Options Strategy

OK, now that I got creamed on the GOOG call options, watching them crater, selling them low, and then watching GOOG cruise back up past my original entry point....

I did this trade blind. Never looked at the daily charts, only the one-minute and five-minute which drove me crazy. Time to back off to the overall trend level and use the dailys with a 10% stop to start, 5-10K buys in the play account until we see how it works. This could be a great long-term play, but must adjust for risk as we near the expiration week.

Set up a watchlist with GOOG, IBM, GS and other optionable candidates to spread the risk. Also check out the new S&P ETF's as they get option volume.

TeleChart vs. StockFinder?

According to Stu, SF supports back-testing. TC only does that with an add-on. Time to hit the forums and see which one to use.

Does Worden have a SF-only plan, or only an add-on with TC?

Does the TC user's group also benefit someone using SF?

Better Gap example: BAC on 6/19/09

Perfect example. Gapped up from 12.88 to 13.10, then dropped right back to 12.88 by 10:10 AM.

Sometimes the Gap keeps widening

Cannot assume the gap will always fill. Note QQQQ on 6/19/09, which kept running. Need to watch the behavior after the open and respond accordingly.

Gap example: GOOG

GOOG gapped up from 413.59 to open at 414.87 today. It quickly jumped up to 418.5 but then dropped to 414.74 by 10 AM. The 420 ITM put (expiring today so delta was over .94) opened at 2.8 and then ran to over 5.4 as the stock dropped.

Mind the GAP

The gap always fills...that means that when stocks gap up at the open, they nearly always trend down afterwaards and vice-versa, almost always in the first 30 minutes of trading. Study the charts for verification.

This can be played by shorting or buying puts at the open, and capturing the profit as the stock gaps down.

Same goes for opening on a gap down, but test it first.

Small positions = Lower Stress = Diversification

Home runs are hard to hit. Two big losses this week (E*Trade options and GS options that ended up higher after I sold) plus a near-miss on Palm options, which went up five-fold the same day i dumped them with a 6K loss, are valuable lessons.

Three 3K positions are better than one 10K. Those who take huge bites are liable to choke. Hope I have learned that by now. Have to make up 40K to break even, then we can start making some money.