Hey you Guys!!

Well, another successful week of trading.  Despite my remorse at Michigan getting bounced in the opening round (I refuse to call the play in games the first round despite what the NCAA says!) it was a good weekend.  UK is in the sweet 16 as well as Ohio – so at least Michigan didn’t get bounced by a flash in the pan.  The BIG 10 did really well getting Indiana, Wisconsin, MSU and Ohio St into the Sweet 16.  ¼ of the Sweet 16 is the Big 10 – who says it is not a power conference in basketball!!!

Now let’s go analyze this week’s trade to see how we put the odds in our favor.  As is now the tradition, I use the initial analysis and augment with new comments in red.

TRADE FOR WEEK ENDING March 16, 2012:

RUT

RUT     810     Put     $1.06

RUT     800     Put     ($.52)               This gives a $0.54 Net Credit for a 5.4% ROI

ANALYSIS

1.       The RUT is starting to show some volatility, but as you can see the price is testing the 20 Day SMA then bouncing higher.  So if we are testing and moving higher on the chart we do Put Credit Spreads per our rule.  The Price continued to bounce off the 20 SMA line the rest of the week as the price and SMA both moved higher.

2.       The 810 price level for the put option to sell is 10 points below the 20 day SMA.  Since the price has pushed back above the SMA line it has not fallen, but tested it then went higher. This gives some degree of certainty that our 810 sell is safe.  As price moved higher this increased our safety in the Put side.  Our basic rule is “Go the opposite of the price direction for the spread trade”.

3.       The 800 price level is even further below the SMA line just adding to our degrees of safety.

4.       My probability calculator put the odds at 88.68% of RUT ending up above the 810 put.  Generally a probability calculator number of 85% or greater is my baseline for a trade.  I also used a tool in Trademonster’s arsenal of a probability of breaking even.  This came in at 94%  so I took that as a good sign that I could at least make some money with this trade.

5.       The trend line this week since the move above the SMA has been for higher highs and higher lows.  This is a classic technical sign that the price will be going higher.  This confirms our choice for the put spread.  This is what happened, and as of Noon Monday is continuing to happen.

6.       I did briefly think of trying a condor setup, but when looking at the chart I saw that the chart was not telling me to use a condor.  Condors are for channeling price charts.  We are on a definite upswing this week, and a condor strategy would be very dangerous.  A condor would have been very dangerous last week.  I did not end up doing on and glad I didn’t.  The condor strategy really only works well if you are in a sideways market, and we are definitely not in one of those.

7.       Also I did look at the SPX and NDX, but there really was not a trade I could see with the same ROI that the one I put on has.    There were trades to be made here, but I like to get the best bang for my buck, and that was not here.  But if your risk tolerance is not as high as mine both these index options had profitable trades.

8.       Summation:

a.       We are in an uptrending market this week according the RUT chart.  Higher highs AND higher lows are a definite signal that the price will be going up.

b.      The probability calculator gave a favorable percent of this trade ending up in my favor, at 88.68%.  Anything over 80% is a very high probability trade, and that is what we shoot for here. A trade with a high probability of success. 

c.       I was able to get good ROIs at 1.0 Std Dev away from the strike price.

d.      All the assumptions proved correct.  We used our skills of technical analysis and mathematical calculators to create a trade that we could back up with facts.  That is the way to high probability of success. 

 

Ok, I haven’t thanked Freestockcharts.com for a while so I should do that.  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.  Yeah, I don’t get any compensation for this, I am just saying this because I use them and am happy with what I get from them.

DISCLAIMER:  Hashley Capital Management, LLC; as well as myself 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. 

Reach me @:

Email:  hashleycm@yahoo.com

Twitter: @awagel01

Or leave a comment on the blog

TTFN

Ash

Trade Completed March 15 2012

Hey all you weekly options traders!

Well, sorry I am a little late in getting this out.  My trade was stopped out at close yesterday as it didn’t fill and my trade for this week was filled right at the open today.  But I have had meetings and such to take care of so I am getting to this just now while watching the NCAA March Madness –UK Wildcats!!!  Ya gotta multi-task sometimes!

This week was a rough week.  See saw action like middle of last year. Up 10 points then down 7 then up 5 then down 15.  This is when technical analysis really shows itself useful.

