As for my plans for today.....Looking to exit all 6 WFMI calls if the shares hit new highs into $83, which is possible considering that the market will just about erase all of its losses from Friday at the open. Nice trade on the Qs falcon, looks like a payoff if you took those calls at the lows. You did take calls on Friday right? Correct me if I'm wrong, Friday was an off day for me. But I'll be looking into RAX earnings for a trade tonight. I also like DE coming up too. If CAT can pull it off, I think seond tier DE has a little something left too. I'll probably finish the week with ROVI puts on the way out.
I´m ahead right now at 11.20 a.m. here. But closing down the computer. I´m going for a swim. The breeze is light, the water green, blue and warm. Just took an hours nap. Not sure whether I´m going to sell out today, or tomorrow or the next day. As a matter of fact, I did get in twice on Friday and surprised that the first try on my SECRET MAGIC BUY INDICATOR actually worked? Got in before there was a move. Of course this only confirms it will work in a BULL trend. Still some markets to go, range bound and bear trends for real live testing. In the mean time ôve been reading another trading book. Interesting about money management. I don´t agree with the rules though. For instance, you are ahead a lot. If you took out your original stake and put it back in your credit union, you would be free and clear working with the icing on the cake. The casinos money. I do understand GREED makes that a difficult thing to do though. In theory I believe you should clear any profit from an account at some level. Say $10,000 was your starting point and end of the month, take off any profit and start again with $10,000 first of the next month. Something like that. I had restarted back on Jan. 1st, at $7300 thereabouts, and now I´m up to about $7500, or $7600, I forget; but because of losses last year for one reason and another, I had gone back to trading in one contract. Last week I was in 3 contracts and this week I´m now in 5 contracts. I will start to make money when I get to 10 contracts. It is sort of going by gambling rules. When you are hot, increase bet size and when you go cold, drop back to one contract. At any rate, those are my rules of money management for this year, which may be adjusted as we go along. In the meantime, my money management rules are ; have a minimum of $5000 I will not touch. Anything above that, is game for trading short term on volatility. Bet that whole hog. something like you have been doing. Though once I clear the $10,000 mark, roughly 5 months I figure or less, I will start to divide the total in HALF, and trade everything above the half way mark. At some point I am just now thinking of when and how to pull something out of the account, in the future. 2% of an account is ridiculous for a short term volatility trader to trade. That is the death of a thousand cuts. I´ve tried all the stuff the grumpy old men pass on as cliches on these forums and it does not work. I mean it works, but I´m 75 years, I don´t want to spend 20 years diddling around for 3% a week, or month, or more returns, in their complicated exotic trading strategies. You can take butterflies, spreads, verticals, diagonals and other stuff and shove it. They risk too much and earn too little for that risk. If there was any factual evidence behind those exotic strategies that it was safer to bet their way, I would agree with them maybe. But I´ve tried those things and they are as dangerous and you are going to lose just the same when things go wrong. The only difference is they lose more slowly. Over a year or two, with wild swings in equity balance. The name of the game in my amateurs opinion, is having an edge to trade straight, on betting the one in three game of chance. Going for short term volatility. Though it does pay to trade a 2 year contract for a three month trade. Did that successfully and made 80% of the account on that, but it was paper trading and I don´t have enough cash to do it right now again. I think your right. I was reading the chapter on stops. Maybe it works in stocks, but sure as heck it doesn´t work in short term trading options where you are trading volatility spikes. I use either a trend line, or a volatility curve to exit. Most of the time, you get out losing just commissions. If there is no volatility to swell the premiums the meat of the trade is all over. One trend in a volatility spike will pay for two losses or more in which you exit losing only a piece of your commissions and no loss to your equity. Even a small loss of equity cannot compare to a good bunch of money from a trending volatility spike. It is all in the TIMING and bite of calculated luck in getting the direction right. Knowing how the market is going to go, more or less. You have that system and luck to you.
