Quick Intraday Trade on FB

I bought 20 FB May 14 55.5 Calls for $3.35. Position size was $6700. I bought at 10:17 and sold at 11:12 for $3.90. Not a bad trade for less than an hour. Today was good and in consistence with my 10-20% profits on each trade.

My trend was the 55, decision chart was a 21, but my action was a 10 MA chart. All indicators lined up.

First, I looked and noticed the DOW and NAS were running in the same direction. I had a good cross on the 55 from yesterday and a continuation into this morning. My ADX was up on my 55-which gives me about as much confidence as any indicator I use.

Off my 21 (decision), I had an elevation on ADX, had a FP, MF up, "E" formed, had that break on the previous day's high, and candles were above my 8 MA. Screaming to the top of my lungs, IT'S A TRADE!!!!! After entry, I rode the 10, until I was called out of my office for a short meeting. I was not taking any chances, so I just exited the trade. If I knew how, I would have put in a stop loss or whatever that is that I should be using after every entry. I will learn that this week- long overdue.
I hope you are having a good trading day!

Thanks for sharing another great trade. I'm still trying to get my head wrapped around the intraday trades. If you don't mind, I have a couple of questions.

1) When you say MF up, do you mean on the 10 or 21 chart? Do you use standard MFI setting of 14?

2) How do you transition from the 21 (decision) to the 10 (action) to time your entry?

oh...thought of another question.

you said

> Off my 21 (decision), I had an elevation on ADX, had a FP, MF up, "E" formed

3) Do you mean "E" on the 21? I thought the "E" was on a 5 or 10 min chart.



Edited 1 time(s). Last edit at 05/12/2014 11:05AM by rufinatti.

Hey Rufinatti,

Good questions!

Yes, I want Money Flow up on both my 10 and 21, but definately my 10. If I am running over that 80 line on my 10 Money Flow, I am concerned, but if I have not reached the 80 off the 21 MA and my 55 ADX is up, the issue with the stock being overbought off the 10 is voided (can care less what MF says off the 10 at that point). Rembember, the concepts of larger charts can work on any time frame. If my 55 is my trend (larger chart), it will weigh very heavy regarding intraday strength or direction of a trade. I will state this again, if you have a rise on the ADX off 55 continuing from the previous day, you really need to start looking at this stock being a possible trade. Yes, I use MFI standard 14.

2) How do you transition from the 21 (decision) to the 10 (action) to time your entry?

I tend to get caught sitting on the fence too long waiting on setups off really small charts like the 3,5, and sometimes 8. I already have a MA chart set on the 10, so I like using it for entry. I will get a little bounce around sometimes, but not too much of a fluctuation. Remember, when trading momentum, if all indicators are running in your direction, you will get a pop (about 90%) of the time. I have practiced so much until, I just jump when all start to scream. I promise you, indicators will definately scream. I love going in between 9:51-10:12. There are very, very, few trades I miss, if indicators scream, and I go in during this window (do not know when was the last time i missed in this window).

3) Do you mean "E" on the 21? I thought the "E" was on a 5 or 10 min chart.

I like seeing the "E" on my 10, and 21. If I do not have a clear "E" on the 21, I want to see divergence in my 3 Moving Average Lines (5, 10, 20). I want to see clear separation between my 5 and 10, and divergence developing between my 10 and 20MA. Again, 21 is my decision, so I want to see solid confirmation of a trade on my decision chart.

I hope this helps

Rookie30, How many stocks do you follow in your trading basket? Just curious as to how many most people can effectively follow.

Traildoc,
I follow 10, but 85% of the time I am in one of the 5, FB, LNKD, AMZN, V, or CF. They are FB, LNKD, TSLA, V, FDX, UA, CF, AMZN, FOSL, HAL

rookie30, thank you for responding. While you are in a generous mood, I have another question please.

I'm trying to go back and look at trades that you and Darcy post and each of you will often say that you had a FP or HRFP on such and such chart. To me that means that all the indicators are crossing at the same time on this candle, but I rarely see them.

So...when you say you had a FP on your 21 chart do you just mean that you had 3 out of 4 indicators were red over green? Does it not matter when they crossed, just that they are all going in the same direction?