Now let’s go and analyze this week’s trade to see how we put the odds in our favor.

TRADE FOR WEEK ENDING March 16, 2012:

RUT

RUT     810     Put     $1.06

RUT     800     Put     ($.52)               This gives a $0.54 Net Credit for a 5.4% ROI

ANALYSIS

1.       The RUT is starting to show some volatility, but as you can see the price is testing the 20 Day SMA then bouncing higher.  So if we are testing and moving higher on the chart we do Put Credit Spreads per our rule. 

2.       The 810 price level for the put option to sell is 10 points below the 20 day SMA.  Since the price has pushed back above the SMA line it has not fallen, but tested it then went higher. This gives some degree of certainty that our 810 sell is safe.

3.       The 800 price level is even further below the SMA line just adding to our degrees of safety.

4.       My probability calculator put the odds at 88.68% of RUT ending up above the 810 put.

5.       The trend line this week since the move above the SMA has been for higer highs and higher lows,  this is shown in the graph by the white lines.  This is a classic technical sign that the price will be going higher.  This confirms our choice for the put spread. 

6.       I did briefly think of trying a condor setup, but when looking at the chart I saw that the chart was not telling me to use a condor.  Condors are for channeling price charts.  We are on a definite upswing this week, and a condor strategy would be very dangerous. 

7.       Also I did look at the SPX and NDX, but there really was not a trade I could see with the same ROI that the one I put on has.    

8.       Summation:

a.       We are in an uptrending market this week according the RUT chart.  Higher highs AND higher lows are a definite signal that the price will be going up.

b.      The probability calculator gave a favorable percent of this trade ending up in my favor, at 88.68%.  Anything over 80% is a very high probability trade, and that is what we shoot for here. A trade with a high probability of success. 

c.       I was able to get good ROIs at 1.0 Std Dev away from the strike price.

 

DISCLAIMER:  Hashley Capital Management, LLC; as well as myself 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. 

Reach me @:

Email:  hashleycm@yahoo.com

Twitter: @awagel01

Or leave a comment on the blog

TTFN

Ash

RESULTS FOR WEEK ENDING FEBRUARY 17, 2012

Hi Ho there boys & girls , ladies & gentlemen!

A little announcement:  Hashley Capital Management is officially up and running.  The papers were signed and delivered to the IA Secretary of State this week.  So we are now officially a company!!

This was another profitable week! It was great overall.  No major health problems and we made money. 

This week was interesting.  Starting Tuesday afternoon after seeing some great spreads – 6% and better in the RUT and SPX I started to enter trades.  At about this same time both indices started their rise so the 6% spreads were quick to leave.  I wasn’t able to get any 6% trades in, but did come close. 

Alright, now onto the trades for the week:  All were in the $SPX – the afternoon settled S&P 500 index.  Since this is the traditional option expiry week both RUT and SPX settled on determinant price Friday morning, but we could not find any RUT trades – we will talk on this later.  Here is the breakdown of the trades:

SPX

SPX     1300     Put     ($0.96)

SPX     1310     Put      $1.50             This gives a Net Credit of $0.54 or a 5.4% ROI

SPX     1305     Put     ($1.08)

SPX     1315     Put      $1.56             This gives a Net Credit of $0.48 or a 4.8% ROI

SPX     1320     Put     ($0.87)

SPX     1330     Put      $1.30             This gives a Net Credit of $0.43 or a 4.3% ROI

SPX     1325     Put     ($1.06)

SPX     1335     Put      $1.59             This gives a Net Credit of $0.53 or a 5.3% ROI

ANALYSIS

1.       The price straddled the 20 day Simple Moving Average (SMA) all week.  Monday opened at 1343.06 and Friday closed at 1362.97 with 1340.83 the lowest the index hit and that happened Tuesday afternoon.  The slow and steady increase over the week and the close hugging of the price and the 20 Day SMA are technical indicators to go with the put credit spread.

2.       The overall trend for the week was that the closing price was above the 20 day SMA.  Even on Friday when there was a big upward spike at the beginning of the day and a steady decline the rest of the day the price we still stayed above the 20 day SMA.  This is a GREAT confirmation signal that our choice to go with the put credit spread was a good one.

