24-10-07 : GOOG trades

Trade 1&2 : GOOG calls
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Winning trades become losing trades. Total loss = $1.40.

Trade 3 : GOOG Call
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Basis for entry :

Daily chart
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15min chart
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5min chart
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The trade is done in 3 mins. Sold for $1 profit.

Exit chart (5min)
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Thus tonite's GOOG call trades summary :
Trade 1 : -0.40
Trade 2 : -1.00
Trade 3 : +1.00

Total loss = -$0.40

24-10-07 : The sundry shop man

There's this small room which is a sundry shop at level 9 of Menara Haw Par. This indian middle age man runs this shop alone. He seems quite a relax and easy going man. Not married, no children. Travel extensively. To where? Places like the Venetians, hong kong, to enjoy the casino, the culture, the atmosphere. Generally, this man knows how to enjoy life ..

Wait? wasnt him just the sundry shop owner? How can he afford to go that type of place often?

The surprise is, it turns out he's a US commodity trader, for the past 10 yrs. Must have accumulated some wealth. Then open a small kedai runcit, and pass time. Wow. he's done what i want to do.

He is a day trader, only trades once a week. How nice. And btw, he opens his shop at 9am, close at 3pm everyday.

What a life.

24-10-07 : MA put trade

MA broke down below 150, thus presents an opportunity to put.

Daily chart :


15min chart :


5min chart :


Note that 146 may be a support at 5min chart. Thus may want to wait below 146 to put. If gap up tonite, and fall back again below 150, then can put immediately with target at 146.

24-10-07 : GS Call tonite

Propose a call tonite in view of GS's stubbornness of not to go down.
15min chart forms an inverted H&S, with 223.20 as the neckline, if break up, will go to $228 soon.



Use my call checklist, ensure all criterias are met, then go in for a good GS call !

However, I must say this is a more risky trade, since daily chart is still bearish, with MACD cross down, and price fall below MA20. So beware ! Enter at your own risk.

Summary of my call / put strategy

What are the things most important to my decision making of whether to enter a trade or not ? These are the most crucial factors :

(1) Trendline - daily, 15min
(2) Breakout ( i call box up or box down based on Darvas's Box Theory)
(3) MACD (5,35,5) - daily, 15min, 5min must all sync in 1 direction
(4) MA20 cross MA50 for Daily & 15min charts
(5) Price above or below MA20 for 5min chart
(6) Extreme price swing in 1 night
(7) Candlestick patterns -esp. Bull/Bearish engulfing, Doji, head & shoulder, double top & bottom

I do look at Bollinger band occassionally to look for outliers that can cause an immediate pullback or rebound (but rarely). I do look at volume sometimes to gauge the strength of the breakout (rarely also).

I dont look at news (except earning announcement date), i dont care about other things. I only look at 7 counters permanently now, and i dont care about the rest of Nasdaq or NYSE stocks (unless my friends told me to take a look at).

These are the only 7 counters I look at everyday :

(1) GOOG
(2) GS
(3) BSC
(4) BIDU
(5) AAPL
(6) MA
(7) RIMM

They are all highly volatile stocks, thus you may say I trade volatility essentially.

I guess there's nothing much to say about my strategy any more.

My Call & Put Entry Strategy

This is the checklist i need to tick before enter a call or put trade. Its no secret. All the criterias are plain simple, even a child can do it. All it takes is stick to this plan, and there's 60% chance the trade will turn out well.

======================
Call Checklist
=======================
Straight Call

Date :
Trade No :

Entry point checklist

Market Bullish
Daily trend up
Daily MACD Cross 0 up
Daily MA20X50 cross up
15min MACD cross 0 up
15min MA20X50 cross up
5min MACD cross 0 up
Price above 5min MA20
Break box up
Touch daily trendline
Rebound from daily trendline

Option chosen

Option
Strike
Premium
Intrinsic Value
Time Value
Highest price of the day
Lowest price of the day

Exit Point Checklist

No of days / mins hold
Sold price
Net profit / loss
Net actual profit %

=================
End of checklist
===================

As you can see, my exit strategy is based on my own discretion. No hard and fast rule. Mainly $0.50 profit / $1.00 / $1.50 / $2.00 profit based on my opinion on the strength of the move in very short term.