I can only speak for what I look for in an FP or HRFP. You are correct, an FP is when 3 of the 4 cross. To me, it gets a bit tricky with when the crosses take place. This is when the experience plays a part in this process. You have to make a decision whether or not you treat a cross from yesterday as a cross for the present day's trade. For an example, Today, I based a big part of my decision based on a FP on the 21, but a HRFP on the 55- all developed late yesterday. The BIG factors that confirmed the crosses were leading into today's continuation were, the 55 ADX on today's chart was up and, I had a break on the previous day's high. I am not trying to dump too much on you, but the best trades are those that open below the Prev. Day high and drive through that resistance level before my favorite period to enter a trade (9:50- 10:20 ish). The same rule applies for trades in the opposite direction. Based on my trades taking place right after Amateur Hour, I have to sometimes use crosses from the previous day. That ADX off the 55 is really big (but not 100% necessary), but they all work together to give that extreme level of confidence. For the rule, that 21 and 10 must have the ADX pointing up.

I have been wanting to say this, and I will at this point..... Trading when a 55 is the decision allows too much time for a trade to turn REALLY BAD for a trader with limited capital. This is where I made my early trading mistakes. I was almost forced to trade small charts. I could not afford to have a trade turn on me off a 55 chart. I COULD afford for a trade to turn against me from a small chart because about 90% of the time, I can get out before I get hurt too bad. My decision to stay or exit is based on every 10 minutes opposed to every 55 minutes. After losing my basket and my family savings twice (was not a lot in savings), I had no choice but do something different. I minimized my losses and the size of my losses. This is when my world turned around. I was making 10-20%. That was anywhere from $100-200. That was good for me because I was being successful.

I think trading from bigger charts are really good for those who can afford to deal with the fluctuations. My worse feelings were waking up to my charts and my position appeared to have dropped 20% overnight. When the market opened, my $1200 is now $900 or 950. I am sick because the market is down that day, and it appears I am going to lose more. I was in turmoil. This was a terrible feeling to have because I knew I was now gambling-praying for the market to give me a break. If you can learn how to have unlimited trust in your research and ride through those roller coaster rides, please hit several homeruns in practice first. I practiced a lot, but I just could never deal with those fluctuations off bigger charts. Give me 10-20% 8 or 9 times a month, and I am happy. I learned that nickels and dimes adds up to become to dollars over time.

When I learned how to make very small gains-consistently, I knew I would be almost afraid to go back to holding over night or trading off bigger charts. I am doing better with it in practice, but for now, I will continue to practice. If I enter a trade and my first candle off the 10 paints against me, I am out! I trade momentum and when a stock goes against momentum, that my friend in negative momentum-lol! Make a long story short, after I enter, I flip between my 21 and 10- that is it for me. If I get one reversal candle paint against me off the 10, I stay if I have about 10% profit under me. If I have less than 10% profit and the negative candle paints, I get out immediately. Again, for whatever reason, I misjudged the momentum. Always, always, always, strong momentum will run 10-20%, after that, the trade is giving you cream on the top of your cake.

I practice about 20-30 trades a week through TOS on Demand. I practice about 2 each night and 1 at 5AM when I first get up in the mornings. I practice about 6 or 7 over each weekend. Practice makes me a more confident trader. If I lose in practice, I will lose with real money. If I win in practice, I will when using real money.

Sorry to get so long winded.

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rookie30
Sorry to get so long winded.

You shouldn't be. Your posts are golden. I've learned (continue to learn) so much from reading your posts. Thanks for sharing your hard-earned knowledge.

Yep, keep the wind in our sails!

AMZN would have butchered me, if I did not follow my rules. AMZN broke the Prev. Day High within my window of trading (Hotspot). My ADX was up on my 10. Non discipline traders would have jumped this trade.

ADX was down on the 21 and 55. MF was not going up, the DOW was not decisive and to close to 0 for me. I like to trade when the Dow and NAS are running in the same direction, but also, I want that Dow to be above 20 or 20 or more in the red. I find that momentum trades run pretty consistently with the DOW. The crosses simply were not there or close to being there on the 55. That 55 has to show me SOMETHING to give me confidence in a trade. Hint- no 55 confirmation on at least a FP-no possible trade for me! This was an easy "No Trade" day for me. I am only looking for about 2 or 3 trades a week. We will see what tomorrow brings.

