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My Options Play
- Thread starter Multioption
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Does your system account for today's DELL lowered guidance?Quote from pinabetal:
XLNX has about a 65% chance to make a higher high than Oct 31st high on nov 1. If it reaches and trades thru 24.13 it will then drop back and probably close midrange or lower. If it doesn't break thru oct 31 st high it will probably trade down and close low.
Quote from Cluseau:
EDIT: pinabetal, have a cigar, you're gonna go far. You are dead wrong about LYO. I would stand aside with that outlook.imo
LYO should make a lower low than oct 31st low on Nov 1. Sorry Cluseau but I see weakness there. Will I have to continue drinking coffee since i don't smoke?
CNMS apart from my own proprietary software I also use tape reading. One assumption in tape reading is that it has already taken into consideration anything that could or has affected price today. The "smart money" or "deep pockets" would have already done what they needed to do for their best interest. I admit this was a hard one to call as it shows a smatter of strenght on one hand but weakness on the other. I leaned ever so slightly that the scales tipped in favor of strenght but I can tell you this ..not by much.Quote from cnms2:
Does your system account for today's DELL lowered guidance?
Quote from cnms2:
I've traded a lot of LEAPS for awhile, but I rarely do it anymore. There are people promoting them as a stock surrogate, praising their low theta (daily value erosion).
They have some specific risks and drawbacks. The first ones that cross my mind are:
- they are rich in premium making them very susceptible to IV adverse changes (IV decrease when you're long, or IV increase when you're short); this is the vega risk
- they have a higher IV than shorter term options (higher probability for wider range variation); this gradually decreases over their life
- they can be adversely affected by dividend and interest rate changes, and there is a higher chance for it to happen over a longer period
- they have high slippage, and lower liquidity
- you can lose a lot of premium in case of takeover or bankruptcy
- as the underlying price varies over the long life of the LEAPS, you'll have to roll them to adjust your risk and to re-tune your position to the new underlying price range; this is an additional expense due to the high slippage; i.e. you open a calendar having an ITM LEAP for the long leg; as the underlying price changes your LEAP will go more ITM or may go OTM, so in the following months to continue your strategy you'll have to roll it to rebuild the risk characteristic required by your strategy.
I can't really think of any instance in which LEAPS offer any advantage to the retail trader.
Quote from hajimow:
Trading on Leap has one problem. Bid and ask spreads are usually 20 cents. It does not move well with the stock. Heavily shorted stock rarely come back.I mean don't make it a rule that they should come back. TZOO, OSTK are two of them. Some heavily shorted stocks don't have options.
cnms2 Thank you for your outline. The idea is to take advantage of chart reading abilities and take outright directional trades for a holding period of no more than a week. The logic is that if the short-term directional call is correct in the first place, then if the stock should drop for a few days after the trade is entered, LEAPS may lose their value but will regain most of the loss and more once the stocks starts trending in the desired direction. The premise is that once the stocks breaks out of a base, you can rely on a short-covering rally to propel the value of the LEAPS higher. I will do some homework on the downside conditions you kindly outlined.
pinabetal, when you say " PMCS should make a higher high than oct31st high on Nov 1 tommorrow" what are you using to base that observation on? Personally I would wait and see how it opens before taking a directional bias.
It is a probability call with some risk because while the tape show strenght my software shows it is somewhat (a little) overbought in the very shorterm and therefore ready for a shorterm decline or pullback. However, my experience has been that many times when a stock is bullish and going up it will show overbought on successive days as it goes up. Nevertheless, it could open low and trade lower but IMO the higher probability lies in it opening high and breaking thru todays high early in the session. If it doesn't do so pretty early in the session (like within first 1.5 hours) then I would reverse my strategy and look at shorting or even if it breaks thru wait until the rally peaks and then short. We can only attempt to predict based upon what has happened but we MUST trade what really happens. So, I try to make the best prediction I can and if it proves correct then look at taking a position.Quote from mhashe:
pinabetal, when you say " PMCS should make a higher high than oct31st high on Nov 1 tommorrow" what are you using to base that observation on? Personally I would wait and see how it opens before taking a directional bias.
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