Finance, Food, Fun & Other Stuff: April 2012

Sunday, April 22, 2012

Results for the Week Ending April 20, 2012

Hey folks,

This week has been a weird week. Volatility has been crazy. All the indexes have swung from one way to another, up then down, then up, then down.

I tried to get something on my normal Wednesday trading day, but could not find anything. So we went into Thursday and were finally able to get a trade in the NDX.

Now let’s go analyze last week’s trading.

TRADES FOR WEEK ENDING April 20, 2012:

Student Trade

NDX

NDX 2740 Call $1.74

NDX 2730 Call ($1.15) This gave a $0.59 Net Credit for a 5.90% ROI

My Trade

NDX

NDX 2740 Call $1.95

NDX 2730 Call ($1.05) This gave a $0.90 net Credit for a 9.00% ROI

Chart 1 NDX Chart for past month

Chart 2 NDX weekly chart for last week

ANALYSIS

1. Usually NDX is an index that is priced for options at $25 increments so that margin requirement for each contract is $2,500 instead of the usual $1,000. But when it comes to the monthly options expiration week there are some NDX options priced in $10 increments. I took advantage of that in this case to get a good ROI and lower my margin requirement so I could get into more contracts and make more money.

2. You see a big difference in the ROI between my student trade and my trade. The difference is in timing. I put my trade on first, and then about 20 minutes later the student trade was put through. This was not an effort to harm the student. It is just I try to find good trades and then show them to students and let them go through the rationale for making a trade.

3. Remember that the NDX is a Friday morning settled option. This means that the settlement price for this option is the opening price Friday morning.

4. I went through my usual procedure of looking at all the indexes and even went to my equity backups Priceline.com (PCLN) and Apple (AAPL) and Amazon.com (AMZN). Nothing hit the threshold to make a trade. Either the price was swinging too much for me or the probability calculators were not at the 85% level. So the normal Wednesday trading pattern could not be done. Chart 2 shows the Call Credit spread we entered with the NDX 2740/2750.

5. Thursday we did find a trade with the NDX. Chart 1 shows that pattern of lower highs and lower lows. This is a classic sign that the price is headed downward. This was our first sign to get into a Credit Call Spread this week.

6. Next the probability calculators finally came in at 85% or better, although just barely. When I made the trade the probability calculator was at 86.36%. When the student trade was put on it

7. So the trades were in. Just after this the NDX shot up and almost got into our spread zone. NDX hit 2738 before deeply retreating down to the 2676 level. Gave me quite a scare. But this is when you have to trust your system and your readings and your calculators. If you have set up the calculation correctly then you have done all you can do.

8. The combination of the trend shown in the charts, and the probability calculator on our side and the Std Dev at least 1.5 away from the underlying price came together to give another winning week.

All of the trades were successful. They all had the same basic thought process:

1. Look at the charts – what do they say – NOT what do I want them to say. Follow our contrarian philosophy and let the charts guide us.

2. Look at the probability calculator – all trades were 85% or higher at time of trade

3. Use the Standard Deviation meter. All trades were at least 1.0 - 1.5 Std Dev away from the strike price at time of trade.

4. Use the weekly options so we have a defined exit point for our trades.

That in a nutshell is the heart of my system. It has worked so far for me and hopefully you too.

Student is now 3 for 3 after doing the trade this week. Learning is coming along at pace. Soon my first disciple out there trading using my system.

If any of you have any comments, suggestions or just questions hit me up using the email, Twitter, or comments here on the blog.

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 and are the opinion of Hashley Capital Management only. 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, that is your decision and yours alone.

Reach me @:

Email: hashleycm@yahoo.com

Twitter: @awagel01

Or leave a comment on the blog

TTFN

Ash

Tuesday, April 17, 2012

Results for Week ending April 13, 2012

Hi Ho all,

First let me apologize for the lateness in getting this out. I have had some personal difficulties over the weekend and that took away time from this venture. I am sorry for that. Hopefully soon there will be resolution to this family issue.

This past week we did some new things. One is that I am starting to train another in the ways of weekly option training. I have a very smart student so I think things will go swimmingly. As part of that I will also be putting in the trade that the student did. Second, I split my trade this week. I haven’t done that for a while so there will be a few more trades to look at this time around.

