Market Analysis – Oct. 31st.
Good news on Friday. On the MSFT front, still no luck.
I have also found a good resource to determine the options values and the assocaited greeks for any given time period. It is optionseducation.com.
Looking further into the MSFT chart, here’s some analysis.
There’s two resistance (trend) lines. The blue one is the first. The brown is the second. The brown one would seem to be the more prominent one for the moment. The CMF shows that the buying pressure is letting up. This doesn’t mean a buy signal by itself. However, it would show that heavy selloff is behind us.
The RSI is still sort of high but bent downwards at the close. The MACD is touching the trigger line but hasn’t crossed it yet. If tomorrow in general is a green day, it should help.
We will see.
Today was a wierd day for the markets. In the morning the market headed up but then reversed directions late morning. This could be consistent with the normal market trend where it starts off in one direction and then late morning turns. However, it reversed again and headed up towards afternoon and formed a second top. Toward close, it just headed down like crazy. So it would appear to have just charted a double top. Hopefully, that fall won’t be that hard.
Normal conditions have been indicating that there might be small rallies in the market and then a longer term decline. However, if this starts the decline, that will be most inopportune time to have averaged downt to .50 on 20 Nov 27 MSFT calls.
Time will tell. There is a GTC order for limit of .70 set in my account ready to go and close out the position. However, it MSFT doesn’t hig 24.50 or during the day, the target of .70 might not be reached.
Form the morning’s close of yesterday position, the profit was $50.00. So the total account value before opening new trades was ~ $1187.00.
New trades are for 20 contracts (over exposed here) and should have been only for 10. But this is the emotional thing that got in the picture and said, it’s probably gonna fluctuate tomorrow and it’s better to buy more and average down and increase position size. Ideally, the first trade should not have been opened. The first position was at a price of .53 but without looking at the overall market direction or considering any technical indicators. The second position seems to be a little on the ok side. If the markets don’t fall thru the bottom of the screen tomorrow, the trade should be fine.
For a profit of $50. That’s 8% profit for investment of $600.00. Not much!
I have become convinced that when the profits run, let them run. However, when the markets aren’t moving much, it’s better to make a small profit and close position. Better to have cash on hand ready for opening a new position than to sit and wait out the market and wait for it to make more profit. Nov 27 calls were at .70 at one point but that was before I got a chance to monitor the markets today. I had set a limit for $1.00 last nite, but wanted to move it to .70 last nite. Didn’t get to it due to being busy. However, set a .65 limit and it executed sometime before noon.
Reentered the position at .53 for 10 Nov 27 contracts. Not much movement either way. But hopefully it will have a nice $50-$100 payoff. I know I could wait for more, but since Oct. is free trades, it feels good to enter and exit positions as if playing Forex – trade without abandon on the commissions point.
Another benefit of holding overnite is that it won’t count as a daytrade for the PDT rule.
Options expiration date is something many day trader do not trade. This is to avoid volatility and unexpected trade turns. Since day traders are looking to make quit 1-5% gains depending on what their risk tolerance and target percentage profit is, they need quick action. Additionally, it needs to be a decisive trade.
On the other hand, for an options player, is the volatility a good things on expiration day. Obviously, you don’t really need to be buying something Friday morning that will be worthless, one way or another, by EOD. So what’s the plan in this type of market? It is good to clear your head and just take a break. It is also a good idea to still watch and learn the market, though. Yet, more options abound. Once can trade for scalps in the stocks, or switch to next month options. Example, the Nov 27 calls that I sold yesterday at .62 are worth 1.05 today. that means it would have been 100% profit if I had held. My profit was 13%. My understanding is that one should never consider profit worth any less than what it is – profit! A profit is better than an alternative whether that alternative is a loss or a breakeven.
MSFT is still underpriced and will be fun to buy. I just don’t want to buy today and see a bear Monday, because that will make me hold it longer. On the other hand, the same Nov 27 calls will be definitely worth more by Nov. since MSFT normally ranges 25-28 on a consistent basis. It’s always got it’s risks, but plays normally don’t offer such good rewards as when securities are undervalued and will shortly rebound.