Comments on: Technical Market Theories:More Tools for the Technical Analyst plus Industry in the Spotlight https://www.thebluecollarinvestor.com/technical-market-theoriesmore-tools-for-the-technical-analyst-plus-industry-in-the-spotlight/ Learn how to invest by selling stock options. Thu, 05 Jan 2012 20:35:58 +0000 hourly 1 By: admin https://www.thebluecollarinvestor.com/technical-market-theoriesmore-tools-for-the-technical-analyst-plus-industry-in-the-spotlight/#comment-560 Fri, 14 Aug 2009 23:48:45 +0000 /blog/?p=1317#comment-560 Jim,

First let me thank you for your generous remarks and welcome you to the world of Blue
Collar Investing.

Some points to consider:

1- Owning the Qs north of $50 makes you part of a very large group of investors. You’re not alone!

2- When you sell a call, you are agreeing to sell the security at that price and that becomes your cost basis, not your original purchase price. At that point in time your shares are worth $38 (unless below the strike at that time) and you’re deciding what to do with that cash.

3- It’s a little early to execute an expiration Friday exit strategy but if we did with the current numbers, here is what you would be considering:

4- You can roll out:

B-T-C @ $$1.89
S-T-O @ $2.29
ROO= 40/3800 = 1.1%, 1-month return
Downside Protection = 163/3800 = 4.3%

5- You can roll out and up to the September $39

B-T-C @ $1.89
S-T-O @ $1.58
Now this appears to be a loss of .31 but it’s not because we are also “buying up” the value of our security from $38 to $39, for a +1.00. Therefore….

ROO = 1.00 – .31 /3800 = 1.8%
Upside potential = 37/3800 = 1%, for a possible 2.8%, 1-month return.

6- I’ll leave it to you to calculate other strikes or you can use the ESOC (What Now tab). The math can be a little tricky and that’s why I created the ESOC, excel calculator.

Alan

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By: Jim https://www.thebluecollarinvestor.com/technical-market-theoriesmore-tools-for-the-technical-analyst-plus-industry-in-the-spotlight/#comment-559 Fri, 14 Aug 2009 22:23:58 +0000 /blog/?p=1317#comment-559 Hi Allen,

I’m new and I may have something out of order. It wouldn’t be the first time as I found your Exit Strategy book first which led me to your Cashing in on CC book. By the way, I’ve read several other CC books and yours is by far the best organized and explained.

I paper traded for 3 months and did very well following your books to the letter. But continuing to tippy-toe into this, I decided to use some QQQQ’s I already own.

I did STO AUG 38 call @ 1.19 last month (average sell around 7/22).

I’m embarrassed to admit my basis in QQQQ is north of $50 and maybe that’s the problem. As Friday expiration draws near, the exit strategy is looking cloudy to me:
1. Assignment.
2. Rolling out looks meager but okay.
3. Rolling out and up looks like a loss.

I’m expecting QQQQ to continue up. If I roll out this month and the calcs continue to be similar next month, could this be a spiraling hole of devalued premium by the time share prices reach my basis?

Should I have bought new QQQQ shares simultaneously with the STO AUG 38 for my education?

Maybe assignment is the way to go as I would keep all the premiums less commissions. There could be some price volatility in after hours trading while I wait to buy them back.

Any words-of-wisdom for a neophyte?

Jim

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By: admin https://www.thebluecollarinvestor.com/technical-market-theoriesmore-tools-for-the-technical-analyst-plus-industry-in-the-spotlight/#comment-558 Fri, 14 Aug 2009 12:33:25 +0000 /blog/?p=1317#comment-558 Tedd,

I’m glad that my books have turned you on to this type of investing. I congratulate you on taking this initial time to paper trade.

You absolutely have it right on technical analysis. My preference is to add stocks to my watchlist that are uptrending. As they say on Wall Street: The trend is your friend. If one of these equities should enter a period of consolidation (move sideways), they are not necessarily bumped from the list or even my portfolio. I use the confirming indicators to further enhance my stock selection decisions and for buy/sell and strike selection determinations. They also play a major role in exit strategy executions.

As far as placing a net debit order pre-market, this would be a good solution since you can’t get to the computer during the day. Many investors prefer this over “legging in” if their online discount brokers permits. You may want to set the net debit .05 higher (pay a drop more) to enhance your chance of execution. Further discussion of this topic may be an idea for a future journal article.

Keep up the good work.

Alan

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By: Tedd https://www.thebluecollarinvestor.com/technical-market-theoriesmore-tools-for-the-technical-analyst-plus-industry-in-the-spotlight/#comment-557 Fri, 14 Aug 2009 12:30:35 +0000 /blog/?p=1317#comment-557 Hi Alan: Love the books. I have put together my first watch list and paper trades (I am using a virtual trading account on the CBOE website, the only one I was able to find that doesn’t require a funded account to use). Very exciting, but I do have just a couple of questions about the construction of the watch list and order entry.

I understand that in order for a stock to be included on the watch list that it must have strong fundamentals as determined by the IBD100/Investors.com SmartSelect Ratings Checklist and the StockScouter rating. My question has to do with the technical analysis. Does the stock have to have positive signals from ALL the TA tools before it makes the list? My interpretation seems to indicate that the upward direction of the 20-day EMA, and having the price bars above the 20-day EMA, qualifies a stock for inclusion on the watch list, and that the other indicators (MACD, Stochastics, Volume) are used for confirming buy/sell signals. Do I have that right?

Also, do you ever use a debit limit order when entering trades? I have found this order useful because I sometimes have troble getting to my computer during the day. I can place the order before the market opens, and not only do I get to buy the stock and sell the call simultaneously, it also allows me to play the bid/ask spead at the same time. Any thoughts on this?

Thanks for your time.

Best regards,
Tedd

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By: admin https://www.thebluecollarinvestor.com/technical-market-theoriesmore-tools-for-the-technical-analyst-plus-industry-in-the-spotlight/#comment-556 Thu, 13 Aug 2009 20:55:23 +0000 /blog/?p=1317#comment-556 Here are 2 free sites to double check ERs:

http://moneycentral.msn.com/investor/market/earncalendar/

http://www.earningswhispers.com/

Keep up the good work.

Alan

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By: Dave https://www.thebluecollarinvestor.com/technical-market-theoriesmore-tools-for-the-technical-analyst-plus-industry-in-the-spotlight/#comment-555 Thu, 13 Aug 2009 20:48:22 +0000 /blog/?p=1317#comment-555 Hi Alan,

Another warning about Earnings Reports. Somehow I got the date wrong for NTES and bought it a few weeks ago. The ER came out yesterday and it’s down 10% today. Lucky for me it had a run up prior to the drop and I also got a good price for the option. So I’m at break even and I’ll be double checking my ER dates going forward.

Dave

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By: admin https://www.thebluecollarinvestor.com/technical-market-theoriesmore-tools-for-the-technical-analyst-plus-industry-in-the-spotlight/#comment-554 Thu, 13 Aug 2009 18:40:29 +0000 /blog/?p=1317#comment-554 Barry,

The bid-ask spread of option quotes is in a constant state of flux just as is the price of a stock. When you see the “last” price of an option fall outside the current bid-ask spread, it is a product of the fact that the spread has moved from a previous position.

We, as retail investors, sell at the bid (the lower) and buy at the ask (the higher). The difference represents the profit for the market makers. As you can see, we are buying high and selling low. That is another reason I like cc writing. We are generating an immediate profit and then managing our positions through exit strategies. We also have more cash to re-invest, thereby compounding our money in minutes!.

Alan

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