Breaking this down a bit.....

I first look at my 55 Gary Chart. If I do not see a cross in progress, or a cross from the last session, and ADX line starting to point up, I "keep it moving". That stock will not offer me a trade that day. I flip to my next stock. I look for my indicators first on the 55. If I see a cross that took place the previous day, but the ADX is flat, I flip to the 21. If I have a good cross, I want to see the ADX climbing, I want to see that previous day's break coming within the next few minutes, or the break could have already taken place. I now get to twitching because I see a possible opportunity to pop this trade. I now glance at my DOW and NAS. If the futures are showing more positive movement in my direction, I flip to the 10MA and look for my "E", ADX up, and MF up. If MF has hit 80 on call or 20 on a put, I flip back to my 21 and see what the MF indicates. If it is rapidly climbing towards the 80 or approaching the 20, I look at the 10 again to make sure the MF is still pointing up and not flattening. If it is still pointing up on that 10, I pop the trade because all I am after is a little chunk in the middle. After entering, I stay on the 10 and watch my first candle paint. If it paints in my direction, I know I made a good entry. If the next candle paints against me, I continue to stay because typically I am in a break even area. I look at my indicators. If the MF is still going up, ADX is still up, Dow and NAS still going in my direction, I know this trade is going to go my way, so I wait for the next candle. If it paints against me, I am out-Period! If it paints a Doji, I stay. If the following candle paint in my direction, I stay. Now I am in the momentum part of this trade. Normally, this is where I pick up my 10-20%. The Option Price usually makes a nice pop around that 10:30-10:40 candle. That is why I want to be either in or out during this window of time- if I entered earlier. If I am in, I am watching the MF and ADX, closely off the 10. The MF is going to help me make my decisions. If that MF has hit the 80 or 20, and it curves before slamming against the top, watch the OP stop. This is technical, but off the 10, if the MF hits the top and flatlines, that tells me that it is still going up. If it drives above the 80 and curves back around, it is turning. If it flatlines, I automatically flip to my 21 and ride it from there. It has run IT'S course on the 10 (sorry, but this is how I see it). If I have reached at least 10% when I get that little curl on the MF and a sudden stop in the Option Price movement, I get out and take my 10% and close up shop. If I stay and MF starts to turn down ( or up on a put), I will not have time to get out before I am rewarded me with a BIG drop that takes me back to nearly break even point. I gain my other 10% or more when I do not get that halter or hiccup. If it starts back in it's previous direction (after it curls), the OP will give another generous pop. That is what I look for. At that point, I am closing in on my 20%. For the duration of this trade, I am watching MF. When MF makes a slight bend, ADX gives me a slight turn, candles have gotten a bit smaller, and that thing inside says, you are up 18%, get out because if that MF turns down, you will give away about 6% of that position. I take my gains and go. I know that was a lot, but that is the nuts and bolts of my trading strategy. I use a lot of basic knowledge and indicators. I do not watch any news. I do not know when there are important dates. I do know the window of time from 10:00-11:30 is fairly safe everyday for trading. I have no reason or a need to know much more than that.

Now take all that and put it together-along with what I shared yesterday, and that is my official trading plan. From what I know, there are two full trading plans on the forum. There is Darcy's and there is mine. Take what you need from each, and make some money. I never thought I would release this, but I not be where I am if Darcy and others would not have shared with me.

Have a good night!

OK- Just re-read my message above and it sounds like "Rain Man" wrote that, but if you can sift through it, and understand it, you have the plan. My wife is killing me right now and I am cracking my side. I let her read my message above, and most of you know what she said first, "Did you take your medicine today....." My response is, " Not today, but I just took it". She says, "That explains it. When are you going to learn that those people do not need to read your messages when you are like this. You know you are embarrassing yourself". I am still laughing, and know some of you just might get it. If you happen to understand it, you might need a pill also-lol! I am who I am and totally love ME!

Made a lot of sense to me; now where can I get those pills?? Seriously though, your help is much appreciated.

I am up-as usual practicing at 5:10AM. My morning practice is Oct. 22, 2013 AMZN. I Do not get as specific as figuring out how much I would have made. I just want to make sure I am correct in my trade.

