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October 10th, 2003
Our mid-term index options trader traded S&P 500 index options for this best trade of the week, but one could have traded NASDAQ 100 index shares or options using the same method. These trades were based strong volume signals and our Market Commentary.
NOTE: This chart of the week is meant mainly for educational purposes. We don't recommend that our customers follow these exact trades. We suggest that you develop your own trading style and try doing some paper trading before using our volume analytics.
| Security | Return |
| Call #1 (SPX December) | +35.3% |
| Call #2 (SPX December) | +84.9% |
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Total Profit: |
+$18,136 |
Even though all the above trades were not entirely without risk, we came out on top with a profit of $18,136
How can this chart be used by me?
Our main reason for publishing these charts is to allow our members to learn
by another trader's example how they can make trades based on our volume signals
and Market Commentary. Members can gain a better understanding of how to enter
and exit the market, based on when a signal is generated. To learn from these
charts, you don't need to trade the specific security mentioned in this
publication, but whatever security you feel comfortable with. The principles for
trading SPX options will not change when trading something like S&P 500 index
futures, futures or SPDRs
shares.
Why did you trade against the current mid-term trend?
Our trader decided to take advantage of short-term movements in the market.
This by no means invalidates the fact that the prevailing trend was up. When
the market is in an uptrend, there are always points where excellent sell
signals are generated; therefore, our trader decided to take advantage of these
signals. Also, MarketVolume's Market Stage mentions that the market is in a
resistance corridor, which means that the market will be
volatile, excellent for short-term trading. Generally we don't
recommend trading against the current trend unless you are a very skilled
trader.
Should I Trade Options?
Only very experienced traders should trade
options because of the high risk involved. You can always trade index shares
instead of options and still make a decent profit, but returns will not be as large.
Should I try to paper trade before trading options?
Yes! We suggest that anyone who is new to our signals and analysis try doing
some paper trading to start, at least until they are comfortable with
interpreting our signals. Only very experienced traders should trade options
because of the high risk involved. You can always trade index shares instead of
options and still make a decent profit, but returns will not be as large.
Can I trade Rydex or ProFund index funds using your Market
Commentary and signals?
Yes, our system is meant for index traders, and there are many Mutual Fund
options to choose from when trading indexes. So yes, our indicators are good for
trading Mutual Funds, especially dynamic Rydex funds.
We would like to the motivations that led to the above trades as clear as possible; therefore, we have created what we call a 'Table of Motivation', in which we try to make the purpose behind each of the above trades as clear as possible.
| Trade | Motivation | MV's Commentary on Members Home Page during the trade |
| Buy Call #1 | MarketVolume's Market Commentary mentioned that continued supportive volume could cause the market to move higher in the mid-term. Because the market moved lower in the short-term today and generated a large amount of supportive volume, we decided to enter into some SPX call options. | There was a moderately large supportive VMA spike to the downside at 11:45 as the market declined. This supportive volume helped move the market higher throughout the rest of the day. As the market rallied, there were two moderate resistive VMA spikes to the upside, but they were not enough to cause the market to stop its rally. Overall, we believe that today's supportive volume, combined with yesterday's supportive VMA spikes, could cause the market to move higher in the short-term. If we continue to see more supportive volume it could change our mid-term outlook. |
| Buy Call #2 | Despite the large supportive VMA spike to the downside during our previous trade, the market continued to move lower in the short-term, but MarketVolume's Market Commentary stated that the market may be having a delayed reaction to the supportive VMA spike. As a result, they still believe that the market could move higher in the mid-term. Because of this and the fact that there was another moderately large supportive VMA spike to the downside, we decided to enter into a second SPX call option in order to average down our cost. | Today's resistive volume to the upside only had a temporary affect on the market, as it was not enough to counter yesterday's supportive volume. Overall, we believe that the market should move higher in the mid-term as it may be having a delayed reaction to yesterday's large supportive VMA spike to the downside, but there is a chance for the market to move slightly lower in the short-term in order to collect more supportive volume to the downside. |
| Sell Call #1 | Since the end of September the market has been moving higher in response to the supportive volume that we acted upon when we purchased our call options. MarketVolume's market commentary mentioned that resistive volume could move the market lower in the short-term and today, as the market moved higher, we saw a moderately large resistive VMA spike to the upside. We decided to play it safe and close some of our SPX call options but keep the rest open as we believe the market still has room to move higher in the mid-term. | There was some resistive volume to the upside at 12:45 and 13:30 as the market moved higher, but these resistive VMA spikes were not enough to counteract the supportive volume seen during the day. Overall, we believe that today's supportive volume will lend support to the market moving higher in the mid-term, but there is a chance that the resistive volume seen in the afternoon may cause the market to move slightly lower in the short term as it did today. |
| Sell Call #2 | MarketVolume's market commentary stated that the market still had room to move higher in the mid-term, but today there was a very large resistive VMA spike to the upside in the early afternoon. In order to play it safe, we decided to close the remainder of our SPX call options on this resistive VMA spike. Shortly after this resistive VMA spike there was another larger supportive VMA spike, but we decided to wait until the next clear signal before entering into the market again. | There was some resistive volume to the upside in the early afternoon that caused the market to move lower by 14:10, but as it did it encountered another moderately large supportive VMA spike to the downside at 14:15. This last supportive VMA spike helped move the market slightly off its lows, but was not sufficient to move the market into positive territory. Overall, we believe that the market may not yet be finished reacting to the cumulative resistive volume from over the past week; therefore, the market could continue to move slightly lower in the short-term. Today's supportive volume, however, does lend more support to the mid-term up-trend. |
The same principles mentioned above works for trading NASDAQ 100, S&P 100, Dow Jones, as well as 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 |
| 09/24/03 | B C1 | 5 | $27.65 | 1,013.88 | 1,035 | 3,562,700 | $13,825 | |
| 09/26/03 | B C2 | 7 | $22.30 | 997.71 | 1,035 | 3,140,600 | $15,610 | $4,885 |
| 10/03/03 | S C1 | 5 | $37.42 | 1,037.44 | 1,035 | 3,183,400 | $18,710 | |
| 10/09/03 | S C2 | 7 | $41.23 | 1,046.62 | 1,035 | 3,136,200 | $28,861 | $13,251 |
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Total: |
+$18,136 | |||||||
To see any of our past best trades, simply select from the list below.
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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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