Trade Put on March 29, 2012

Good Afternoon!

Ok, with volatility pretty low this week, it was hard to find a trade to put on.  All my indicators were split, the charts were leaning call spread, but looked like they were trending toward put spread; the probability calculators were in the 70% range for success – much lower than the 85% I like; and finally the long term trend was leaning put, but starting to show a switch to the call spread side.

So about noon I put on my trade.  I went to the call side and to an index I don’t use much the NDX.  But this is where the analytics led me this time.

Now let’s go analyze this week’s trade.

TRADE FOR WEEK ENDING March 30, 2012:

NDX

NDX    2775     Call     $1.57

NDX    2800     Call     ($.26)             This gives a $1.31 Net Credit for a 5.24% ROI

The white lines are the boundaries of the call credit spread. 

ANALYSIS

1.       The NDX 20 Day SMA crossed the 50 Day SMA and both are heading lower.  This was the first indicator that the Call Credit Spread is the way to go today.  Also the price line is below the 20 Day SMA and way below the 50 day SMA. 

2.       The 2775 price level was 1.5 Std Dev away from the underlying price at the time of the trade.  The 2800 was almost 2.0 Std Dev away at tome of trade.

3.       My probability calculator put the odds at 90.01% of NDX ending up below the 2775 Call. 

4.       When we were doing put spreads we looked at higher highs and higher lows indicating that the price for our index was on the way up.  Great for our contrarian philosophy.  This week we are seeing lower highs and lower lows.  A marker that the price is heading lower.  Using our contrarian idea we go with the call spread to make our money. 

Thanks to Freestockcharts.com for the chart site I use.  All of the charts you see in this blog are from freestockcharts.com.  They have great charts and some nifty tools to help your analysis.  I use the site tons.  It is a great resource.  And no, I don’t get any compensation for saying this.

DISCLAIMER:  Hashley Capital Management, LLC; as well as I are not giving any trading advice.  All data is historical in nature and is intended for use as an educational tool.  Trading in options is risky and can result in loss of capital.  There is no attempt to sell any brokerage services or act as a broker or dealer by Hashley Capital Management, LLC.  Any forward looking comments on this blog are not attempts to solicit business for Hashley Capital Management, LLC.  If you choose to follow the same path and invest in the strategies and trades used by Hashley Capital Management, LLC after doing your own due diligence than that is your decision and yours alone. 

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Email:  hashleycm@yahoo.com

Twitter: @awagel01

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TTFN

Ash