I decided to start writing the occasional blog, focussed on trading options, that is to be short and informative in nature. So, the first thing I did was to plan out the structure of the blog, and then I needed to select the topic. Well, that slowed me down a bit. I have so much to say about trading, in particular about trading options, and I wanted my blog to be self-contained and informative, not just some half-told story with promises of more information after joining as a member.
So, there I was at the Dog Olympics (at Wickham Park, Islington, Newcastle), wandering around with Tehani, our twelve-year-old Pomeranian, meeting and greeting hundreds of other dogs, when I noted something. The big dogs were not mixing with the small dogs and vice versa. There was respect among them all, but it was as if the big dogs knew that they couldn’t engage in rough games with the small breeds, and they quickly moved on to find their own size of dog. And there was absolutely no reaction to...
After our recent club webinar work with the Butterfly strategy I have decided to place a directional Butterfly where I would usually place a Long Put or a bearish Debit Spread. The reason is that I was already in a bear trade on AAPL (with the Long Put strategy) from a couple of weeks ago, and now AAPL has triggered another bearish signal (different system) so I am bearish again. Rather than use another expensive position (doubling my risk on a single stock) I have employed a cheap bearish directional Butterfly as shown. I will keep you posted as it unfolds.
On Friday I identified a suitable entry for the HOG Rider, just as the previous trade closed. Last night, I got the bullish credit spread filled at 75c per contract, using strikes set $2.50 apart. So all up (staying under the $1,000 limit), I got five contracts filled for a $375 reward with a $875 risk over 31 days.
This high potential return comes about due to the high risk in this particular trade as it has a lengthy term and is set reasonably close to the price.
Well the Sep 16 expiry was met with the HOG still on track making maximum potential profit. After the late start waiting for the signal, I only had a short run to expiry and HOG did not move in the right direction, however the trade closed for maximum profit at expiry for 9% profit after brokerage (about 11 days).
And the setup is there to enter another HOG ride on Monday. Since the price action is close to the 63 EMA and there is a full month to expiry, I expect to get a high value trade placed.
I had to make a decision about the HOG Rider system today. At expiry (nearly two weeks ago) the setup was bullish, but there was no entry signal, and I have been watching HOG daily now for nearly two weeks, and last night the signal appeared. Please note the last candle is misdrawn by my software, but I have included suitable notes.
So I see a ''nearly Doji'' candle (only 1c between open and close) that has barely closed over the 9WMA. So the system requirements have been met - but is there some discretionary reason not to take the trade?
The next picture is the options chain and the light blue highlights are the options selected by the system. If you zoom in, you will see a very large bid-ask spread in the selected options. Buy spread is 10c and 30c, and the Sell spread is 46c and 57c, which are both significantly wide for normal HOG prices.
What should I do? Can I wait a night and see if the signal improves? Should I blindly follow the system regardless o...
Here is the risk graph of the trade I opened Monday morning (USA) on CAT using the CAT of Nines system. It is a Bear Credit Spread which is also known as a Bear Call Spread. It has been placed for a potential
$210 profit from my $1,040investment in 28 days. Let's see how it goes.
CAT has finally signalled a move, and it is bearish. The setup leads us to use a credit spread according to the system.
By the rules we select the expiry and strike by considering the ''Open Interest'' and ''Bid-Ask'' spreads within the first 21 days of available options.
But ... a special consideration for this particular trade is the pending speech by the USA Federal Reserve that has the US markets tied in knots. Lately CAT has been showing price increasing without any momentum support, and so it is more prone to fall than rise in my view; however, I will be watching the market reaction to the speech and deciding from that outcome.
With the August 2016 expiry date having passed, HOG Rider traders are now watching the chart for an entry signal. At this point it is shaping up for a bullish trade, however we will need to see a bullish bar close above the 9 WMA (red line) before we can open a trade.