I usually just queued to sell at a fixed $0.50 interval price after i buy an option.
My cut loss point is $1 for high volatility stock like GOOG, BIDU, GS. $0.50 for less volatile stocks like AAPL, MA, RIMM.


======================
Put Checklist
=======================

Straight Put

Date :
Trade No :

Entry point checklist

Market Bearish
Daily trend down or uptrend met a major resistance pt
Daily MACD Cross 0 down
Daily MA20X50 cross down
15min MACD cross 0 down
15min MA20X50 cross down
5min MACD cross 0 down
Price below 5min MA20
Break box down
Touch daily trendline
Fall from daily trendline

Option chosen

Option
Strike
Premium
Intrinsic Value
Time Value
Highest price of the day
Lowest price of the day

Exit Point Checklist

No of days / mins hold
Sold price
Net profit / loss
Net actual profit %

=================
End of checklist
===================

23-10-07 : GOOG call trade turns out ok

I bought a GOOG call Nov07 $670 strike (yes, that one again) on 22-10-07 before market closed. Option price is closing price = $12.00.

I queued to sell at $13.00. But upon seeing the market is bullish, and GOOG is already up $10 before market open, I cancelled the sell order, and planned to sell upon market open, at market bid price.

Market opened at $15.80. It went up to $16.00 where I sold my option @ $16.00. Profit is $4.00. Nice. Option price retraced to $15.00, before it went up to $19.20.
I failed to catch this move. Felt like going in, but no indicators to support, thus did not go in.

Also, at $670 area around 10pm, where option price is at highest, and hence put option is at lowest around $10 area, i intend to go for a put for the expected coming retracement, but did not go in either. Again, lack of indicators to support.

But i did it at paper trading, and it went well. Got 1 put @ 10.70. Got another put @ $9.70. Thus averaged down to $10.20 for 2 contracts of Nov07 $650 Put.

Sold @ $11.20 for both puts later, thus $2 virtual profit. Since its a strongly bullish night, I didnt go for the put.

Below is the Call trade :



This is the put trade :

22-10-07 : GS Put trade turns out ok

The trade is summarized as below. Bought before market closed on Fri, sold
when market opened by Mon. Autosell order actually, and i was not around.



Reason for the trade : Broken 220 support down.
Share price when option bought : $218
Price target : $215 (which is reached)

Thus $3 down in share price results in option price up $2 actually to $12.90. But i queued to sell at $11.90, thus only $1 profit for me.

19-10-07 : GS put trade

GS broke trendline down earlier, and all long positions have been cleared.

We went for a short position in the form of put at $220 Nov07 Strike. The price is $10.90. 1 contract.

Daily chart
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15min chart
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5min chart
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Reason to put : Break 220 support with long black bar

Take profit pt : 210

Loss profit pt : 221

Holding period : 3 days

19-10-07 : BSC new put trade

Before close of the market on 19-10-07, a new BSC put option position was initiated, after just sold the 2 put contracts earlier. This trade is treated as separate from the previous, and is based on totally different entry signals.
Entry signals shown up in daily, 15min and 5min charts respectively :

Daily chart
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15min chart
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Reason to enter : Break 120 down.

Take profit pt : reach 110

Cut loss pt : above 121

Expected holding period : 5 days

21-10-07 : BSC trade (18-10-07 buy,19-10-07 sold)

BSC Buy
-------
1st contract was bought too earlier, before the
retouching of 120 happens. The black cdl that drops
below 118 gives the impression that its not going up
to 120 anymore. It may just hit the previous resistance
at 118 (the day before), and down again.

Thus 1st contract was bought there at $7.20. Way too expensive.
The plan was to buy another put cheaper when it actually goes
up to 120 and down again.

That happened at 11.30pm when the touching of 120 has
occurred, and fall down again. At around
119 area, another contract was
bought at 6.00 to average the option price to 6.10 for
2 contracts.

Then I went to sleep. What foolows is that price actually
went beyond 121. The option must have reduced a lot in price,
but i was sound asleep. Thus saved myself of pain and
agony.

the next day opens high, but eventually drops below 118
and at 116.50 area, both contracts was sold at 7.10. Thus
$2 gain from this trade.

Reason for this trade : Break below 120 support in daily chart
seen as temporary weakness to go lower towards 110.