3.       The spreads we entered into were between 1.5 and 2.0 Standard Deviations (SD) from the current price (Tuesday and Wednesday) when we entered the trade.

4.       We did not commit all our resources to this trade.  I split my resources and put on several trades this week, all with ROI above 4.0%.  AND we still kept a safety pool in case we ran into trouble.  REMINDER OF RULE FROM LAST WEEK:    BIG RULE = NEVER COMMIT ALL YOUR RESOURCES TO ONE TRADE & ALWAYS LEAVE YOURSELF SOME CAPITAL IN CASE YOU NEED TO MAKE A LAST MINUTE ADJUSTMENT.

5.       Again I created a ladder in this trade series.  REMINDER OF OTHER BIG RULE FROM LAST WEEK:    BIG RULE = THE FURTHER IN STD. DEV. YOU GET AWAY FROM THE STRIKE PRICE THE SAFER THE TRADE, BUT USUALLY THE LOWER THE PREMIUM. 

6.       I did look at the other index option – RUT and NDX.  They did not have the ROI matched with the safety and trend line analysis that made me comfortable to enter into any trades. 

7.       Summation:

a.       The closing price trend line was up for the week

b.      The closing price straddled the 20 SMA all week

c.       I was able to get good ROIs at 1.5 – 2.0 Std Dev away from the strike price

d.      All these added up to getting into the Put Credit Spreads.  We pocket our overall 5.1% and move on to the new week!!!

QUESTIONS

You don’t talk about the Greeks much when you do your analysis.  Do you use the Greeks when doing your analysis?

Another good question.  To be perfectly honest I do not use the Greeks as much as many traders of traditional options use them.  And they are not a big part of my analysis.  There is one that I do look at and do use as part of my analysis is Theta.  Theta is a measure of time decay.  All options have a defined life, I deal in weeklies that have a one week shelf life.  As the options get closer to the expiration date the option will lose some value due to time decay.  Since I deal in credit spreads I want to know what the value of my time decay is.  That is what theta measures.  Here is a definition of Theta:  Theta shows how much time value is eroding as each trading day passes.  Example:  if Theta = -.20 and the closing price on Monday is $1.00 then the opening price on Tuesday should be $0.80.  Theta is always a negative number for calculation, but you have to watch some option chains on online brokers.  Some assume that everybody knows this and puts Theta out there without a sign, implying to the newer traders that Theta is a positive number. 

I am working up a post detailing the basic points of the Greeks and will have that up soon.  If you are into just about any option trading it is a good idea to know what the Greeks are and what they can tell you.  If you like to buy options and hope they rise in value then the Greeks are very useful.  Like I said, I do not use them as a main part of my analysis, but I do look at them as a secondary metric to help confirm my analysis from other data.

Keep the great questions coming.  I love it.  Also let me know how this blog helps you or what you would like to see.  I am striving to improve the blog and make it as meaningful as possible.

DISCLAIMER:  Hashley Capital Management, LLC; as well as myself are not giving any trading advice.  All data is historical in nature and is intended for use as an educational tool.  Trading in options 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 Hashley Capital Management, LLC after doing your own due diligence than that is your decision and yours alone. 

Reach me @:

Email:  hashleycm@yahoo.com

Twitter: @awagel01

Or leave a comment on the blog

TTFN

Ash

Results for Week ending January 20, 2012

Well, this week is another lesson on how to manage trades.  This time there is a happy ending.  We made money this week and we didn’t lose anything.  We stayed on our rules and they kept us safe.

Here are the particulars:  Wednesday while looking for spreads to trade I found one really quickly.  That trade was:  SPX 1275-1285 Jan 12 Put Credit Spread ROI = 5.3%.  The issue was that I just couldn’t find another spread to trade.  It was very tempting to try and force a trade through and see what happens.  BUT that is not what our rules state.  The rules state that if we cannot find a trade suitable we do not put a trade solely to put a trade on.  Try as I might just couldn’t get one to be over 2.8%.  My lower limit is 3% so I didn’t put one on. 

Luckily I didn’t because all the trades either would have lost money or cost more than they would have made me.  This is why we have our trading rules.  These are rules that have been forged over time and trial and error.  Everybody’s rules are different, but they work for them and their trading style.  The rules you establish are there for a reason.  Listen to them!!!