Well, I'm in FOSL spread 105/115 at 2.90 and RAX feb 49 call at $1.95. I'd love to hit the ocean too and jump in for a swim, but it sure is too cold here lol.......so instead of some ocean and sun, I'll be looking more at warm tea in a couch. I've got a good chunk of play in those two positions so I'm looking forward to solid results from RAX tonight (it hasn't disappointed in the past 3 of 4 quarters). As for FOSL, I can see that analyst have lowered their guidance enough that FOSL can beat the estimates. FOSL's a 10- pt mover so I can exactly put a strangle type of play on it. With the way things have played, I'm just playing the odds of an upside surprise here and now.
Now that FOSL has reported with all numbers inline, it will be interested to see how the stock reacts. It's down -4 points so far this morning. I expect FOSL to open slightly lower before rallying up to at least $110. Either way, I have 1 spread on this trade with most of my capital in RAX. I do want this one to jump higher though after 2 poor reports over the past 6 months.
I´m just coming online. I was just reading about the strangle vs the straddle. I´m familiar with the long straddle. Which returns usually 3% and gives you a win 2 times out of the 3 directions that can happen. The third would or should, at least break even or close to it. Your system of trading earnings pops seems a good one. Though your batting average needs to improve. I´m wonder which trade is more secure in your method, the strangle or the straddle, presuming you get a volatility move? Compare them for returns for me please? What happens when you get to close a trade the same day. Are you getting hit with the day trader rule? Or are you holding over two days? I like the idea that you can make 3 to 7 trades in one week. My own system is geared to 1 trade per week. The more trades the more your equity curve should rise more steeply. I don´t know anything about researching stocks with wide percentage swings on earnings reports. Where would you find this stuff? I´d guess as a filter, you could bet straight for higher returns on the bet when you are reasonably sure of the direction of the earnings pop and place a strangle or straddle when you are not so sure. That would give you 2 wins out of 3 choices. Nice warm day here. Balmy trade wind that is light. On Sunday we had a strong NNE at 25 mph and the kite surfers were impressive out there in the lagoon between the island and the barrier reef. Some of them jumping clear in the air about 30 to 50 ft hanging on their parafoil kites. Going like a bat out of hell on those tiny boards they use. Man that looks like fun. Wish I was that young again. Just finished my stretching excercises, using a half a cement block for a weight. Otherwise an old man seizes up unless the tendons and muscles get stretched and blood carries oxygen around. Sitting as usual in my underwear at the computer and the sun is rising coming through the open door to my verandah.
Ryan Out of curiousity I looked up FOSL and RAX daily charts. I have FOSL going UP. I have RAX going down. Now this is purely from a technical chart reading, standpoint. I don´t know anything about earnings pops.
For the fun of it. I decided to do a paper trade on your two choices. FOSL 115 CAll @ $3.40 RAX 50 PUT @ 3.30 See what we get today and tomorrow? I have to hold overnight, can´t close the same day.
I have both going up, but I did have RAX going up much higher than FOSL. There was still that skepticism that FOSL could miss by a little again, and it has. But the reason I had FOSL going up is that its short interest has jumped quite a bit, which to me meant that traders who wanted to short FOSL is already in play. Who's left to short? Which is why I felt downside risk would be somewhat limited. As for RAX, the cloud has been crazy up. I currently have the sense that traders are grabbing all the shares they can of any cloud type company that reports solid earning results. I expected that from RAX and expected the breakout in RAX at $46 to continue for at least 20% or $54ish. I'll be looking to sell the 4 calls I have on RAX as $54 was met this morning, but for FOSL, I can lose that option if necessary.
You know what, that's interesting. The next strangle play I make, I'm going to take that to the test....1 straddle and 1 strangle trade on the same earning play just to see the results.
Well both my paper trades failed and lost a dollar. First off I was shocked I could not buy April options and had to buy March, which means quicker action and it sure was quick. Lost almost $2 on each. Something like that, not accurate but the fast volatility move in the premium came as a shocker to me. As I usually trade three months out in-the-money. Goes to show that if this is an earnings play I can´t do it by technicals. I´m out of my depth here. Don´t know enough to judge any of this stuff. More kudos to you for figuring a system out for earnings plays.