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March 7th, 2004
Our short-term index options trader traded QQQQ options for this week’s “best trade of the week”, but could instead have traded NASDAQ 100 index shares or options using the same method. This trade was based on our volume indicators and our Market Commentary.
This week's “best trade of the week”
is a continuation of the
previous week’s
best trade,
where we left a QQQQ Call position open.
This trade was closed with
14% of profit.
NOTE: We discuss our “best trades of the week” here mainly for educational purposes. The trading examples we illustrate are based principally on our volume indicators and market commentaries. Our main intent is to show you how you can apply our volume indicators and to explain the specific correlations that exist between volume spikes and the movement of the indexes. We do not mean to imply that you should follow our exact trades, but rather wish to suggest that you may make use of our volume analytics to develop your own trading style. We also urge you to paper trade before committing your money to the markets.
For
this week’s “trade of the week”, "Buy QQQQ Call
#1" is opened
in order to close it later with profit if the index moves in our favor.
| Security | Return |
| Call #3 (QQQQ April) | +16.67% |
| Call #4 (QQQQ April) | +9.37% |
|
Total Profit: |
+$3,550 |
Even though the trades shown above were not entirely without risk, they resulted in a profit of $3,550
Why were only call options were purchased?
In the following, we would like to show you the motivating factors that led us to take above trades. For this purpose, we have created what we call a 'Table of Trade Motivators':It's very risky to buy put options when general market trend is defined as an up-trend. This is because the market does not always react to supportive volume in a timely manner, or sometimes the reaction is not as large as expected. In the majority of the case, the market will react to supportive volume during an uptrend, but resistive volume will be somewhat diluted, unless it is a very large amount of resistive volume.
| Trade | Volume Motivation | Market Commentary on Members Home Page during the trade |
| Buy Call #3 02/27/2004 Was left opened last week |
The supportive VMA spike that occurred today at 11:45 was one of the largest seen in quite some time. | Our mid-term and long-term forecasts remain bullish, particularly in view of today's significant accumulation of supportive volume. |
| Buy Call #4 03/02/2004 |
Despite this supportive volume to the downside, the market continued to move lower. As the market continued its descent, it generated more supportive volume, this time a moderate supportive VMA spike to the downside that peaked at 13:45. | Our mid- and long-term outlook remains quite bullish and we see no reason for the market to alter its current up-trend. |
| Sell Call #3,4 03/05/2004 |
About an hour into the trading day, the market encountered a large amount of resistive volume to the upside, which peaked at 10:30. | We feel that the market could begin to move lower in the short-term in order to retest its local support level and generate more supportive volume to the downside, which would serve to strengthen a mid- and long-term move up. |
| Buy Call #1 03/05/2004 Left opened |
With the decline came a large supportive VMA spike to the downside, which peaked at 11:15. This supportive VMA spike was larger than the previous resistive VMA spike. | Our mid- and long-term views remain unchanged, because we currently see no indication that the market will deviate from its bullish mid- and long-term uptrend. |
These are the trades which netted the returns shown above:
Date |
Trade | Strike | Expiration | Contracts |
Contract Price |
Amount | Profit |
| 02/27/2004 | Buy Call #3 | $36 | April | 100 | $1.5 | -$15000 | |
| 03/05/2004 | Sell Call #3 | $36 | April | 100 | $1.75 | +$17500 | +$2,500 |
| 03/02/2004 | Buy Call #4 | $36 | April | 70 | $1.6 | -$11200 | |
| 03/05/2004 | Sell Call #4 | $36 | April | 70 | $1.75 | +$12250 | +$1,050 |
| 03/05/2004 | Buy Call #1 | $36 | April | 100 | $1.5 | -$15000 | |
|
Total: |
+$3,550 | ||||||
For this week’s “trade of the week”,
"Buy QQQQ Call #1" is opened
in order to close it later with profit if the index moves in our favor.
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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