I bought in at 331.22 at 9:48 and exited at 10:31 at 335.97. I waited for the rise over the previous day's high, and other indicators had already developed. I rode until the 10:30 candle dropped below the close of the previous candle (10:20) and MF had started to turn down. I know my style and can feel when momentum is leaving, so I ran for the hills and took profit. The momentum run was over because AMZN dropped like a ton of bricks, but I was out.

I will not get to fanatical and send these too often, but just wanted to give you and idea. I will not use the site as FB or something, detailing every part of my day.

Have a good trade today!

Rookie, thanks for posting the practice trade. That gave me an opportunity to test out a new indicator I'm working on (bottom row of screenshot).

I've got to say, I'm not sure I would have jumped on that one yet because I still get nervous when I see the stock that far outside of the bollinger bands. PLUS the RSI on the 10 min chart is extremely overbought (at 100). So, what do you look at to give you confidence that it'll go up some more and not just do a hard reversal on you?

I really appreciate your teaching and stream-of-conscious posts.

[click for full size image]


edit: I added the end of the trade just in case anyone wanted to study the whole play.

[click for full size image]




Edited 1 time(s). Last edit at 05/14/2014 06:24AM by robert.

Thanks Robert,

My strongest indicator is the 55 ADX (but it is not 100 necessary). If that ADX is up on that 55, ADX up on 21, break in major support, MF up on 10 and just approaching the 80, MF is in good range on the 21 (35-65 going up), DOW and NAS are going to go in my direction and meet the 20 poiint rule, you have a very high percentage trade. If you do not get the indicators you want, do not trade. The big key is, try to pop it before it is too late. When it breaks the resistance level and you get a nice full candle painting or painted in your direction off that 10, you got to pull the trigger. Try this in practice and you will see that it will give you a profit 9 out of 10 times. After entering and I am riding the 10, I will draw lines under the bottom of the previous candle. If my stock drops below the last session's low, I consider getting out. If I have my 20%, I am definately getting out. If the run just started, I will allow that candle to paint, but the next candle better paint in my direction or, I am out with a small loss.I have gotten to a point that some of my indicators do not have to confirm a trade because others are showing so much strength. For an example, After the market has been open for 20 minutes and I have the ADX pointing straight up on the 55, some other indicators can be disregarded. Do not practice this way, but I am just speaking about my trading approaches. Again, this is how I keep my losses small. When trading this style, I expect losses. I just manage those losses. I read the book, Trading the Plan. It really helped teach me how to manage my losses. If I lose $600 or $700 in a month, but gaint over $7000, I am very happy with those numbers. Again, I expect a few losers, but if I do not alter my plan and follow it as written, I almost never lose. When I have a losing trade, I usually immediately know why, so I do not have to go back and spend endless hours, trying to figure out why. I try to not change my emotions when I lose. At one time I would go nuts when I had a loss. Now, I know it is part of trading. I go nuts, if I stay in a position too long and lose more than I expect from a loss. That is simply a lack of discipline. Yes, I am a trader who will ocassionally lose. Based on my last 10 trades, I lost on two of them. The amount I loss was less than my smallest profit trade. I can live with that.

I proposed a question to my son. I asked, " If you lose money 1/2 the trades you enter, can you still turn a profit?" He thought about for a second and said, "Well, yes. Dad, that was slick. I get it now. I totally understand where you are going with this managing loss thing". Of course, no one wants to have losing trades 50% of the time. As I train my son, I am teaching him that the one most important aspect of trading is, managing your losses. You will lose your basket so fast if you do not master the art of when to exit and take a profit or a small loss. For those who are starting this business, please have solid exit strategies. Again, this is where I was butchered in the beginning. I want to repeat this process.... Once I reach my 15% gain, I start drawing lines underneath the previous candle. If my stock drops below that line, I exit with a very nice profit. If the next candle paints higher, I draw a line underneath it. The process goes on and on. Sometimes, I will run candles up to 50-70%, waiting on that close below the bottom of the last candle.

Alright- If you guys keep asking questions, I am going to keep writing these books. Robert, I know you were looking for a simple answer. No such thing for me-lo!

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rookie30
Robert, I know you were looking for a simple answer.

