19 October 2007
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. ^_^
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
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
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.
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 October 2007
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.
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
-----------
5min chart
-----------
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
-----------
5min chart
-----------
17 October 2007
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)
------------------------------
Range : $9-$25 ($16)
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)
------------------------------
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.
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
-------------------
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)
Time for put now
-------------------
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.
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.
16 October 2007
16-10-07 : BIDU the Big Bull ...
Haha.. BIDU's bearish engulf forces the price to open at 300, goes up, and yesterday its down again. I guess it may retrace to 300 .. or even lower?
I would like to think more positive and say 300 is the strong support. Until proven other wise, I think 300 will hold for now, and a call around 301 area is not that bad. but its not that safe either.
For me, I will wait for BIDU to fall below 298, and I will go for a put. May retrace a lot in 1 night if you are lucky. Cut loss point of coz, is 301. Take profit point? 280 maybe. May be even 200 !!
okok .. cut the crab.. its not going so down .. is it ? Who knows ...
16-10-07 : GOOG is dropping before earnings on 19/10? For Christ Sake !
Oh No ! GOOG is dropping so soon? How about Pre-Earning play? Its not going to work is it?
Anyone long GOOG? Its big bearish engulf for God's sake !
Anyone long GOOG? Its big bearish engulf for God's sake !
First the big black with big tails on both ends (fierce fierce stuggle between bulls and bears), then the more reassuring white, then the big black again that fully engulf the white !
Oh no.. whats this world coming to? Anyone dares a put on GOOG tonite? kekeke ...
16-10-2007 : GS may not break 230 so soon
Gs .. GS ... the bull is so so strong after its large retracement to 160 area. But now it seems the bull has lost much steam at 230 area. Will it break 230 now? soon? ever?
That question we should leave to market movers for GS, but I do believe a lot of institutional big boys are supporting GS. Thus going back to 160 position seems unlikely. But a retracement is possible.
Lets look at the daily chart closely, and look for signals of bull weakness :
Sign 1 : Equally long black cdl after a long white
Sign 2 : 2 bearish engulf in a row.
Sign 3 : There has not been a single retracement since 160.
For you GS supporters out there, you may still hold call positions (I hold 1 Jan08 $280 call @$1.95 premium). the premium is now $1.65. Not sure how much value it will cont to lose. So the dillemma now is to get out, or to embrace for the fall.
But to make things clear, bearishness is not confirmed to turn into a free fall. For all we know, 220 is strong support. so is 200. But hope is never the element in my trading strategy. So I may look forward to cut tonite, if the stock falls below 227. Other than that, I will cont to hold. If it does fall below 227, I will cut and look forward to buy back at 220, 210 or 200 area. Definitely will buy back 1 call at 200.
We will see if our dear GS will be driven by bulls or bears tonite. Oh Cramer, do you know ?
That question we should leave to market movers for GS, but I do believe a lot of institutional big boys are supporting GS. Thus going back to 160 position seems unlikely. But a retracement is possible.
Lets look at the daily chart closely, and look for signals of bull weakness :
Sign 1 : Equally long black cdl after a long white
Sign 2 : 2 bearish engulf in a row.
Sign 3 : There has not been a single retracement since 160.
For you GS supporters out there, you may still hold call positions (I hold 1 Jan08 $280 call @$1.95 premium). the premium is now $1.65. Not sure how much value it will cont to lose. So the dillemma now is to get out, or to embrace for the fall.
But to make things clear, bearishness is not confirmed to turn into a free fall. For all we know, 220 is strong support. so is 200. But hope is never the element in my trading strategy. So I may look forward to cut tonite, if the stock falls below 227. Other than that, I will cont to hold. If it does fall below 227, I will cut and look forward to buy back at 220, 210 or 200 area. Definitely will buy back 1 call at 200.
We will see if our dear GS will be driven by bulls or bears tonite. Oh Cramer, do you know ?
16-10-2007 - RIMM is ripped for a pullback
RIMM seems not to be going up at all. Seems 2 bearish engulf. I guess it may retrace to 100. If pass 120, then it will go higher. So its 100-120 its in now. If break 108 tonite, then get a put. If go above 111, then get a call.
Below 108 -> Put --> Target = 100. Cut loss at 111. Risk:Reward = 3:7
Above 111 -> Call --> Target = 120. Cut loss at 108. Risk:Reward = 3:9 = 1:3
13 October 2007
Welcome to our options blog!
Hi all. Welcome to our options blog. All are welcome to post any comments, any research.
Have a nice stay here.
Have a nice stay here.
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