Trading the Cow

Staggering expirations

steoli@gmail.com (Unknown) — Tue, 25 Feb 2014 09:42:00 +0000

One strategy that people usually find very attractive is the selling of naked put options. The strategy consists in selling a put option at level that you consider a good point of entry and until that price is reached you get the payment to wait.

This seems good, especially when you are speaking about good stocks. The main problem is that for you to achieve a good premium on the sold option, you have to get close to the actual trading price, which usually isn’t the strike you are planning to buy when you evaluate the trade.

One of the solutions for this strategy is to staggering the options. So if you sell an option far away in time, you might get the premium you were willing to get, as well as the perfect strike price.

What happens now is that you are too far in time. In order to solve this issue, you can sell a 3 month option today, a new 3 month in the next month and a new 3 month after that.

After a while, you will have your options expiring monthly, as if you were selling the front month. The first three months will be boring, but after that you get a cash cow.

Selling a put option has the same chart of a covered call.

Note: Options are risky and you should read Characteristics and Risks of Standardized Options and Supplements.

Keep it simple... always!

steoli@gmail.com (Unknown) — Mon, 24 Feb 2014 19:29:00 +0000

This is a nice chart showing the characteristics needed for a turnaround story.
Most of the times people tend to focus on a lot of ratios and complicated projections.

My advice... Keep it very simple.

Ur Energy on the weekly frame... by steveoliveira on TradingView.com

The Loop...

steoli@gmail.com (Unknown) — Wed, 19 Feb 2014 11:16:00 +0000

Have you ever noticed when you start studying some technique that almost immediately you get the feeling that everyone is doing that? It starts with a search engine, then forums, then a lot of other things, and you get that sensation that you are jumping to the new trend in investing. With the market being in the end highly counter intuitive, this will put a big hurdle right in the beginning as you will have to deal with your own insecurity and only after you can get through the market.

Let's consider an example: You finish reading a book with a very interesting theme like covered calls. The subject is fascinating and makes a lot of sense. You dig further, and find many sites that are full of members devoted to this trading strategy. You begin to look for potential failures and testimonials for someone who got it wrong. After a while, you are inside a world that makes you think that nothing else makes sense. You just found the closest thing to a holly grail.

Then comes disappointment, all the dreams you had seemed to vanish slowly and like a drug addict you will go through all the phases: disillusion, disappointment, frustration and in the end you give up.

Can you avoid all of this? maybe not...

Spring/Upthrust System

steoli@gmail.com (Unknown) — Sun, 15 Sep 2013 19:21:00 +0000

Introduction

The original set o rules came from a book by John R. Hill.
They were reoffered by another vendor and sell for $100.

Long entry rules

Pivot Point Low: Lowest point in a movement prior to penetration of a daily high. Close must be above previous close on day of penetration of that high.
After pivot point, wait for penetration of that low. Go long on the close of day that:
1. Closes above two previous closes.
2. Close is above the pivot point low.
3. Close is above opening price and above the midrange of the day action.
4. This day range is greater than the previous day's range.
5. This reversal day occurs no later than six days after penetration of pivot point low.

Short Entry Rules

Exact opposite of the above. In other words, look for penetration of pivot point high and then reversal down.

Initial Stop on Long:
One tick below the extreme low after entry.

Initial Stop on Short:
One tick above extreme high after entry.

Trailing Stop:
Always move stop up to next pivot point low.

Exit Rules on Buys:(Exit Rules for Shorts are Opposite)
1. Only on execution of stop or on a sell signal.
2. After a $1000 profit or rule 1.
3. Four days after entry or rule 1.
4. Move stop to a point of entry if position is at a profit after four days and then exit via rule 1.

How to diversificate properly your portfolio?

steoli@gmail.com (Unknown) — Tue, 10 Sep 2013 09:19:00 +0000

Just follow this set of rules:

1. You cannot purchase a stock that will increase a position more than 25% of your portfolio (always).
2. No one stock can exceed 25% of your portfolio assets (Majority of quarter).
3. Half of your portfolio must be made up of stocks of 10%(or less) of your portfolio assets (Majority of quarter).

And that's it!

Next cycle up?

steoli@gmail.com (Unknown) — Mon, 09 Sep 2013 15:21:00 +0000

Next cycle up? by steveoliveira on TradingView.com

Complex normally is followed by a contrarian movement.

What everyone looks for in the stock market?

steoli@gmail.com (Unknown) — Mon, 09 Sep 2013 08:23:00 +0000

Everyone have dreams, and the majority has a crappy job or a lot of debt and Mr. Market is there and offers you the light at the end of the tunnel. Most people can achieve a good return on investment if pointed on the right direction, however if a good return is something around 10 to 15% a year, then we have a problem.

How can I solve my problems with a 15% per year on 10.000 USD of investment? 1500 USD?

So the solution is to try to keep looking for some kind of strategy that yields you something big. Because you know that is possible to achieve such a return. You saw Tim Sykes, and the guy can do it, and teaches you how to get there, so can you replicate him? I don't know that answer, I just know that for the majority of you are going to loose time and money in the process.