As always, thank you so very much. But, you are wrong in assuming I want simple answers. I've pretty much got the big brush strokes down pat. Now I'm looking for the finer details that may not be able to be conveyed in a simple answer. By the way, simple doesn't necessarily mean short. Your answer was lengthy, but easy (dare I say, simple) to understand.

I practiced V on November 6, 2013 this morning. I lost on the trade. This one turn on me quickly, but after looking back, those candles on the 55 were losing steam from the previous day. I have not had time to find other reasons it did not work, but i will tonight! I exited the trade and gave up $1.17 on the STOCK PRICE, so my loss would have been fairly minimal. I still do not like losing- just happy it was not real money.

Put on FB was my trade for today. I gotta a litte brick (real money).

V was also there for a nice Put trade this morning. Both are in my basket, so it was a toss up for me. I just wished I had a choice like this everyday.


I hope you traded well today!

Today was a good day for me. I have been sitting on the fence, waiting for the right setup, so when I saw FB meeting all my criteria, I went it pretty strong this morning.
Bought 17 Call contracts of FB. Stock was 61.99 and sold at 62.65. Really good profit in about 40 minutes. I hit my 20%, so I bailed. Nothing changes with the way I trade. I trade the same way everytime- just gotta wait until stocks show the setup. I am learning how to trade FB as I did AAPL in the past. I am trying to teach my son that he loses everytime he chases a trade. It is pretty black and white-it is either a trade or it is not-Period. My son is in college, so I have to break this down to him. I am trying to teach him to fall in love and marry that ONE stock. I hope he chooses FB, but right now he likes UA. Not a bad stock. I trade it also, but FB is where the "hot money" lives.

I hope you had a good trade today.

Rookie30,

Excellent trade. I have been reading your posts and am a big fan . You had very small bid ask spread in options, classic cup pattern and breakout on high volume in an upward 60 minute trend. All the other traders who day trade options with huge bid ask spread (the CMG's and the NFLX's and the PCLN's) should learn from this. The wide bid ask spread gives a huge edge to market makers and seriously affects the performance of any trading system, no matter how good it is. You end up 5% or more down as soon as you enter the trade and in the long run this will seriously reduce the profit factor of any system. The goal should be to minimize the market maker's edge when entering a trade.

I have a similar trading methodology, influenced by your style. Breakout on high volume above previous day high or 30 min open range high (whichever is higher) or breakout from a cup pattern on high volume, in an upward trend on 60 min, 15 min and 5 min (close above 8 EMA), with 60 min and 5 min ADX above 20, and SPY moving in same direction. I exit when 2 successive candles close below 8 EMA on 5 minute chart. The difference is I trade shares instead of options. I can get bid ask spread of 1 cent and don't have to worry about delta, vega, theta, gamma effects, and I get 4 times buying power on TOS.

Tan

Tanman,

That is good stuff. Your trading style is very interesting. There are a lot of components I really like. The two closes below 8MA is nice. I watch my MF pretty closely. When I enter a trade, I draw horizontal line on my chart exactly where I entered on MF. I am on a 10 minute chart. I am considering using a chart that is a bit smaller, but I am practicing that process before going in with real money. Anyway, I use all other indicators that I mentioned in my previous posts, but if for whatever reason my MF direction changes and turns to go below my entry line, I consider getting out (depends on what my candles are telling me). As long as MF is rising on a call, I typically stay in the trade. When it reaches 80 on call or 20 on Put, I watch it closely because now it has become my primary indicator for exit. If it charges through the 80 and candles are still looking good, I stay, but as soon as it drops below the 80 or above 20, and I am seeing a doji or reversal candle, I am out!

I am with you on the 5% thing. I cannot afford to give up that amount going in because if I get a turn that I did not expect, I could be down 10% before I can punch the sell button. I love FB for that reason-tight between bid and ask. My neighbor is one who buys options on "No Name Companies" that carry HUGE spreads. It frustrates me because he is "Hard headed" and continues to lose money. He will not practice. He has listened to some of these so called Gurus who have charged him tons of money. He is going to lose everything he has, and I am hurting for him, but honestly, I am too a point that I am letting him go. It is just a sad situation, but I think he assumes because I do not know the terminology ( he does), I cannot help him. He ripped me pretty good because I do not totally understand Calls and Puts. Heck, I think I am buying calls and buying puts (according to him, I am selling puts), do not know how volume work, beta, gamma, theta and none of that. He went through this spill about how this works and that I need to know how this works before I can be successful at trading. I laughed and said, " Cool, I can think of about 100,000 reasons why I am content with my lack of technical knowledge and terminology". Again, when folks start to insult, I leave them alone. Sorry, back on my soapbox.
Have a good day!

