low risk.
Juan,
Appreciate your detailed explanation. You have always been very helpful.
I feel safer with PCCRC and have no intention to try the CRC. Thanks.
HK
HK
If you have been using the PCCRC, please tell us more about your experiences. Like what % gains have you had, what stocks and when have you traded the PCCRC with.
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