You are partly correct, there is no way of knowing when a stock will trend the other way; but there is a way to make a strong educated guess based on historical performance the range the stock price will be in before it changes direction and trend up for a period. After the market closes, and on the weekends is when I pull the data; I was using data from stockdataguru. Intra-day analysis is too risky because of all the junk out there in the news driving sentiment. I track a number of stocks historical movement every day (say about 100 different stocks at a time), and model them based on some calculations I use to determine a "buy in" range. The stock is trending down, and the daily price volatility is high compared to the norm (the absolute value of the difference between the open and high plus the open and low). It is not always the lowest the price the stock will fall to before I buy in, but from that point the stock price usually moves up 20% at a minimum within 30 - 40 days. Understanding the stock value, company, sector, etc. is to me a better way to estimate/anticipate if a stock price will move up. Then the other side is what you already know, with stock price movement, comes option price movement. (I am talking calls only, puts are for the true gamblers; I don't touch them.) I look at the historical option prices to see how the option price has moved during the contract, it gives me insight to the stock price / option price correlation; seeing the history day by day together really helps. Eventually I sell the stock and option long before the stock price hits the option strike price; both are trending up so I take a little money and run. Multiply this times about 10 - 15 stocks and option contracts per month; at it adds up nicely. My worst case is holding a stock longer than 40 days, and loosing marginally on a contract; but it is not the norm and when I sell the stock I make back what I loose on the contract. I am concious of holidays, dow average, earnings releases, and common things like that; they sometimes have an impact on the stock price. Since I have been doing it, I have had 2 copanies go bankrupt on me; one was a bank and the other was a greek company. In both cases, I knew not to buy, but I didn't listen to my concious. This is how I do it. Other people may have diffent methods... --- On Wed, 5/12/10, rvd <rvdidit@yahoo.
|
__._,_.___
The goal of TheOptionClub is to provide a forum for members to work together for the purpose of furthering our individual understanding option trading. All messages and postings, and any materials circulated are provided for discussion and educational purposes only. No statement contained in any materials from TheOptionClub should be considered a recommendation to buy or sell a security or to provide investment, legal or tax advice. All investors are encouraged to consult a qualified professional before trading in any security. Stock and option trading involves risk and is not suitable for most people. There is no guarantee that any information provided is accurate and, may in fact, be wrong. It is understood that the participants in TheOptionClub have varying backgrounds and degrees of experience in option trading, and that regardless of experience each member is considered a student. As such, any information distributed through TheOptionClub should be considered with a critical mind and not relied upon as an authoritative source.
To unsubscribe from TheOptionClub, send an email to:
OptionClub-unsubscribe@yahoogroups.com
To unsubscribe from TheOptionClub, send an email to:
OptionClub-unsubscribe@yahoogroups.com
MARKETPLACE
.
__,_._,___
No comments:
Post a Comment