Trading the Gooniverse...

T

TheGoonior

I've decided to start this journal in the hopes that it makes me a bit more disciplined about following my trades.

THE BASICS:
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STRATEGY = Find oversold/overbought stocks with the intention of getting in to a larger trend early.

VEHICLE = Long Near/ATM PUTS/CALLS with 90+ days to expiration.

REQUIRMENTS =
1) 10 < Stock Price < 75
2) Avg Daily Vol >= 2,000,000
3) Option Bid/Ask spread <= $0.10

RISK = 0.5% per trade.
STOPLOSS = 2*ATR(14) although a reversal may take me out earlier.
INITIAL POSITION SIZE (C): Determined by option change price change if the stoploss is hit (using ThinkorSwim theoretical price).
TRADE MANAGEMENT: Add contracts as price moves in our favor, starting at 1.0ATR and every 0.5ATR afterwards.
MAX TOTAL POSITION SIZE: No more than 5% of account
 
LONG:
NOK (> 13.37, ATR=0.48)

SHORT:
MRO (<34, ATR=0.95)
WMB (At Open, ATR=0.58) Triggered 10/20/09 and it's still valid.
KFT (<26.98, ATR=0.39)

OPEN: None

COMMENTS:
  • Using Jan10 ATM/NTM calls/puts.
  • All Stops are 2*ATR(14)
 
SETUPS: 10/26/2009
OCO order used so that first order to hit is activated.

System changes: Risk=0.25% per trade
Limit of 3 setups per direction.
Only 1 fill allowed in each direction.
HOLDING
LONG: NOK
RED: KFT, WMB
 

Attachments

Just noticed that TCB spreads are wider than I allow (Bid/Ask > $0.10), so we'll scratch that setup. No longs on the books for Monday.
 
I've noticed that I tend to have problems sticking in my trades, so I decided to try a volatility-based stop. Since I read Tharp's book and also some stuff on the Turtle system, and without any compelling data to choose some odd multiple, 2*ATR seemed like a good starting point.

I use 2*ATR as my disaster stop and as trailing stop (chandelier-style), although normally it will not get hit, as I recieve an exit/reversal signal before then.
 
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