Now let’s go analyze last week’s trading.

TRADES FOR WEEK ENDING April 13, 2012:

Student Trade

SPX

SPX 1340 Put $0.98

SPX 1340 Put ($.60) This gave a $0.38 Net Credit for a 3.80% ROI

ANALYSIS

1. The SPX 20 Day SMA crossed the 50 Day SMA with the 50 Day heading lower and the 20 day going slightly higher. This indicates that the short term trend is up, but the longer term trend is down. This would indicate that the price action will be slightly up to flat in the near term. And that is exactly what the SPX did, went slightly higher in the midweek, and then went flat at the end of the week. This was the first indicator that the Put Credit Spread would be the way to go. Also the price line broke above both the 20 and 50 Day lines.

2. The 1340 price level was about 1.5 Std Dev away from the underlying price at the time of the trade. The 1330 was almost 1.75 Std Dev away at time of trade.

3. My probability calculator put the odds at 94% of SPX ending up above the 1340 Put.

My Trades

NDX

NDX 2700 Put $1.39

NDX 2675 Put ($0.31) This gave a $1.08 net Credit for a 4.32% ROI

ANALYSIS

1. Remember that NDX is an index that is priced for options at $25 increments so that margin requirement for each contract is $2,500 instead of the usual $1,000. That is why the ROI number is a little different than what you are probably used to seeing here.

2. This trade we got into on Thursday morning as I couldn’t get the trade I wanted (the same trade the student made). This one when I looked at the charts Wednesday night basically shoed the price staying between the 20 Day and the 50 Day lines. Both lines are flattening, with a slight downward bent. But the price did a big shoot up in the last part of trading Wednesday leading me to think that is would continue up on Thursday.

3. Remember that the NDX is a Friday morning settled option. Refresher: this means that the settlement price for this option is the opening price Friday morning. With the big shoot up Wednesday night and the continuation Thursday morning I got into the spread early Thursday morning.

4. The price stayed way high throughout Thursday and made a dramatic fall first thing Friday morning very unlikely. It would have to have fallen by more than what it gained on Thursday all day to hurt me.

5. The probability calculator also was on my side. The probability on this trade was 91% at the time of trade.

6. Now Friday the NDX did fall, but it was after the settlement price was determined so I was not hurt. This was a little more risky of a trade, mainly because of the compressed time frame. I entered into the trade because despite the slight increase in risk, my indicators were giving me the signals that this would be a good trade.

PCLN

PCLN 720 Put $1.09

PCLN 710 Put ($.61) This gave a $0.48 Net Credit for a 4.8% ROI

ANALYSIS

1. Again I got into this trade late in the week – Thursday afternoon. The big run up was over, all major indexes and some stocks were pulling back. PCLN is a weekly option that I go to if I cannot see any other index options that have a good return. I had just put on and index trade in the SPX and the RUT was not giving anything at this late stage of the game, so I went to my equity standby PCLN.

2. The 20 Day and the 50 Day lines were moving downward, but the price was stabilizing on Thursday. That is why I went with the Put Option Spread.

3. The 710/720 Credit Put Spread (to use some terminology) was at 1.5 Std Dev at tie of trade and the probability calculator was giving an 89.92% success reading. I took that as 90%, and it is above our 85% minimum threshold.

4. Equity options make me a little nervous, because if the trade goes against you, there could be lots of issues with your account. I have had this happen before so I try to avoid the situation if I can. The price was stabilizing and slightly moving up toward the end of the week so I went low on the put side as was successful. I was successful because I used my indicators. I was successful because I let the charts tell me what the likely action was with regards to price. I was successful here because I listened to my system.

All three of these trades were successful. They all had the same basic thought process:

1. Look at the charts – what do they say – NOT what do I want them to say. Follow our contrarian philosophy and let the charts guide us.

2. Look at the probability calculator – all trades were basically at 90% or higher at time of trade

3. Use the Standard Deviation meter. All trades were at least 1.5 Std Dev away from the strike price at time of trade.

4. Use the weekly options so we have a defined exit point for our trades.

That in a nutshell is the heart of my system. It has worked so far for me and hopefully you too.

