Is TODAY the day???

Today was a hiccup. More downside in my opinion. Earnings aren't pretty and the market is too over valued. I think the dow needs to be around 6000 and the naz around 1000.
 
Originally posted by T/A_Bo
Market just peeked to a new low and broke under 7700. Extreme TICK reading have been coming in like clockwork. Rather then buy the DIA or go long futures I'm taking out of the money calls in DIA. 84's will give me a very nice risk to reward ratio if my prognostication is proven correct.

I'd rather do this trade with options because I don't trust this market to pivot cleanly, and would expect to be stopped on a rinse if I bought the futs and set stops under any swing lows.

With any luck, this fib zone coupled with the extremely oversold market will deliver me a ramp move that gets up in the $88-90 area for DIA. If all goes well I'll still be in these things when I give my seminar at the expo :D Would be a nice war story to tell the folks!

-Bo
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I'd be very hesitant about buying OTM options now. Volatility is huge, you're paying through the nose for the options and are going to get killed if volatility collapses. Other than that, good rally call :)

Ik
 
Originally posted by Rod Shaft


Uh, how about the 5th or the 15th? Today's was somewhat larger then those two, but the market was also very oversold this morning.
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5th & 15th were not key, just plain ol' reversals. Technically, todays reversal took out the highs & lows of the previous day and many regard it as a potent signal of a change in trend. I would imagine all those who see the key reversal tonite flooding the market with buy orders tomorrow.

I'd be a nervous short right now...
 
I'd be very hesitant about buying OTM options now. Volatility is huge, you're paying through the nose for the options and are going to get killed if volatility collapses.
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Actually, the premium seen in the OTM calls is a representation of the “hope” that they will eventually trade in the money. When I took mine, the Dow had just broken to new lows, and nobody in their right mind would be buying calls... :D SO, as a result they were very cheap as there was little “hope” value built in. Nobody wanted them as the market was “obviously” in meltdown mode. Now today, we get a gap and snap, the biggest day since 1987. The market has just whacked the majority upside the head, telegraphing REVERSAL REVERSAL!!! They get greedy and hopeful in short order, and as a result, my calls doubled in price today. As the bullish argument grows, so will the hope, and with luck a little ITM value will kick in for the final day and reward me for the risk I took.

The market is set up perfectly for a breakaway gap tomorrow, keep an eye out for high tick readings, and a lack of gap fill in the first 30 mins as confirmation signals.

Good Luck and Good Trading!

-Bo Yoder
 
I hope you got your cheap calls and are prepared to dump them on a moments notice, or else buy puts at a high point to make a straddle. If you can leg into a straddle you can make serious cash or at least get a free position when you leg out.

My attitude is that the economy and the general market fear will not allow a "V" bottom right now. I am looking for a real bottoming pattern like a double bottom or a reverse head and shoulders, etc.

I went long puts on djx and qlgc this afternoon.
 
Hope schmope. They were expensive. Take a look at Implied Volatility in the past year on the DJX (I'd say DIA, but since they've only been trading options on DIAs a month or two, DJX should mirror the IVs on DIAs pretty much), now look at the IVs of the calls you bought, now look at IVs on the DJX for the past 5-6 years. Yep, expensive options.

Ik
 
If he bought calls when he posted his message he made out like a bandit. IV's from 5 years ago don't mean much. I've never heard of a 5 year old option.
 
As I write this the Dow is sitting +375 for the day!!

I took 1/2 profits on my call position a little while ago as my options have now more then tripled from my entry. Banking some of these gains as the dow is up near my target of 88-90. Would rather take some green off the table now as the Dow is so extended, and then hold the remainders for a continuation of trend.

This play shows why I did this with options rather then futures or DIA. Went long as DOW was near 7700, and then would have stopped out hard on my outright positions the next day as the gap and snap took off. In stead I had the staying power with options to not lose my position, and be able to ride the dow up more then 900 points :)

WHen there is a shock move waiting in the wings, OTM options are a nice way to ride the volatility to a nice r/r scenario!


Good Luck and Good Trading!

-Bo Yoder
 
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