Search This Blog

Friday, June 26, 2009

3 weeks to profit

Hey everyone


The call will expire in three weeks. There are 15 trading days left. The price of the stock has moved past and is now above the call price. As long as the price of the stock is higher than the call price, the call will be exercised at expiration. This will allow the program to take the funds from the trade along with the continued growing capital to form another trade with a larger pool of opportunities.

Technically, the chart shows that the stock is above the 20 and the 50 day moving averages as they are both increasing. The chart also shows the stock at a resistence level.

There is to be some scheduled news in regards to the company's products during the month of July. What is not known is whether or not the news will come before or after expiration day (the 17th.) So there is still some risk involved in this trade if news on products is bad.


The option itself is still priced above the norm. The stock would have to move over 10% just to catch up to the option price today to break even. The expectation for the relationship between the stock and the option is that they would be closer intertwined than they are now. The curve of the slope has not increased as is the norm. This action provides a clear bullish signal that the stock will end in the money.


Overall, so far so good. As this is the program's first trade, it will be nice to get the details to get some feedback. Yet, the hope is that this is only one trade in a long prosperous trading career.

-As always, I do not fully divulge information on open trades. When the trade ends, I will give out the rest of the details (stock name, price purchased, call purchased, news on company/ETF, chart info) that sort of thing. Please feel free to ask questions and I will answer them the best I can without endangering the trade.

Tuesday, June 16, 2009

6/15-6/19 info

The stock had fallen below the strike price on Wednesday, but at the end of trading on Thursday the stock was pushed past the strike price and stayed over on Friday. The crazy thing is that this was done without any news for the company.

Now the July options get set for current month movements. The stock is floating around the strike price. There are 19 trading days (4 weeks minus July 3) left until expiration. Currently the option is priced almost double what I sold it for indicating a positive move in the future. But because this is the current month, time value will diminish at an accelerating rate. Currently the stock has moved 25% up and the option has doubled. The option price move has only been 60 % of the upside move for the stock price.


But because of the option activity, and the expected news regarding the company's products this month, the option could be in the realm of guaranteed assignment at the end.

This would allow the profit from the stock to be added to the premium received from the option to be added to the continued collected capital for the accout. This puts the account in a much more favorable position to choose from a greater pool of stocks and the possible use of an added strategy. That strategy is selling in the money calls at a premium. But we will see.

As always, I do not fully divulge information on open trades. When the trade ends, I will give out the rest of the details (stock name, price purchased, call purchased, news on company/ETF, chart info) that sort of thing. It will be detailed with charts and progress reports. Please feel free to ask questions and I will answer them the best I can without endangering the trade.

Wednesday, June 10, 2009

33% of the way there

Hey



Thirty Three percent of the time involved in the current trade is gone. There are now only 25 days remaining until the call expires. The stock continues to be over the strike price. There has been some more positive press in regards to the company's products which should keep the stock at a high level.

There was an analyst that moved the company's recommendation from hold to sell during the week. It happened after the run up earlier in the week. The analyst seemed motivated to reiterate his thinking on the stock because it has started to get away from him. The crazy thing about this recommendation is that the analyst feels that if a certain product test fails, the stock could lose about 60% from today's levels. The analyst also writes that if the test goes well, the stock could move upside of 350%.

The option currently has a time value ratio (time value/option price) of 57%. It was 100% when the option was sold.

Because the stock is above the strike price, the call could get called out. The fact that it could happen at any time is neat. It's almost like Christmas waiting for an email from Optionsxpress telling me that the call has been exercised.



As always, I do not fully divulge information on open trades. When the trade ends, I will give out the rest of the details (stock name, price purchased, call purchased, news on company/ETF, chart info) that sort of thing. Please feel free to ask questions and I will answer them the best I can without endangering the trade.

Tuesday, June 9, 2009

reading materials

Hey

I came across a book at Barnes and Noble named Getting Rich with Options by Lee Lowell that has a chapter on call selling. It gives real world examples as to how selling options can provide an extra source of revenue for a stock holder. I recommend heading to your library or book store and checking this book out. I can't say I have a full grasp of the rest of the book's strategies yet, but it normally takes a few times to read before I get all the info.

If you have any books or reading materials that would assist in the development of this subject, feel free to post.

As always, I do not fully divulge information on open trades until they are done. When the trade ends, I will give out the rest of the details (stock name, price purchased, call purchased, news on company/ETF, chart info) that sort of thing. Please feel free to ask questions and I will answer them the best I can without endangering the trade.

Monday, June 8, 2009