It was tough sitting through last week, but I will give myself a pat on the back because in the past, I would have tried to change some things in my trading philosophy, and probably lost some money. Instead, I waited patiently until the market decided to give a little slack. I think a lot of us jumped on the opportunity.

Rookie30,

Thank you for the positive feedback and the lessons based on your experience. I have learned a lot from your style. If I want to be more conservative, I use 2 closes below 8 EMA on a 2 minute chart for exit, but that misses some larger moves. Also when I hit a certain profit point (for example 10% with options) I sell half position and raise stop loss to entry price. That gives me a free trade with a guaranteed profit no matter what. I let the other half position run with no fear or anxiety. Then I exit full position when there are 2 closes below 8 EMA on a 5 minute chart.

I am going to try using the MF indicator to exit and see how that compares with 2 closes below 8 EMA on 5 minute chart. In your FB trade, I would have gotten out at $62.64 on the 12:25 pm 5 minute candle which would have been 2nd close below 8 EMA on 5 minute chart. Almost the same as your exit

Today I entered FB at 63.85 on a 5 minute chart using my criteria. I got out of half position at 64.13 (entry price + (ATR x 2) and raised stop loss to 63.85. Trade is still running and at this point it is a risk free trade and I can relax. I am closely watching the 8 EMA.

Tan



Edited 1 time(s). Last edit at 05/28/2014 01:06PM by tanman.

Out of full position in FB at 63.92 which was 2nd close below 8 EMA on 5 minute chart. Made 0.28 on half position and 0.07 on half position.

My TWTR trade is still running. Got in at 31.96 on high volume breakout from 30 min open range, got out of half position at 32.26 and raised stop loss to 31.96. Still waiting for 2 closes below 8 EMA on 5 minute chart to exit full position. I made 0.30 profit on half position and should make at least $1 profit on remaining half position.

Good trade, Tan. With you and rookie both posting positive results trading FB, I'm encouraged to begin practice trading that stock. I've shied away from it because I didn't think intra-day options would work too well since the stock doesn't move much more than a dollar on any given day.

Thanks, Robert. Yes FB is a slower moving stock but its options are cheaper, and you can take a bigger position size because of that, which will result in a higher dollar figure in returns. Even though it appears to be a slow mover, it still has daily ATR of 2 which is excellent! Additionally, the bid ask spread is only 1 cent which is unbelievable, and gives the least edge to market maker. You can trade delta 25 calls which are very cheap. For example June 67.5 call is delta 25 right now with ask of 72 cents and bid 71 cents.

The advantage of delta 25 to delta 30 range options for day trading is that when price moves in your favor, the options go up at a faster rate because the more price moves in your favor, the higher the delta (rate of change of price) of the options becomes (from 25 delta to 41 delta in FB ). On the other hand when trade goes against you, the options go down at a lower rate because the more price moves against you, the lower the delta of the options becomes (from 25 delta to 13 delta in FB ). This automatically ensures that when you win you win more and when you lose you lose less! This feature of options is not present in shares and is the only reason I might consider day trading options.

Buying at the money options (delta 45-50) for day trading is not a good idea because at the money options have the highest theta (time value) which increases the premium a lot and make them relatively more expensive and you pay top dollar for the extrinsic component. Also gamma (rate of change of delta) is the highest for at the money options so the price moves very fast in both directions and if you are losing you can lose very fast. You don't have to worry about options expiring in day trading so no need buying in the money options because they can be very expensive. Also, delta of in the money options changes at a slower rate than the 25 to 30 delta options.

