By All About Trends
Let’s back up here a bit and talk about August because it’s important.
First off, remember a stock can only do one of three things. Up Down and Sideways. Per the mechanics of reality we have no control over that. All we can do is put ourselves in a position to win via chart pattern recognition high probability trade set ups.
Now comes the hard part. The moment one hits the enter button on a trade you are at the mercy of the market and have no control over what happens. It’s all about what happens AFTER the trade is placed that counts. It’s either going to follow through higher, go nowhere or go down. Whether you bought at the money, out of the money or in the money calls it made no difference if the stock isn’t moving those options are going nowhere as well as decaying time value depending upon which you did.
In August we saw numerous names along with basically the whole market opt to enter into a sideways go nowhere trade environment. Keep in mind the moment you took trades you had no clue and neither did anyone else on the planet know that that was going to be the trend that developed for the month and that is an option traders worst enemy.
That is why August was the way it was for us. Fast forward to September and we saw basically two to four days out of the whole month (Fed and ECB news driven induced) that accounted for basically the whole months worth of gains in the indexes and a lot of stocks. It really was a “Be There Or Be Square” month. If you weren’t positioned already you missed the bulk of the gains. We were there with a few issues but as of yet? They have been content going sideways and consolidating for the most part. Again an option traders worst nightmare. That MAY be where we currently are with our October expiration call options in NUAN, INVN, TLYS and DDD. We’ll see as we still have a couple of weeks here with them to decide if they want to trade to the beat of their own drum.
Now also in late August we had positions in our stock newsletter that took off like rockets and stock investors made some really nice short term gains in an extremely short period of time compliments of Being There” all because of what patterns were showing at the time. Take a look at IBM, CXO and VMW below.
So why did you not see any options trades in that list of screamers? Simple, because we targeted this portfolio to a total value of $2,000.00 and in order to be able to get any exposure to any of our stock newsletter screamers we would have had to really pay up for those. The bottom line is we were hindered by the overall portfolio size as mentioned in the CXO chart above.
Most were in the $5-10 range per contract and we just didn’t have the ammo to be able to do those.
For example, we remember looking at the CXO at the money calls they were about 5.00 per contract just before the stock took off. Seeing as how we like to do two contracts so as to be able to sell one and leave the other for a free ride it would have took up $1,200 of our total portfolio of $2,000 to do that trade. It would have left no room to be able to take advantage of other names that came to the forefront either and would have made the whole portfolio a one trick pony and that pony had better perform.
But that is going to change right now. What we are going to have to do is raise the total value of the portfolio so as to be able to take advantage of these type of names. We are adding $8,000 so the overall portfolio is based upon $10,000 account. That way we won’t have to concern ourselves too much with whatever option strikes we are looking at and be hindered due to overall portfolio size.
If you trade options are are looking for ways to make the most out of a smaller sized portfolio then Fun Money by All About Trends could be just what you are looking for. You can test drive their service for $20 for two months before decided if you want to subscribe. This week we are targeting options on Apple but you’ll have to be a subscriber to determine which ones we are looking at.