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1/31/2006
In the following example, we have based our QQQQ options trades on S&P 500 index volume indicators and on advance / decline indicators. Using the principles outlined below, you may wish to trade options on the SPDRs (SPY), ^SPX, DIAMONDS Trust, Series 1 (DIA), as well as on other underlies that generally tend to move in concert with the S&P 500 index. It is also conceivable that an analysis similar to the one shown below could be used to trade options based on the NASDAQ 100, Russell 2000, and other indexes.
This "best trade" is a continuation of previous "Best trade" newsletter posted on January 20, 2006, where we left a QQQQ Call position open. According to the trading strategy #2 described in the the last newsletter (on January 29, 2006), the calls were sold at 21% profit.
| Security | Return |
| Calls (QQQQ - QQQCO) | +21% |
|
Total Profit: |
+$2,100 |
Below you will find a Table of Trade Motivations and a chart showing the trades, including detailed trade calculations.
| Chart 1: | Options trades on the
S&P 500 Advance Decline Indicators and High Magnitude Volume. January, 2006. |
|
|
In Table 1 - a "Table of Trade Motivators" - we show the motivating factors that led us to take the above trades.
Table 1: Table of Trade Motivators
| Date |
Trading Decision |
Motivation |
| 01/20/2006 | On January 20, 2006 we noted extremely low market sentiment readings. The S&P 500 advance/decline (A/D) issues and A/D VOLUME ratios reached critical levels of 0.11 and 0.09, respectively. This revealed an extremely bearish market sentiment, indicating the market was oversold and thus prone to trend reversals. | |
| 01/20/2006 | Buy Calls | On January 20, 2006 we noted a high-magnitude buying volume surge. The (2/10) PVO was 16.2%, indicating that that the average volume was more then 16% higher than it had been for the previous 10 trading days. |
| 01/31/2006 | Sell Calls | On January 31, 2006, on the S&P 500 15-day chart, the slow index moving average (40) crossed and ran over the fast index moving average (20) and we found that it was a safe bet to close all open call options and fix profit. |
Below we list in detail the actual trades made,
along with the netted returns achieved..
Table 2: Details of the trades
| Date | Trade | Strike | Expiration | Contracts |
Contract Price |
Amount | Profit |
|
01/20/2006 |
Buy QQQCO Calls | $41 | 3/17/2006 | 70 | $1.40 | $9,800 | |
|
01/31/2006 |
Sell QQQCO Calls | $41 | 3/17/2006 | 70 | $1.70 | $11,900 | $2,100 |
| (+21.4%) |
We welcome any questions or comments you might have regarding this "best trade".
1/31/2006
HGH Associated Traders
List of Trading Newsletters sent out in 2006
Trading System - proprietary trading system based on the available nowhere else patented volume indicators. Discover our charts and find out the new way of trading.
QQQQ - QQQQ options trading signals that delivers stable returns. 3-4 signals a month allows to trade options conservatively.
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QQQQ Trading System QQQQ, SPY and DIA trading signals for conservative mid- and long-7 term traders ...
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