Tan

tanman,

Excellent strategy. I like the idea of selling 1/2 of a positions and riding the other 1/2 through a couple of bumps. In the past I used the 8MA as one of my major indicators. I still use it, but when I discovered the power of MF, I started to use 8MA as a secondary entry/exit indicator. There is a lot of consistency when staying in trades on one side or the other of the 8MA.

I always buy in the money options, but I buy weeklies (usually same week) because when the stock moves, the option price moves basically on every tick. As I have stated in the past, I have no idea why, but I practice a lot and find these consistencies, so I trade it. I know this sounds crazy, but I absolutely love finding trades on expiration Friday. It is about as risky as ever, but if the setup is perfect, I pop in the money trades and can take 5k to 8k literally in minutes. I guess you guys know why, but for me, I I know it happens, so I salivate when I see a "Cream of the Crop" set up on Option Friday. Tanman, you are an intraday Guru! I am inspired by your style. I am going to work hard to learn more. I know some think I am strange and probably wonder how I trade well, because I do not seem to know a lot. I practice so much until I just figure out consistencies. If enough time is spent practicing, anyone can do it. I am convinced there are people who have found consistencies that bring profitable trades nearly 100% of the time. I will get to a point when I trade intraday positions that are valued at 30, 40, 50K (broken into a few positions).If I can hold 5-7K positions, and have successful trades, there is nothing different about taking 50K and trading it- ACCEPT THE MARGIN OF PROFIT. I would need to figure out how to break the 50K up into multiple positions. The one comment that is embedded in my mind that Gary said is, " I trade as easy as I breathe". I want to get there. I will get there! Lets keep working and sharing to help others. Have a good day!

Rookie30,

Thanks for the kind words. I am just an amateur trader in front of Rookie30 the real Guru You have tremendous experience and nothing can beat lessons learned from experience. Knowledge can never be a substitute for experience which makes you the real Guru and I have a lot of respect and admiration for you as a day trader

You seem to be the only one here who knows the secret weapon - weeklies. Front week weeklies is the way to go for day trading options. Front week weeklies have the highest gamma and you get the biggest bang for your buck. You can make money real fast with them and you get a bigger percentage return for the same stock move than the monthlies. They are also much cheaper than the monthlies and vega (volatility) does not affect their price that much. I just don't understand why everyone here other than you wants to day trade monthly options instead of the front week weeklies. Makes no sense whatsoever. Why spend extra money for a lower percentage return over the same stock move? With monthlies if you make 60 cents on a $3 option then with front week weeklies you can make the same 60 cents on a $2 option. Why pay the extra time premium and make less money?

The biggest and best kept secret of the weeklies is option Friday and you know about this secret too .... I am really impressed! Now I am an even bigger fan With the right set up you can make 500% to 1000% return on your money in just a few hours on an option Friday using out of the money weeklies. Out of the money Friday weeklies have very little time value left and you can buy an out of the money call for 20 cents and if the stock price moves above the next strike price, it suddenly becomes in the money and price jumps to $1 giving a 500% return!

You can also play out of the money cheap OTM strangles (buying both puts and calls that are out of the money) on an option Friday in certain stocks that have the highest potential for a move and can make huge returns no matter which way the stock moves. I put a limit sell order at 300% on both puts and calls after buying a Friday strangle and when the stock moves up I can get out of the calls with a 300% return and then when it reverses and moves the other way I get out of the puts with a 300% return! It does work if you catch the right stock. Make sure to trade only those stocks that have highly liquid weekly options with a low bid ask spread and closer strike prices, and are volatile enough to move through a strike price intraday. This is extremely important.

FB was dead today. Earlier in the day YELP had a nice breakout move and it was on my watch list but I missed it because I was working Could have made $2 on YELP today despite a choppy market. Oh well

I will give an objective example of the power of weeklies for general readers. Let's take TSLA. The 205 in the money May5 weekly call option is $5.70 ask right now with delta 87. If the stock moves up 5 dollars that call will become $9.95 bid for a profit of $4.25 which is a 74% return. The same 205 in the money June call is $11.45 ask with delta of only 61. For the same 5 dollar move in stock, the call will become $14.40 for a profit of $2.95 which is only a 26% return. Clearly you can see that the weekly option is much cheaper, with a higher percentage return as well as a higher dollar amount profit for the same move in the underlying stock! You could have bought 2 weekly calls for $1140 and made $850 profit instead of $295 profit from June call with the same investment.

