Stock Trading

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sweetandsour
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Post by sweetandsour »

Del wrote: 27 Oct 2022, 09:30
sweetandsour wrote: 27 Oct 2022, 06:57
Del wrote: 27 Oct 2022, 06:53 Mr. Market is calmly considering this and recent earnings data over a morning cigar and cup of coffee. I think I'll join him.
Me too. I missed my golf game today, too much going on here at the house. CAT made a big move, also looking at Honeywell and Comcast. Why did NVDA jump so high during the off hours?
Apparently META (Facebook) announced a big capital spending plan to increase their data center. So Mr. Market bought chip makers.
https://www.benzinga.com/news/earnings/ ... fter-hours

Del wrote: 25 Oct 2022, 09:34
sweetandsour wrote: 25 Oct 2022, 08:35 I've bought and sold SPY several times already, but got sidetracked with other things and missed the last dip. I still have some shares that I bought at 390, so I was watching this mornings numbers with interest. The Fidelity analyst was pointing to a teacup shape on the SPX chart this morning, but he and his partner had different opinions. We'll see. Interesting week for sure.
For a meaningful cup-and-handle, I'd like to see SPY get up close to 385/390, then pull back to about 375 and return to 390 over the next week or 10 days. By that time, earnings season will have matured and the market will be more ration in its enthusiasm. That would be sign of a healthy recovery and a solid year-end.
Your guy at Fidelity was right about the little cup-and-handle forming at 375.

And it looks like a bigger teacup is developing under 387, as I mentioned in my reply. If the market consolidates for a few days and punches through 387, SPY could easily head up to 410.
It's at 380 this afternoon. If it does get back to 375 I'll buy it again. In fact I'm going to go ahead and put in a limit order today.
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Post by Del »

sweetandsour wrote: 27 Oct 2022, 06:57 SPY is at 380 this afternoon. If it does get back to 375 I'll buy it again. In fact I'm going to go ahead and put in a limit order today.
It hit 375 shortly after market closed. Did your order fill? How much $$$/number of shares are you in this position?

Trading on an expected uptick: Are you familiar with the trick of buying a long call or two rather than shares of stock or ETF?

It's a leveraged trade, so you can make a lot more money from a smaller investment. Without significant loss, if the trade goes against you.

Let me know if you are interested in an illustrated example.
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Post by Del »

Hey, Tim! Thanks for texting this morning.

So we all know the trick of buying a share of stock, and then selling the stock after the price goes up.

We can do the same with options. We can buy a call option to purchase 100 shares of stock at a fixed price. As the stock price goes up, the value of that option also goes up. Then we can sell that option back to the market at a profit. We never have to buy the stock.

It's not too complicated to trade the options, but there are more moving parts to consider than simply buying stock.
This is a leveraged trade, so we plan to make a lot more money than trading stocks. We also risk losing bigger too. (Coach always recommends practicing with paper trades until a guy is confident with real money.)

We talked about the teacup forming on SPY. Let's remember "TEST":

Target: 400 to 410
Entry: 375
Stop: I'm thinking about bailing on the trade if it drops below 365.
Time: 1 to 2 weeks to target

Now let's look at the option chain for SPY. I am buying one option contract for 100 shares.

Expiration Date: FEB 17. I like to go out at least 3 months for long options, even as I plan to hold it for just 2 weeks. The time value of an option loses slowly at first, then accelerates quickly closer to the expiration. Kinda like paying off the principal on a mortgage.

Strike Price: 370. SPY closed yesterday at 378. For this trade, I like to buy options that are already somewhat in the money. I look for a delta of 0.6. This means that the option value will increase $60 for each $1 increase in SPY.

Also, there appears to be a lot more "open interest" (volume, market liquidity) in the 370 option, compared to 369 or 371. Better shot at getting filled at my price.

Option price is currently $2640. My software estimates that this option will trade at $2450 or so when SPY hits 375. So I place a limit order to buy at $2475, to fudge a bit.

I open the risk graph. Enter the date of Nov 11 (looking two weeks ahead). Profit will be $1500 at SPY = 400. Loss will be $666 at SPY = 365. Reward/risk ratio = 2.25.

Time decay (theta, daily cost of option as it expires) is $11 per day.

$1500 profit ÷ $2475 invested = 60%
========================================================

Let's look at buying an option that is out of the money. Less risk, less profit, more leverage.

Expiration Date: FEB 17.
Strike Price: 396. Delta is 0.4. Plenty of open interest.

Software estimates option will trade at $1200 at SPY = 375.

Profit is $1000 at SPY =400. Loss is $500 at SPY = 365. Reward/risk ratio = 2.0. (sorry about all of the conveniently round numbers. It just fell that way, I promise!)

Time decay is $9 per day.

$1000 profit ÷ $1200 invested = 83%
========================================================

You have my number. Call me if you want to talk about this trade.
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Post by Del »

I panicked this morning. Bought a call when SPY was at 382.50.

BOT +1 SPY 100 17 FEB 23 370 CALL @30.23 NASDAQ
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Post by Del »

Del wrote: 28 Oct 2022, 07:28 I panicked this morning. Bought a call when SPY was at 382.50.

BOT +1 SPY 100 17 FEB 23 370 CALL @30.23 NASDAQ
That was 9:00 am. Bought a single call for $3023 (plus commission of 63¢).

At 12:30, SPY is almost 388. My position is up $350. That's 11.6%. I am sorely tempted to close now and crow about it.

But I think there will be more upside next week. So holding on for the ride.