Student is entering week three of tutorial and will be making a recommendation to me this week for a trade that we will then analyze to see if the trade should be put on. That should be really exciting!!! Student is 2 for 2 in winning trades the first two weeks.

Reach me @:

Email: hashleycm@yahoo.com

Twitter: @awagel01

Or leave a comment on the blog

Thursday, April 5, 2012

Sorry - no trade for week ending April 5, 2012

Hey guys,

Sorry, there is not a trade put on this week. Being a short week with the Good Friday Holiday I just couldn't find anything that my indicators said was a good bet.

Tuesday would have been then day for a trade, and some things on my radar would have panned out profitable. BUT - the indicators I use and rely on were mixed, so I didn't follow through with the trades. This is when a system gets fully tested. When you see things that popped up on your radar, but you didn't execute. The second guessing starts and you say to yourself "Dang!!! I coulda had a bunch of profit here if I had only put through one of these trades!!" THIS is when you really need to trust your system and your indicators. I went 12 -13 in the first quarter by following my indicators, and the lone loss was my fault not the indicators when I entered in the trade as a call instead of the put the indicators were telling me.
Woulda shoulda coulda doesn't make for a profitable trader - finding a system that works for you and following that system is what makes a profitable trader. We are following our system and will hit it next week. One of my maxims is: "I would rather make $1 than lose $1." We put that into practice this week. Or as Phil Town says: Rule #1 is to make money. Rule #2 is not to lose the money you just made. Rule #3 is when in doubt refer to rules #1 and #2.

We will hit it again next week and hopefully find a trade with a high probability for success.

TTFN

Ash

Monday, April 2, 2012

Week of Marh 31, 2012 Trade Analysis

Good Day Fellow Traders!

Another successful trading week, we got into the game a little late this week, but with a switch of indexes used we were still able to hold the 4% line. Normally I use the RUT or SPX indexes, but last week we went to the NDX.

This index tracks the NASDAQ Top 100 stocks. This index is a little more difficult to track than the others, so I don’t use it much. Here are the main differences: The NASDAQ ticker shown in CNBC, FOX, Bloomberg and other cable networks is the full NASDAQ index; The NDX usually trades in increments of $25 (giving spread values of $2,500) rather than the $10 (giving spread values of $1,000); The premium given is usually lower on a percentage basis than the other indexes.

There is one big similarity between NDX and RUT. Both are Friday morning settled. Meaning that the settlement price is determined at 10:00 AM Eastern Time on Friday morning. This can be nice if you are well away from the spread boundaries, but a little nerve wracking if you are close to your spread boundaries as you can’t trade the last ½ hour of activity on the spread.

This week was a very unusual week. The RUT and SPX were giving VERY little in premium. VIX activity increased early in the week then dropped Wednesday – Friday. Generally when VIX drops, so does premium. It was also the end of the quarter, so the beginning of the week, many were selling on the recent run up to lock in quarterly profits. Later part of the week, prices dropped as volume dropped and buyers just kinda went away.

This was shown in the indicators I watch all week last week. Finally on Thursday I got confirmations and put on a trade.

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 gave a $1.31 Net Credit for a 5.24% ROI

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. The price just kept dropping as did the 20 and 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. As the price decline kept up through the rest of Thursday and Friday morning, this degree of safety just got better.

3. My probability calculator put the odds at 90.01% of NDX ending up below the 2775 Call. I have not had a losing trade this year when the probability calculators showed the odds more than 85% in my favor.

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. There is a reason all this technical analysis stuff is out there. It can help you dramatically increase the odds in your favor. This definite pattern played out again the way it usually does. That means we did interpreted well and piled the odds MORE in our favor.

Some Things to Look for:

1. This is the start of a new quarter. Since there was a sell off at the end of the week, look for those sellers to come back in as buyers this week.

2. The big money managers will be rebalancing over the next week or so. This usually means lots of activity and lots of volatility. More volatility means more premium, but also more risk in the market.

3. There has been a long term build up in the markets – basically since the start of the year. We are ripe for a pullback, but it should be short lived – like a breather. Then we should start another run up that could last until late summer/early fall when the political season gets into high gear.

Reach me @:

Email: hashleycm@yahoo.com

Twitter: @awagel01

Or leave a comment on the blog

TTFN

Ash