Reason for exit : MA50 may still be a good support around
116 area, thus exit early ensures profit locked in.

Shortfall : May not capture the downfall all the way to 110
or even 100.

Thus a separate contract was entered as next put trade towards
110. Its viewed as a separate trade on its own. But that is another story by itself.

The Entry pt
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(1) Daily chart (Put contract # 1)
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(2) 15min chart (Put contract # 1)
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(3)5 Min chart (Put contract #1)
------------------


(4) 15min chart (Put contract # 2)
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(5)5 Min chart (Put contract #2)
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Exit pt (both contracts)
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(1)Daily chart
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(2)15min chart
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(3)5min chart
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Books that helped me along my trading journey

Way of the Turtle - its a great book

The best turtle told us how to make money in trading. What are the important ideas from the book?

(1) Even for best traders, only 30% trades are successful. 70% trades a wrong. Then the 30% trade's profit must be more than enough to cover the 70% of losses. Thus the concept that all big trends can not be missed. And can not exit too early.

(2) Every trade should only risk a small fix % of the total capital (eg. 2% for the turtle). When the % is up, cut loss no matter what. That is crucial for capital preservation.

(3) Enter trade whenever the entry signals are clear. Dont pick and choose which trade to enter. Over the long run, trader will lose out.

I believe these are the 3 principles hardest for me to swallow from this book.

But well ... it works that way. I cant argue otherwise at my own perils.

19-10-07 : MA option choice for pre-earning play

As a follow up of my own recommendation on playing MA for pre-earning, which option is there to choose from?

Choice A : $150 Nov07 Call - $11.30
Choice B : $155 Nov07 Call - $8.70

Lets analyse these 2 options closely.

$150 call has intrinsic value of $153.70 - 150 = 3.70
thus the time value = 11.30 - 3.70 = $7.60 for 21 days left before expiration.

$155 call has intrinsic value of $153.70 - 155 = -1.30
thus time value = $8.70 + 1.30 = $10 for 21 days left before expiration.

Thus how much we are actually paying for the option?
$155 call : $10
$150 call : $7.60

$150 call is cheaper. I will get this one. ^_^

19-10-07 : MA pre earning play (31-10-07)

With GOOG's pre-earning play come to and end, its time to search for next
play. I suggest MA has a good potential to earn some quick profit within these 10 days. Now is the 8th day before the earning announcement on 31/10/07.

Daily chart sees support at 150.



15min chart sees reversal towards uptrend.



Take profit pt : $169
Cut loss pt : $149.50
Holding period : 8 days

19-10-07 : Pre-earning play summary

GS (20/9/07) 2 weeks = 7-9-07 to 19-9-07
Share price :
7/9/07 : $176.50
19/9/07: $220.50
Profit : $64

GOOG (19/10/07) 2 weeks = 8/10/07 - 18/10/07
Share price :
8/10/07 : $595
18/10/07: $640
Profit : $45

AAPL (23/10/07) 2 weeks = 8/10/07 - 22/10/07
8/10/07 : $163.5
18/10/07 (current) : $173.5
Profit : $10

BIDU (26/10/07) 2 weeks = 12/10/07-25/10/07
12/10/07 : $301
18/10/07 (current) : $320
Profit : $19

19-10-07 : GOOG Pre-earning play comes to a close

As we wondered the day before, if its a bullish night, whether will path 1 or path 2 be fulfilled.

As it turns out, the market is bearish last nite, but path 1 is still fulfilled.
Price stayed at 630 throughout the 1st half, and never went down. 2nd half saw price sour to $640 level, as predicted.



After market close, the price went on to go to $647. But thats another story, since its gap play already. For those who play gap, its a gain, but to risk $15.50 to play a gap, its half my capital, and thus not worth the risk.

I also did not go for call last nite at 12am time, where the upside is more certain with strong 630 support. Why? I was sleepy and went to sleep like a pig.

For all of you who played the pre-earning play for GOOG, i want to congratulate you, because its a worthwhile cause.

18-10-07 : GOOG pre-earning play. Last Chance.

Tonite is last nite before the earning which will be announced after market close tonite. Pre-earning play ends at 4am tonite.

So you want to take the chance for a call?

if market is bearish tonite, forget it. If market is bullish tonite, then go for a quick call, enter tonite, exit before market close tonite.

