Exponential growth

Quote from Cache Landing:

I never get into bearish plays on a day like today. There might have been good reason for some selling, but today was definitely an overreaction. IMHO.
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I don't know how much of an overreaction today really was. I think today's action was VERY interesting and I view it as longterm VERY healthy, but VERY BEARISH for the short term. I have been looking at the DOW charts (follow the DOW and trade the DIA sometimes) and solid support is a little ways away. 10,600 may offer some support, but don't see really solid support until 10,500 and that may tentative at best considering the nature of today's action.

There was just a lot going on today and was a bit crazy. Monday afternoon I belive should be a good tell. The Iran wild card is starting to develop which is putting oil spikes into the mix. Options expiration only added to the days volatility along with earnings reports that I believe are being "knee jerk" analyzed. I think there are a lot of people trying to get flat, lock in and regroup.

Personally I am still long pipelines, oil and tobacco. Other than these more defensive plays, I am just not willing right now to stick my neck out.

I greenlight your overreaction call, but also think there is some more downside that needs to play out. Earnings are looking pretty good overall, but we just need to get them behind us as well as the Fed moves. The "Wall of Worry" is almost totally defined, but until it is totally revealed I'm not going to try to scale it.


Just my .02 of course.
 
I agree. My overreaction comment was about today only. If you look at my recent plays. I was bearish on DJX for two months now. I think that will continue for the short term. I just think the fall today was unwarranted. I would've expected a slower slide not a 200+ point drop. Lots of buyers on the sidelines waiting to take advantage of days like this. Rather than get in on bearish plays, I prefer to wait and see if I can get a bounce for a better fill.
 
One positive out of the action of the past month or so is that volatility is coming back to the market and that is GREAT.

Just take a look see at the VIX, starting to wake up. Some more down days followed by a good rally leg should pump that baby up some.


Volatility makes the options world go round!
 
Quote from Algorithm:

One positive out of the action of the past month or so is that volatility is coming back to the market and that is GREAT.

Just take a look see at the VIX, starting to wake up. Some more down days followed by a good rally leg should pump that baby up some.


Volatility makes the options world go round!
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So is that why my SM May 35 call went up yesterday?...

I bought this on Friday 13th. Stock went up > 2 points and my call was unchanged. Yet on friday, the stock fell 1 point and I suddenly had a 2% equity gain.

Bizarre! Coudn't understand it.

Should I assume that the drop came courtesy of the overall markets?

In that case, how would I best manage this trade?

10/20 cent trailstop?

Just close out?
 
Overall volatility increases recorded by the VIX is generally good for options overall. As the markets starts to whipsaw and thrash around a bit, holders of underlying equities start to use more options to hedge, lock up profits and insure their positions.

So with the VIX coming back to life you will see more option activity in a broader range of stocks than in a sluggish gently upward or slowly trending market.

You see hands with substantial gains over the past two months may still like their positions, but due to their size they can't liquidate without killing themselves, so all of a sudden the puts and calls come alive.

Don't know about your specific position, but if it's waking up, sitting tight may be something to consider unless the awakening involves a move against you.

What was your exit strategy before you initiated the position? Did you have a predetermined P/L target? Has it been achieved, yet the move still looks favorable?

I prefer to let my winners run, but nobody ever went broke taking an early profit.
Just my .02
 
Quote from Algorithm:

Don't know about your specific position, but if it's waking up, sitting tight may be something to consider unless the awakening involves a move against you.

What was your exit strategy before you initiated the position? Did you have a predetermined P/L target? Has it been achieved, yet the move still looks favorable?

I prefer to let my winners run, but nobody ever went broke taking an early profit.
Just my .02
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My exit strategy was to look for signs of weakness, then either sell or set a fairly tight trailstop.

P/L target was 2:1 (as % of equity)

I've achieved my 2% equity gain, but, assuming the stock was only pulled down on Friday as a result of a drop in the wider market, then the stock has strong momentum and no resistance in sight.
 
Not sure what happened there.

Bought my SM call for 7.70.

Bid was 9.10 at the close on Friday.

Changed my stop loss order to a 20 cent trailstop and got home to disover my call had been sold for 8.10.

??
 
Quote from Neoxx:

Not sure what happened there.

Bought my SM call for 7.70.

Bid was 9.10 at the close on Friday.

Changed my stop loss order to a 20 cent trailstop and got home to disover my call had been sold for 8.10.

??
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This is why I keep reemphasizing the idea that stops only work well on high volume issues. A trailstop turns into a market order once triggered unless it is specified as a limit order. On options that are thinly traded the market order has a high likelyhood of filling at a very unfavorable price.
 
Quote from Cache Landing:

This is why I keep reemphasizing the idea that stops only work well on high volume issues. A trailstop turns into a market order once triggered unless it is specified as a limit order. On options that are thinly traded the market order has a high likelyhood of filling at a very unfavorable price.
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I was lulled into a false sense of security by that previous trailstop (on a similar volume stock) that worked out perfectly.

What would you have done in my position?

Should I close all my open positions if I know that for a whole week, I won't have access to my account during trading hours?
 
IB has conditional stops which I use for options. They are related to underlying, thus work better, however large spreads can still take money from your pocket.
 
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