Technical Analysis. |
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April 10th, 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.
| Security | Return |
| Call #1 (QQQQ May) | +108.70% |
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Total Profit: |
+$12,500 |
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Nasdaq 100 Indicator |
Even though the trades shown above were not entirely without risk, they resulted in a profit of $12,500
Why buy expensive options that will expire in 2-3 month?
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':Even though next months Call & Puts options are more expensive, they tend to be less volatile in reaction to market swings, and they don't devalue as quickly as a current month options. By trading options that are at least one month ahead, you can protect yourself from unforeseen short-term fluctuations in the market. Also, if the uptrend continues on a long-term basis, one can hold these options for a longer period as they will substantially substantially in value.
| Trade | Volume Motivation | Market Commentary on Members Home Page during the trade |
| Buy Call #1 03/22/2004 |
The market declined throughout the rest of the morning and early afternoon, until about 13:30 where it began to generate a large amount of supportive volume to the downside. This supportive volume was concentrated in two large VMA spikes: the first at 13:30 and the second at 14:15. These supportive VMA spikes enabled the market to begin moving higher once again, but during its end of day ascent, it encountered some resistive volume to the upside, but not quite as large as the supportive volume seen earlier in the day. | Despite today's decline being larger than anticipated, the market did generate more supportive volume to the downside during today's move. As such, there is large amount of unreacted supportive volume to the downside, which will likely fuel a strong mid-term and long-term rally in the near future. |
| Sell Call #1 04/02/2004 |
On 4/2/2004 the market moved higher throughout the morning and into the early afternoon, when two large resistive VMA spikes to the upside appeared, one at 11:45, the other at 12:30. Although these resistive VMA spikes slowed the market’s ascent, they did not bring it to a stop. By 14:00, the market had generated a further resistive VMA spike to the upside. Although it was not nearly as large as the previous spikes, this third resistive VMA spike brought about a short-lived down move. A relatively small amount of supportive volume to the downside at 14:45 then counteracted, pushing the market higher again for the remainder of the afternoon. The close was at the highs and was, in fact, the highest closing level seen in several weeks. | Today's volume levels were among the heaviest in over a week. Since the majority of today's volume was resistive, we caution short-term traders about a possible short-term downturn. |
These are the trades which netted the returns shown above:
Date |
Trade | Strike | Expiration | Contracts |
Contract Price |
Amount | Profit |
| 03/22/2004 | Buy Call #1 | $35 | May | 100 | $1.15 | -$11500 | |
| 04/02/2004 | Sell Call #1 | $35 | May | 100 | $2.4 | +$24000 | +$12,500 |
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Total: |
+$12,500 | ||||||
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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