Technical Analysis. |
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Highlight Investments Group |
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May 15th, 2002
Our analysis of volume over the past week has resulted in the following trades using QQQQ Options by our conservative long-term trader.
| Security | Return |
| Call 1 (QQQQ June) | +30% |
| Call 2 (QQQQ June) | +64% |
| Call 3 (QQQQ June) | Holding |
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Total Earnings: |
$12,600 |
Even though not all the above trades were profitable, we still came out on top with a profit of $12,600.
Why use such a low strike price?
The fact that MarketVolume in its Market Commentary
was not 100% sure about whether the market would try to retest its support level
led to the decision to purchase longer term options in the event that the market
did continue to rally. The higher the price and the further out the expiration
month, the less depreciation in price as time passes. This way you can make
fairly conservative longer term trades using options.
Why deal in Options?
Options offer the potential of a high short-term
return. Compared to futures, options are less risky, and don't require as much
capital to trade. Those who trade options should reduce the risk by only trading
options that are at least two or three months away from expiration, or as
liquidity permits.
Why buy Call Options?
MarketVolume has recently seen volume signals that
indicate we are in a support corridor, and since we bought June QQQQ options, we
don't need to worry as much about short-term fluctuations as with futures, or a
May call option.
We would like to make it clear to our members what the motivation was to make the above trades; therefore, we have created what we call a 'Table of Motivation', in which we try to make it clear the motivation that was behind each of the above trades.
| Trade | Motivation | MV's Commentary on Members Home Page during the trade |
| Buy Call 1 | Volume for the NASDAQ 100 and S&P 500 indexes has been high for quite some time, and coupled with the fact that MarketVolume™ was suggesting the NASDAQ 100 was in the lower portion of it's support level, gave enough indication that this point would be a good entry point. | Volume over the past few days for the NASDAQ 100 and S&P 500 indexes has remained at unprecedented levels (60-day chart using a 1-day VMA), in other words, volume has been critical. ... Even so, our analysis still concludes that the NASDAQ 100 and S&P 500 are in the lower levels of their support corridor. |
| Buy Call 2 | The index moved further down and volume was decreasing as well. When volume began to increase again as the index was declining, it provided an excellent entry point to purchase more calls and to lower the average cost of the calls already purchased. Bought 30 contracts total, 15 contracts for Call 2 and 15 contracts for Call 3 | Volume is still at critical levels, and the longer the market keeps this up, the bigger a direction change we will see. Our analysis still conclude that the NASDAQ 100 and S&P 500 are in the lower levels of their support corridor. |
| Buy Call 3 | ||
| Sell Call 1 | Due to the fact that the indexes have risen quite substantially, coupled with the large amount of volume recently generated, found that a safe option would be to close 60 of the 90 open call contracts and take the profit from them. Left 30 open contracts for a longer term gain. | Today we saw a great deal of volume near the end of the trading day for the NASDAQ 100 and S&P 500 indexes. ... Due to this analysis we still believe the market is in an up-trend, but with a chance for a small correction. |
| Sell Call 2 |
The same principles mentioned above works for trading S&P 500, S&P 100, Dow Jones, and other indexes.
Here is a detailed list of our investor's trades, which netted the above returns:
| Date |
Put/ Call |
Ctrcts |
Contract Price |
QQQQ Value |
Strike |
VMA (1-day) |
Amount | Profit |
| 5/3/02 | B C1 | 30 | $5.25 | $29.87 | 25 | 1,922,500 | $15,750 | |
| 5/7/02 | B C2 | 30 | $4.15 | $29.23 | 25 | 1,847,900 | $12,450 | |
| 5/7/02 | B C3 | 30 | $4.15 | $29.23 | 25 | 1,847,900 | $12,450 | |
| 5/15/02 | S C1 | 30 | $6.80 | $32.15 | 25 | 2,452,100 | $20,400 | +$4,650 |
| 5/15/02 | S C2 | 30 | $6.80 | $32.15 | 25 | 2,452,100 | $20,400 | +$7,950 |
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Total: |
+$12,600 | |||||||
To see any of our past best trades, simply select from the list below.
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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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