The idea that you can yield a big return from a little account that can change your life and put you trading for a living from any part of the world seems compelling.

My advice…

Take a look at Millionaire Traders from Kathy Lien. It’s an interesting book… See if you identify yourself with any of the traders and good luck with the process.

Harmonics

steoli@gmail.com (Unknown) — Thu, 05 Sep 2013 19:23:00 +0000

Now harmonics are the new trend in technical analysis. I haven´t seen this subject in my CMT exams, but i guess it will be there soon.
The big question is to know if it works, and the answer is yes and no.

We have a tendency to memorize the charts that worked and seem to forget the ones that didn't, in the end it's all a matter of money management for the people who put the trades.
There will be the whipsaws or the noise to make your life harder, it's a part of the process as in all other patterns.
In the meantime, let's enjoy.

Thanks,

S.

Some upside here... by steveoliveira on TradingView.com

Anatomy of a Position Trade

steoli@gmail.com (Unknown) — Wed, 04 Sep 2013 09:08:00 +0000

I want to share you how i approach a trade setup on the SPY.

First thing to do is to perform a technical analysis and identify the red zones and potential movements.

It's clear that there is a strong support around 160, which if breached will end the bull scenario, however we also have a good positive divergence on the last swing lows which are also present in some of the index components.

We have a gap at 168 that can be used as target.

So, if i wanted to play the long side, i would Buy 100 shares at 164.39 and sell a Covered Call at 168 for 0.54 cents and collect some premium.

I would also Buy 2 163 Puts and Sell 4 160 Puts for 0.98 cents, making a ratio spread.

This means that if the stock falls to 159 (at expiration), below support i will be assigned on the 2 Puts that are naked, making me long on 200 shares @ 160. However my average on this 200 shares will fell to 157 because of the profit on the long puts.

In the end i will have a position of 300 shares with an average price of 159.46 plus the premiums received on the covered calls and the ratio.

If the stock rises to 168 at expiration, i will assign and keep the profit and premiums.

Note: Options are risky and you should read Characteristics and Risks of Standardized Options and Supplements

When to Sell?

steoli@gmail.com (Unknown) — Tue, 03 Sep 2013 07:52:00 +0000

One question a i get a lot is when to exit the trade. Because if you study a little bit, you will find that it is easy to get it right when to buy, the problem comes later when it’s time to sell.

Mr. Market knows how to get your mind mixed up and that’s why there is this complex movements that make you exit at the lows and enter at the highs.

That’s why I think you need to have some sort of strategy to help you exit without making you think a lot.

One way to this is to plot a moving average of the lows. In the following chart you have a 3 day MA of the lows, and you can see that it helps you with the trend.

You can tweak the indicator to get a more accurate setting of the stock in play.

However, remember that this kind of strategy is best as a trailing stop, and that’s because when you enter is also when there’s more volatility and the only way to overcome the noise is to have a fixed initial stop that is in line with your risk parameters. As the price enters in trend mode, you place your trailing strategy.

Thanks,

S.

The importance of time during the day to daytrade

steoli@gmail.com (Unknown) — Mon, 02 Sep 2013 10:31:00 +0000

Normally i see some directional movement until 11h30 and then after 3PM.
In the between hours, normally there are very good opportunities to fade highs and lows.

Use an oscillator to help and a stock that had a recent strong daily thrust bar.

Here is an example:

Level 2 quotes will help improving the odds of a successful entry.

Thanks,

S.

Wedge or Ending Diagonal

steoli@gmail.com (Unknown) — Sun, 01 Sep 2013 11:02:00 +0000

If you like patterns, my advice is to look for them in higher time frames.

I found this beautiful wedge 5 months ago. It was a good trade and i want to share it with you.

Original Post:

This one shows a good ROIC (return on invested capital) which means that fundamentals support the long side, however this sector is one of the hated, but still, i see some accumulation building.

I will wait for the wegde breakout to get long, and i'll wait until the 38.2% retracement, that's a 60% upside.

I like this one a lot!

Capella Education Company by steveoliveira on TradingView.com

Trading System Rules

steoli@gmail.com (Unknown) — Fri, 30 Aug 2013 16:37:00 +0000

Do you have what it takes to follow the rules of a system? Most people can't.

Example:

1. Stock above the 200 Day Moving Average;
2. RSI (4 Period) close below 20. Buy 1/2 on close;
3. Buy a second half if RSI closes below 15;
4. Exit when RSI closes above 60;

What do you think?

I will show next how to improve the exit.

Thanks,

S.

Gold retracement

steoli@gmail.com (Unknown) — Fri, 30 Aug 2013 07:39:00 +0000

Gold retracement by steveoliveira on TradingView.com

We are near the completion of an ABCD pattern. Following the harmonic rules, a C point retracement leaves up with a 200%BC projection

I think we could see some downside, which is confirmed by a hidden price divergence (not on the chart).

Please take notice, that there were very strong sell offs and we are still in the bears zone.

