A second bite at the cherry

Discussion in 'Trading' started by Cutten, Oct 15, 2008.

  1. Cutten


    The downtrend got broken by that huge rally, and we saw clear capitulation last week. So IMO it's more likely this is a pullback which is going to form a higher low, than a resumption of the downtrend to break to new lows. I could be wrong but that's what stops/options are for.

    If the market is forming a higher low, then the upside is very large. So IMO it's worth going long some ES with a stop around 870ish, and also buying some calls (Nov probably best, maybe a bit in Oct for a punt) for a limited risk play on a large rally in the next few days/weeks.

    One possible scenario is a gap down open tomorrow. In that case, I would buy futures and calls on the gap down with a stop about 20 points below the opening gap for the futures leg. Gap downs often market the low of a short-term pullback, just like Tuesday's gap up was the high of the big fast rally from Friday evening.
    #11     Oct 15, 2008
  2. maybe all the odd lotters that refrained from selling becuase the market was up monday will finally throw in the towel tomorrow.

    I aint retiring no time soon, exhaustion bottoms are fun!
    #12     Oct 15, 2008
  3. Hello daddy, hello mom
    Im your ch ch ch ch ch cherry bomb!
    Hello world Im your wild girl
    Im your ch ch ch ch ch cherry bomb!
    #13     Oct 15, 2008
  4. Thanks for your explanation Cutter. I am also following your idea of the Platinum/Gold spread so I really value your insight.

    You mention buying options. I'm currently long ES and due to (stupidly) averaging down I'm over-leveraged. So I don't want to buy any more ES. I could, I just don't feel comfortable adding more.

    Can you explain more about buying options? I'm vaguely familiar with how they work but I've never bought one before.

    I was thinking I could buy some calls for the ES. I just took an example for ES Nov 08 930 and it's 112. I'm not sure what is the best option to get and at what strike price. Any recommendations?
    #14     Oct 15, 2008
  5. If there's a 1% gap down tomorrow, then Monday's gap will be completely filled.
    #15     Oct 15, 2008
  6. ES DEC08 Futures ESZ8
    NOV 21 '08
    Multiplier: 50

    The quote I'm getting on this option is 47.25, down 50%.

    From what I understand, I take the price of 47.25 and multiply by 50 to get the price of an option for 1 ES option? That's $2362. I have no idea how to calculate if this is a good deal or not.
    #16     Oct 15, 2008
  7. Market got its cherry popped by the big hedge fund dick!
    #17     Oct 15, 2008
  8. Cutten


    Gap up, gap quickly filled on emotional selling on the open, then a decent bounce. So far this is a nice setup for a long play.

    Can place a stop below today's lows e.g. 895. 2% downside, that's relatively small risk.

    Next signal will be a decent break above the globex highs of 931 on ES, then if a pattern of higher highs, and higher lows on pullback tests emerges, that will make things even more bullish. Break below 895 and all bets are off for today.
    #18     Oct 16, 2008
  9. Cutten


    Bearish figure but that's to be expected. Most important is not the knee-jerk reaction, but how the market responds once it stabilizes. If we rally above the pre-news figure 920, then that's a bullish sign.
    #19     Oct 16, 2008
  10. So until it breaks 920 or 895, just wait?

    Whats the best free site to track ES when the market is closed?
    #20     Oct 16, 2008