Now let's see what would happen with out of money calls. The 215 May5 weekly call is 0.42 ask and with a 5 dollar move up of the stock it will become $1.82 bid for a profit of $1.4 which is a 333% return! Buying 15 contracts for only $630 would have returned a profit of $2100! The same 215 out of the money June monthly call is $6.45 ask and with the same 5 dollar move in the stock it will become $8.55 bid for a profit of $2.10 which is a 32% return. Investing same amount of money would return $2100 for weekly and only $210 for the monthly.

Does anyone still want to day trade monthlies instead of front week weeklies??

Rookie30 please try some practice out of the money weekly trades. If you can do 10-20% with in the money you should be able to do 50-100% return with out of the money!



Edited 1 time(s). Last edit at 05/29/2014 08:43PM by tanman.

Tanman,

I am all on it! It is awesome that you have the knowledge to break it down-so it is clear. I will have to read you post over a few times, but I understand most of it. The concept of trading weeklies is amazing. I have been trading that way for a while, but I have not talked about it much because I know that is not a concept that was taught. I have only looked for option Fridays, but now I am going to trade strictly weeklies. I just know in the past, I came out of a financial crisis really fast when trading weeklies. I was literally taking $1000 and turning it into $2000 literally in minutes. I would bail and watch it continue to rise, but I was scared to death because I have also seen $1000 plummet to $200 in a matter of minutes. Now, I have a trading process that works about 9 times out of 10, so I have no problems trading weeklies. I will warn and say this to those who are beginning traders.....STAY CLEAR OF WEEKLIES UNTIL YOU KNOW WHAT YOU ARE DOING! This trading process will wipe your positions off the map before you can hit the sell button. It is not worth the risk for those who are learning how to trade intraday or swing. As I always say, practice, practice, practice. Homeruns in practice equate to homeruns in the live market. You gotta be right when trading this concept. Those small loses that I occasionally experience have just become big losses, but I will take it for much bigger profits.

I am about as excited about trading weeklies at this point as I have been about anything in my life. I will practice those OOM weeklies, but for now, I am all over the ITM weeklies. You are correct, that 10-20% now becomes a heck of a lot more. My position size is normally between 5-7K. If this works as it should, my retirement time frame from my 9-5 just got trimmed by 3 or 4 years, reducing retirement choice for me to only 3 years. I am going in with "Real Money" on the first trade because my trading concepts have not changed. Wow, is it possible that I just received a 70% raise? I will keep you posted. It almost sounds too good to be true.

Just want to say again, thanks to all of you who have been an inspiration to me and have helped me learn this art. Darcy is and has always been my inspiration to get through the tough times of trading. She learned how to do this without a mentor. That is amazing. She did not have the luxury of a forum such as this one. Anyway, when I was lost and was begging for guidance and thirsty for knowledge, Darcy answered every question I asked. Well, when she and I started communicating a couple of years ago, there were NOT many on the forum who would share critical trading techniques. She PUT IT OUT THERE for all of us to learn. I followed suit, and later we had others step out and help. I was like a sponge and vowed that if I ever learned how to trade well, I would help train others-if they needed me. I will be FOREVER grateful to Darcy and her S/O. Darcy helped turn the face of this forum into a place where traders could come and learn. Today, this forum is vibrant and full of life. I love coming here to learn and read your posts. Good luck on your trades today.

Quote
rookie30
I will warn and say this to those who are beginning traders.....STAY CLEAR OF WEEKLIES UNTIL YOU KNOW WHAT YOU ARE DOING! This trading process will wipe your positions off the map before you can hit the sell button."

I agree 100%. This is because weeklies have a higher gamma than monthlies so price of options moves very fast in both directions. The highest gamma out of the high gamma weeklies is at the money options. So the gamma impact can be lowered by trading either in the money delta 70 or higher delta weekly options or trading the out of money delta 30 weekly options which have a relatively lower gamma, instead of trading at the money weekly options.

But I agree that first you have to get your win percentage high and only then try day trading weeklies. With weeklies you have to have an excellent exit strategy and watch the stock very closely and be ready to pull the trigger fast as soon as the exit point is hit (stop loss or profit target).