Thanks,

Climax Selling

steoli@gmail.com (Unknown) — Thu, 29 Aug 2013 07:18:00 +0000

Climax selling... by steveoliveira on TradingView.com

This is a perfect example of a parabolic movement, which normally ends with a 61.8% retracement.
Volume was there for confirmation.

What about credit spreads?

steoli@gmail.com (Unknown) — Wed, 28 Aug 2013 11:18:00 +0000

So many write about credit spreads, but what about them? Are they reliable, are they risky, are they adjustable? Can I trade it on the weekly options? All this questions seems to arise when someone puts some kind of effort to try this strategy.

I’ve been doing this for a while and I must say that the first problem you face when you start trading credit spreads, is the risk you take. Normally you start looking to high price stocks like Apple and start with out of the money options.

So let’s suppose you want to place a trade in Apple very far away from the current price.

Assuming a 10K account.

You pick 430-420 (21 September):

Theoretically you get 45 USD (112-67) for every 1000 risked. If you place an order for 10 options contracts, you are gaining 450 USD for the 10.000 USD at risk. That's 4.5%! You just need that Apple stays above 430 to cash in the premium. If you do this every month then that's 54%!!!!

This is what everyone is selling in the webinars.

But what if the stocks falls to 440 in the next 10 days...

430 strike will start trading at 5 and 420 will trade at 2.5, which means that you're down around 2000 USD.

And if in the process Apple shows some kind of problem and the stock falls to 420? The 430 will start trading at 14.7 and 420 at 9, that sums around 5000 USD loss, which if we are speaking of a 10K account, that will be gameover for you.

So the question is: Does it make sense to risk so much for such a return?

No it doesn't...

So what's the problem?

The problem is called leverage! You are trading a possible exposure of 430.000 USD with a 10K account. Eventually it will end bad... It's a question of time.

The right mindset for a credit spread it the same for a naked put, which means you are willing to buy the stock if you get there. That's it! Don't expect the 4.5% steady income month after month.

Like a covered call strategy, you don't buy 100 shares and sell 10x more call options. You trade 1 option for each 100 shares.

Remember, leverage is the fastest way to blow up an account. Then again, many are doing it and are successful and that is the reason that in the end you will ignore everything i just wrote.

Good investing,

Italy can retrace?

steoli@gmail.com (Unknown) — Wed, 28 Aug 2013 09:33:00 +0000

Italy can retrace? by steveoliveira on TradingView.com

We have here a retest of the resistance zone while showing a very bearish combination of candles.
I expect to see some downside in the next days, probably testing the 16600 zone which was a previous rotation area. It could develop in an ABC format.

Bearish Gartley

steoli@gmail.com (Unknown) — Wed, 28 Aug 2013 07:45:00 +0000

Bearish Gartley by steveoliveira on TradingView.com

I still think the odds favor the upside break, however we must not ignore the price action and right now we are testing resistance in confluence with a bearish Gartley. I'll be looking for confirmation and watching it closely. Tks, S.

Big Range...

steoli@gmail.com (Unknown) — Wed, 28 Aug 2013 07:43:00 +0000

Big Range... by steveoliveira on TradingView.com

We are trading at resistance (1.3450/1.3415) and if we clear it, we could go to 1.37. This would be the next stop. However looking at a 12 month Market Profile Chart, we see that right now we are trading at Value Area High and this is important because if we fail to breach it, then the next stop will be the point of control at 1.3050.
We can see also that divergences are present and oscillators are overbought, which means that we need to have a lot of strength to get through the current resistance zone.
Safest thing right now if to go down to lower time frames to figure what the tape is telling us.

Trade well...

S.

SPX - MY BEARISH CASE

steoli@gmail.com (Unknown) — Tue, 27 Aug 2013 07:38:00 +0000

SPX - MY BEARISH CASE by steveoliveira on TradingView.com

We have two rotation zones or box of prices as you wish to call it. What i think it is important, is that we have two distinct moves that end very similar at the top of each rotation box. So we could have some downside with a very strong support at 1549, which is my Point of Control for the last 6 months (market profile chart), and then if Mr. Market wants, we could head down to the bottom of the box. The movement until 1549 will be an ABC on the current Elliott Wave Count, and i think it has a good probability to happen. The movement from 1549 to 1400 is a low probability and we have to check the chart again after 1549 is tested. If 1549 is breached, there will be a projection that will take place and that's where i'm basing my analysis on the downside target. One other important detail is that the gap at 1700 is still there to be filled.

Setup

steoli@gmail.com (Unknown) — Mon, 26 Aug 2013 14:30:00 +0000

Trading Setup (Example) - Harami by steveoliveira on TradingView.com

A good trading setup have to show us a confluence of signals, so in this example we have: 61.8% Retracement; Good Hidden Divergence; Oversold; And an inside bar pattern. The Inside Bar Pattern is traded by entering in the breakout direction. It is best to name it harami, as we are looking to a candle chart. In this example i would say, that the entry point would be 15.000, with a stop around 14.879. The target will be set around 15.250, corresponding to the mid point of the selling bar. which leaves us with 2/1 return ratio.