Market Curiosity: Exploring Markets And Systems

January 4, 2011

Possibly short ST, but only until Friday -16%, (now long)

Filed under: -05 to -24%, Long Calls, Short Puts — Tags: , — Jeff Fitzmyers @ 10:54 pm

Action: If market is not strong tomorrow, and depending on the open, buy ST Feb 30 puts for around $120. Position size: 1/4.
Exit: Hold until Friday. If profitable great, if not, lose the spread (which is not small). It seems the market might be weak for a week. Some stocks don’t seem to break down exactly when most do.

– On Dec 17th a large gap up: exuberance.
– Weekly CCI declining
– RSI > 70 for a while (light red line)
– Taylor indicator suggests a down day tomorrow. (top color band)
– Relatively large volume yesterday, but did not keep up with stock market.
– Insiders sold over 97% of shares recently. (much of this might be due to the IPO lock up period ending, but still, insiders sold almost everything.)
+ On the other hand, price easily absorbed all those shares!
– Debt to equity ratio is 208. I am not expert on fundaments, but this seems high to me.
+/- Earnings on January 24th.

Results: -18% Bought for $120. Sold a few hours later at $100 because ST and stock market were going up.
Lessons: Should have just used stock not options since these options are illiquid and the move would have likely been small anyway. And what am I thinking?!!? As long as the fed (neither federal, nor reserve) keeps printing, decent stocks are going to trend up. What I was trying to do is catch a down draft like:

Obviously the analysis is incorrect. So time to stop and reverse. Being in the IBD Top 50, if price is not going down, it will likely go up.
Action: Bought ST March 30 calls for $190.
Exit: Stop loss is if option lose 50% of value or closes under about 29.60.

Jan 9th: I failed to notice that there was no follow through on the gap and fill on Dec 17th. And now there has been mostly green bars. The little spike higher on Jan 7th is fine since price probably is just correcting from making a new high. This seems to still be a strong stock.

Jan 15th: Price sitting right on up trend line. Needs to rise in the next day of trading or position is sold. Depending on the open, it might be time to go short. Market was up and this stock seems weak. How may whipsaws can I ring up? 🙂

Jan 18th: Sold for $1.95. +2%.

Jan 22: This is why I sold: The march calls are now worth about $1.10 -40%.

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