Archives


 

trade stock, stock market result

[Weekend Summary]

Dear Member,

I remain in a bear call spread in CYBX (short the Sept 20 calls (QAJID) and long the Sept 22.50's (QAJID) as my protective leg). The stock has cooperated and dropped in price since my entry. That's fine with me. As long as sthe stock price doesn't go up through the resistance around $20 I don't have anything to do but count the money the market gave me to enter this trade. If I don't have to adjust, I'll be able to keep the 31.5% return for the month.

I also entered a LEAPS play on Northrup Gruman (buying the Jan '06 50 calls (WJOAJ)for $6.10). This stock is staying in a nice uptrend and with the markets up for the time being, I like the play and intend to stay in as long as the stock doesn't close below the uptrend. I do expect a little bump if I am in as long as another two weeks or so since Northrup will be paying a dividend in mid-September which could result in a down day or so.

I'm just riding along on my "hog" straddle (Harley Davidson Feb 60). Straddles work best when there is a pop in implied volatility and/or a strong move in the stock. They can lay dormant for quite some time and then really jump. As I mention in my comments about the overall market, volatility is still very low. Implied volatility has a tendency to revert to the mean so I am expecting a rise which would give the HDI trade a boost. I still like the play.

Well, I don't have any seminars to teach for a couple of weeks so the weekends are free for a bit. I really enjoy teaching, but the extra free time is great.

I don't expect to see a lot of volume in the market next week as we approach the Labor Day Holiday. The markets all have something in common. The NASDAQ, SP-500 and DOW Industrials have all been moving up. The problem is that the upward move has not been supported by volume. Volume has been decreasing as the markets rose. Generally that is a bearish sign. However, volume is generally low at this time of year while the major players enjoy the end of summer at the Hamptons. What we can guess is that volume will be low next week and the volatility a little more likely to increase because of that low volume. I intend to proceed cautiously. Obviously I will continue to moniter my few open plays. I'll also be looking for short term volatility based trades. Meanwhile, I am waiting for the market to get back to business after Labor Day. Then we should see how the NASDAQ will deal with its' next resistance near 1900 and whether the DOW industrial can hold above 10486 (if it gets there). I'm looking at the next resistance for the SP-500 at 1125.

Volatility is quite low and has been going lower. When it turns it may well forecast a downturn in the markets. I like to buy cheap volatility and expect some pretty promising trades in the next few weeks to go along with what is already in place.

As the markets approach these numbers, I'll be willing to make some money in whichever direction they choose.

Have a wonderful weekend.

Sincerely,
Bill

Home  |  Subscribe |  All Rights Reserved |  Privacy Policy |  Advertising |  Contact Us |  Terms of Use |  Disclaimer |  Links


trade stock
stock market result