After 6 weeks, SPX is slowly rising up from the floor and trying to climb back onto his mattress at 3900!
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Post by Del »

It's the end of the month again. Time to assess my progress.

Balance and performance:
My trading account started year at $23,500. Currently $32,500 net value. $9000 gain YTD. 38% return YTD.

End of September: $28,500. $4000 gain. Much success with condors, XLE, and latest position on SPY.

SPY: Bought a long call option on Friday morning, 10/28 (yesterday), as SPY was trading at 382.5 -- because S&S noticed a cup-&-handle formation. (Thanks, Tim!)
Position is current holding $473 gain. I expect SPY to hit 400 next week, and will lock in $1000+ gain. I paid $3024 for the option.

XLE: I have 100 shares. Currently trading at 89.25. Also cash from selling covered calls and selling puts (hoping to acquire more at low prices). Total profit/gain in XLE is $1833.

Nov 18 cash-covered put at 87 ($200 premium). If XLE closes under 87 on Nov 18, I will acquire 100 shares at the net price of 85. (Puts that expired in October were not assigned, so I just pocketed the premium -- about $300, as I recall.)

Nov 18 covered call at 96 ($78 premium). If XLE gets up to 93 or so and looks to get called out, I will buy 100 shares. Enjoy some extra gain across the gap, and end November still holding 100 shares.

CPER: Peace in Ukraine failed to develop, and housing is in a slump. I sold deep-in-the-money calls, locking in my position (plus $334 added time value). I expect to be called out on Nov. 18. I lose nothing if my ETF falls a bit. If it falls below my strike, I get to keep the shares and sell more calls.

Iron Condors on Russell 2000 Index (RUT)

Week ending; profit/loss
7/6 $693
7/13 $1194
7/20 $1073
7/27 $-1614 Total July: $1346
8/3 $1071
8/10 $1328
8/17 $934
8/24 $80
8/31 $1405 Total August: $3413
9/7 $-298
9/14 $-2054
9/21 $867
9/28 $507 Total September: $-987
10/5 $436
10/12 Vacation week. No trades. But I got to see coco in Alabama!
10/19 $1187
10/26 $-371 Total October: $1252
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Post by sweetandsour »

You're doing well, Dell. I've slowed down lately but I'm still up over 2% for the year. I don't know why my limit order didn't fill last week but I've read about it and apparently sometimes that happens, especially with small players like me.
I'm still practicing with options trading, and will make some safe moves to begin with.
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Post by sweetandsour »

SPY pre-market was above 390, and it opened right at 390, but quickly retreated to pick up where it left off yesterday in the mid 380s. My only position right now is Abt 20 shares of SPY at 390 that I bought back when 390 was support. If it'll get to 400 I'll sell it. If/when I gain confidence I'll buy a call like Del is doing.
My FA still expects SPX to go back to 3500.

Btw, for anyone buying heating oil, or driving a diesel, watch and plan for shortages and higher costs.
The Indians will not bother you now, on account of ... you are touched.
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Post by Del »

sweetandsour wrote: 31 Oct 2022, 14:30 You're doing well, Del. I've slowed down lately but I'm still up over 2% for the year. I don't know why my limit order didn't fill last week but I've read about it and apparently sometimes that happens, especially with small players like me.
I'm still practicing with options trading, and will make some safe moves to begin with.
I haven't tried placing limit orders overnight. I have heard that they don't fill reliably, due to the low volume of trades.
Options do not trade after market.

Tell my about your Fidelity advisors. Is that a podcast that anyone can watch, or is it behind a paywall?

I'd like to catch some decent morning market news.
=====================

Mr. Market woke up in a good mood and promptly fell out of bed.

Do you suppose that he is concerned about the Fed rate change tomorrow?

If Powell makes some dovish remarks about slowing down rate increases next year, the market could go zoom. But the Fed are on record as planning to continue with rate increases until they see positive confirmation that inflation is under control. I think they want to see unemployment rate increase to some desired level.

On the other hand, I bet that the Biden Admin is begging for some dovish talk to trigger a market rally just before the election. We'll see if Powell and friends are willing to bend to political pressure.

The bond market is flashing red signals that we are about to collide with a real recession next year.
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Post by sweetandsour »

Del wrote: 01 Nov 2022, 07:56
sweetandsour wrote: 31 Oct 2022, 14:30 You're doing well, Del. I've slowed down lately but I'm still up over 2% for the year. I don't know why my limit order didn't fill last week but I've read about it and apparently sometimes that happens, especially with small players like me.
I'm still practicing with options trading, and will make some safe moves to begin with.
I haven't tried placing limit orders overnight. I have heard that they don't fill reliably, due to the low volume of trades.
Options do not trade after market.

Tell my about your Fidelity advisors. Is that a podcast that anyone can watch, or is it behind a paywall?

I'd like to catch some decent morning market news.
=====================

Mr. Market woke up in a good mood and promptly fell out of bed.

Do you suppose that he is concerned about the Fed rate change tomorrow?

If Powell makes some dovish remarks about slowing down rate increases next year, the market could go zoom. But the Fed are on record as planning to continue with rate increases until they see positive confirmation that inflation is under control. I think they want to see unemployment rate increase to some desired level.

On the other hand, I bet that the Biden Admin is begging for some dovish talk to trigger a market rally just before the election. We'll see if Powell and friends are willing to bend to political pressure.

The bond market is flashing red signals that we are about to collide with a real recession next year.
https://www.fidelity.com/learning-cente ... g-sessions

Click on "find a session" for daily market briefings. Sign up and then listen in.
The Indians will not bother you now, on account of ... you are touched.
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