Friday, June 6, 2008

In Review, week ending June 6, 2008

Oh my gosh, what a week! The market continues to be manic depressive, and the longer that it is the more we come to expect it. While listening to CNBC I heard at one point this week someone refer to the DOW being down over 100 points as a minor correction. It wasn't that long ago that would be a major event! Now the DOW needs to move closer to 300 points for anyone to start batting an eye.

But enough of that, now for my notes for the week.

My research blog has worked out well. I have gotten some good feedback from fellow traders at Ihub, and I am glad to share my work with them. One of the things that I decided was to try and earnings play this week. I had done a few earnings plays and found that the price of the options increased the closer time got to the earnings, a premium seemed to be built in. Running with that idea I made a few plays, and I have to say the results are less than sterling. What I netted from the experience was extra work time in research, distraction from playing positions that I know (the ones I have been watching daily for months) and a loss of 2.1658% assuming that the JTX calls that I am holding expire worthless (I didn't get the end of day out I was looking for, or the earnings I was expecting). While I don't normally like to give up on an idea so soon (I only gave it a week), I have decided that right now is not the time to continue on with that path at this time. I may try it again, but right now the market is too precarious to be adding a new play to my bag of tricks.

My goal has been to close my open option positions by June 12th. I have been holding a lot of red options that I picked up since I came back to day trading full time in April. When I have an open option position, I like to watch the level two of the option side by side with the underlying stock level two. This works out great for trading, but I was having a couple of problems. First of all, only one of my accounts has level two functionality, and with their platform you are limited to 6 level two's open at one time. That meant that I could only basically have full vision of 3 option plays at a time (and I usually have a few more than that going). Another problem that I had is that very often the option level two on Ameritrade would either stop functioning all together, or their would be a difference between what the level two was showing as the option price, and what was showing on other parts of the site. These problems had more than once caused me to make a bad trade just because I wasn't clear of what was happening with my option bid/ask.

A great person I met on Ihub that runs the The Lotto Pick Project was helping me out with level two's now and then when I asked. She was kind enough to lead me to the AlphaTrade trading tools, and I have to say I'm very pleased! I am currently only using the level two and charting functions, but even those are well worth the price of the service. I'm now set up with level twos on one computer, complete with awesome real time graphs and my Command Center for trading open on the other computer.

One of the great things about the graphs at Alpha Trade besides being real time is that you can pull up graphs for options as well as equity ticker symbols. I went for months without having access to option charts. I also recently found that Big Charts has option chart access for free. Anyway, at one point I realized that I was holding way too many option bags to keep an eye on all of them, so I spent a little time one evening and pulled up the chart for each of the options that I was holding, found out what the highest price was that the option had achieved in the past few weeks, and set a GTC (good til cancelled) bid. If something happened to the stock in after hours, I could always change the bid, but if there was some unforeseen spike in the underlying stock while I was paying attention elsewhere, I would fill for what I felt was a fair closing price. This was invaluable for helping me to eliminate some of my positions.

Overall my trading account value is down 8.16% month to date, but that of course includes part of my monthly "salary" which comes out the first week of the month. My trading account has seen realized gains of 7.99% so far this month.

In conclusion, here are a couple of new option links that I found that I will start looking into this week as round trip option trading resources.

Most Active Options

Options you should have bought

Option Chains

Always perform your own due diligence before making any investment.

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