Technical Analysis. Nasdaq 100, |
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Highlight Investments Group |
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July 31st, 2002
This week is a continuation on last week's best trade where our professional short-term trader left some positions open.
| Security | Return |
| Call 1 (NDX Sept) | +18.8% |
| Call 2 (NDX Sept) | +69.8% |
| Call 3 (NDX Sept) | +91.2% |
| Call 4 (NDX Sept) | +91.2% |
| Call 5 (NDX Sept) | Holding |
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Total Profit: |
+$70,105 |
Even though all the above trades were very conservative, we still came out on top with a profit of $70,105 over two weeks!
Why buy expensive September calls?
Even though December Call options are more
expensive, they tend of to be less volatile in reaction to market swings,
and they don't devalue as quickly as a current month option. By trading
options that are at least one month ahead, we protect ourselves from
unforeseen short-term fluctuations in the market. Also, if the uptrend
continues on a long-term, one can hold these options for a longer period as
they increase substantially in value.
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 | Based on MarketVolume's Market Commentary for the previous day stating that in order to set a proper support level there should be more volume to the downside, decided to purchase 5 call contracts due to the occurrence of a large amount of volume to the downside shortly after midday. | During the decline for the S&P 500 and NASDAQ 100 indexes there was a great deal of supportive volume generated to the downside for these indexes, but this volume continued to increase as the indexes changed directions and began to go up. Due to the fact that the volume continued to increase as the indexes did, we cannot easily say that any support level has yet been reached, and that in the short-term the S&P 500 and NASDAQ 100 indexes may have a corrective move up followed by a continued move to the downside. |
| Buy Call 2,3,4 | In the morning, the market opened quite a bit lower from the previous day's close, and first thing in the morning there was a very large volume spike of unprecedented levels which signaled that there was a lost of institutional supportive buying volume going on. This could be the volume MarketVolume was looking for in order to confirm a support level. Bought 15 call contracts based on the assumption that the market will move higher from this point. | Today we saw the first very large supportive volume spike to the downside on the S&P 500 and NASDAQ 100. This volume was almost entirely supportive volume and could signal that a support level has been, or will shortly be set. This means that we are in the lower levels of the support corridor. |
| Sell Call 1,2 | Due to the fact there was some volume to the upside at the end of the day, decided to sell 10 of the 20 open contracts because this volume introduced an element of uncertainty as the market could move a bit lower the next day due to this volume spike. If it does it will be a good point to buy more call contracts at a lower price. | |
| Buy Call 5 | Since the market tested it's support level and had a very large amount of supportive volume as it did so, found that a wise choice would be to buy more calls at a lower price. | We still believe that the market is in the lower levels of it's support level, and since it did not actually REACH the low it set yesterday, it may do so tomorrow. If it does, we would like to see more supportive volume before we can confirm that a support level has been set. We still don't recommend anyone to have short positions open at this point in time as the market can easily go up 6% or more in the short-term future. |
| Sell Calls 3,4 | Due to the large amount of volume to the upside to the NASDAQ 100 index, found that it would be best to play it safe and close some open positions. Keeping one position open for the future is an acceptable risk as the market could move a lot higher in the mid-term future. | The market is really beginning to look as though it's changing into an uptrend, but this cannot yet be confirmed. As we mentioned before, we would like to see a sustained move up such as we saw today, with little volume. This could be the end of the support corridor. |
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 |
Index Value |
Strike | VMA | Amount | Profit |
| 7/23/02 | B C1 | 5 | $59.21 | 918.85 | 950 | 2,868,200 | $29,605 | |
| 7/24/02 | B C2 | 5 | $51.15 | 874.18 | 920 | 2,128,100 | $25,575 | |
| 7/24/02 | B C3 | 5 | $51.15 | 874.18 | 920 | 2,128,100 | $25,575 | |
| 7/24/02 | B C4 | 5 | $51.15 | 874.18 | 920 | 2,128,100 | $25,575 | |
| 7/24/02 | S C1 | 5 | $70.36 | 943.75 | 950 | 2,029,000 | $35,180 | $5,575 |
| 7/24/02 | S C2 | 5 | $86.87 | 943.75 | 920 | 2,029,000 | $43,435 | $17,860 |
| 7/25/02 | B C5 | 5 | $57.20 | 891.13 | 910 | 2,312,300 | $28,600 | Holding |
| 7/30/02 | S C3 | 5 | $97.82 | 975.50 | 920 | 2,067,900 | $48,910 | $23,335 |
| 7/30/02 | S C4 | 5 | $97.80 | 975.50 | 920 | 2,067,900 | $48,910 | $23,335 |
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Total: |
+$70,105 | |||||||
To see any of our past best trades, simply select from the list below.
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