Here's the plan. there's 2 path possible if the market is bullish, and if the share is bullish :



The retracement must occur, and the reversal up must occur for this trade to take effect. If not, dont risk. Dont even enter the trade.

So enter at 630 level, or 627 level. Must see a white cdl reversal up before enter the trade. Good Luck.

18-10-07 : GOOG is back on track

oh well, GOOG did go up before earning after all, just delayed.
In fact, if you are a believer of GOOG pre-earning play, you would be in for a wind-fall, after the retracement, the Nov07 $670 call is really cheap ($12).

So what happened to all my put plans last nite? Didnt execute. The market sentiment is bullish last nite, so all puts are put on hold.

Then, then, how about call last nite? Is there any signals for a call? Yes.

Both 15mins and 5mins charts show signals to enter a call at $626 level.

15min chart
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5min chart
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17-10-07 : Option strategy for GOOG tonite

We decided earlier that we are bearish on GOOG tonite. Thus we now wish to prepare the right option to enter tonite, to capture this opportunity.

Choices we have are :
(1) Straight Nov 600 Put (OTM) : $21
(2) Straight Oct 620 Put (ITM) : $18.80
(3) Bear call spread Sell 630 Call, buy 640 Call : $11.25 - $8.10 = $3.15
Return = 3.15 / [(640-630)-3.15] = 46% return (> 25% is acceptable)
(4) Straight Nov 620 Put (ITM) : $30.50 (too expensive)

With these choices in mind, I decided to put all 4 choices to the test. We will see the results of these 4 choices tomorrow.

One thing to notice is the price fluctuation of the 2 straight Puts. Their graphs are as below :

(1) Straight Nov 600 Put (OTM)
------------------------------
Range : $11-$24 ($13)



(2) Straight Oct 620 Put (ITM)
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Range : $9-$25 ($16)

17-10-07 : GOOG direction tonite

I think this will be the million dollar question. 2 days before earning announcement on friday 19-10-07, which direction will the stock goes? This is pre-earning play, and its important to know with precision.

Lets review our technical signs, and deduct the most possible path for GOOG tonite.

15min chart :



5min chart :



Daily, 15min and 5 min charts are all bearish.
Thus expected path of action tonite for GOOG is downfall.

Down. Down. Down towards $610.

17-10-07 : S/R levels for various counters

GOOG : Below $610 is put

GS : Below 224 is Put

RIMM : Below 108 Put

MA : Below 150 is put

BSC : Below 120 is put

AAPL : Above 170 is call

17-10-07 : Various entry points for various counters

Most counters seem to have broken their short term trendline, and going to break their short term support level. These are the support levels and their implications :

Time for put now
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GOOG : Below 620 (already broken). Now will fall to 610, or 600.
MA : Below 160 (already broken). Now will fall to 150.
GS : Will fall to 220

Time for call now
------------------
GRMN : WIll go to 120

Put after break support
--------------------------
BIDU : Below 300, will fall to 280.
BSC : Below 120, will fall to 110, or 100.
RIMM : Below 108, will fall to 100 to close the gap.

Call after break resistance
---------------------------
AAPL : above 170 (call)

GOOG did continue to fall before earning

I went insane last nite with a false bullish signal, and went for a call. The damage is heavy, $220 loss.

Mistakes I made :

(1) Went in for a call during a down market last nite. The overall market sentiment is heavily bearish.
(2) The range of option premium was around 13.80-15.60 that time. Buying a call at $15 is expensive towards the top end of the range. Risky.
(3) Fail to cut loss according to my $1 cut loss plan for high volatility stock like GOOG, BIDU. Less volatile stocks like GS, BSC, AAPL and RIMM should be 0.50 cut loss.
(4) Did not wait until the 2nd session of the market before went in for call. Should wait till 1am, as planned.
(5) 15min chart MACD never cross 0 up. It crossed back down below 0 area. Not patient enough to wait for this crucial confirmation signal.

Things I did right :
(1) After confirmed price will stay below $620, cut loss @ $12.80. Price closed @ $11.70. Saved $1.10 if did not sell.

The mistakes are not new. Mainly old, plain, simple mistakes that I have made over and over again. Again, it shows my mental focus is not strong enough.