Now on to this week’s trade analysis:

The Trade:

SPX        1285       Put         $1.19

SPX        1275       Put         $(0.66)                  ROI = 5.30%

The two solid lines are the parameters of the trade.  A couple of things to look for:

1.       The price hovered around the 20 day Simple Moving Average (SMA) and mostly stayed above it.  This is a BIG technical indicator to go with the put credit spread.

2.       The overall trend for the week was slightly up.  Again another big technical indicator to go with the put credit spread.

3.       The spread we entered into was 1.5 Standard Deviations (SD) from the current price (Wednesday’s) when we entered the trade.

4.       We did not commit all our resources to this trade.  I split my resources and put half into this trade.

5.       Trading was very thin on ROI going lower on the option chain:  1265-1275 Put Spread ROI = 2.8%, 1260-1270 Put Spread ROI = 2.0% and the results just got lower, so the 1275-1285 was the “Tipping Point” spread we look for to trade.  Going lower on the option chain for put spreads lowers the risk, but as you can see also lowers the reward.  If we were going with a Call Credit Spread we would go up the option chain to get the same result.

6.       This would have been a good week to enter into an Iron Condor as the price action was fairly steady throughout the week.  I thought about it, but the lingering cold did me in & I didn’t get to that trade.

7.       By following my personal rules, archived on this site by the way, I was able to come out of this week with a good profit.  The old athletic phrases of “Staying within yourself”, and using the system” showed again why they are tried and true.

I have started some more questions, but this past week and a half I have been really put down with a lingering chest cold, so those answers will have to wait until next time.  Sorry.  Keep the questions coming; I like the interaction and ideas.  There are some pretty smart people reading this blog.  Stay with me!!

Reach me @:

Email:  hashleycm@yahoo.com

Twitter: @awagel01

Or leave a comment on the blog

TTFN

Ash

RESULTS FOR WEEK ENDING 12 23 2011

Ok folks, the short story is I made very little money this week ($50).  I had been set up for  quite a bit more.  And this is where the story gets interesting.

First the trades I had on:

RUT     750     Call               

RUT     760     Call                This was set up for a 4.8% ROI

SPX    1260    Call

SPX    1270    Call                This was set up for a 7.8% ROI

These trades were put on Wednesday.  All was ok until Friday morning.  The SPX had moved upward all Thursday and so Friday morning I was going to exit out of my position at breakeven.  So, I go to enter the trade, get the trade entered, and immediately after my wireless radio tuner goes out and disconnects me from the internet.  A few swear words later I go and get my sweet baboo’s computer and login to my account.  Much to my surprise when I logged back into my account the trade had been cancelled and I was starting to lose money.  So I was typing as fast as I could and managed to get in a trade.  But by that time (almost an hour had elapsed between trying to figure out what happened on my computer and then getting my honey’s computer) I was saying many GRRRRs to my computer and Optionshouse.  They maintain that I cancelled the order.  Only thing I can think of is that when my radio tuner went out it must have sent something along the wires that cancelled my order. 

So RUT trade did me well, but the SPX lost me some.  Between the two I made $50.  So good thing I was diversified in my trades so one baddie got some relief by a goodie. 

NEW ANALYSIS TOOL!!!!!!

I am adding some more analysis to my work.  I am starting to use the 20 day simple moving average as a part of my analysis.  If I would have used this analysis I would have seen that the price for SPX crossed over the 20 day SMA (Simple Moving Average) and would stay there the rest of the week.  My Wednesday look would have shown the SMA cross, telling me I should have gone with puts instead of calls.

As can be seen in the chart the blue line is the 20 Day SMA.  By the end of the day the price moved above the SMA line and stayed there all week.  This is a STRONG indicator to use puts for the  weekly options person.  But I didn’t know that until I started doing some reading the LinkedIn Options traders forum.  A guy there used 20 day SMA  as his lead indicator for trading weekly options.  Now he trades directionally – calls and puts only, he doesn’t do spreads like I do but the principle is the same.  If I had known this I would have probably been safe last week and not had to get into the mess of making a saving entry and then having hardware issues.  The put spread would have brought in slightly less premium, but it would have been much safer.  So, I am now adding the 20 Day SMA to my arsenal.

Be careful this week my friends, the trading will be light this week, so market volatility could be high!

TTFN

Ash