November 21st, 2012
The following is an excerpt from last weekends premium update from Fun Money. Subscribers receive structured option trade ideas with trade alerts so you know exactly what to do and I’m pleased to announce that Chris Ebert has recently joined the team as he brings a wealth of information regarding options trading.
As our stock newsletter pointed out, the indexes finally gave us a constructive day Friday. And our two current positions are acting well with opportunities for us to do more (see our watch list below) as the market may give us a well needed bounce via a holiday week.
It sets up a nice profit-yielding game plan for us which is to use a bounce in the indexes this week to profit from a bull call spread in AAPL (see our watch list) and lock in gains on NOW and BIIB. We’ll then look look to buy puts in the stocks on our watch list should they trade up to resistance.
Trade Idea For The Week. BIIB (We own 1 December 135 call at $7.10 — bid price as of Friday’s close: $8.20)
After churning around at support BIIB turned in a nice day Friday with impressive volume! From here it’s all about follow through up to the 50-day where we’ll look to lock in our gains.
With SINA — we needed a bounce on earnings into the $55-$59 range. Instead it went the other way, closing just over $45. Since we bought a ratio bull call spread, all of our calls expired worthless so we washed on the trade.
Remember, there can only be one of three outcomes when placing an options trade:
- You make a gain
- You wash on the trade
- You lose part or all of your initial investment
By executing a ratio bull call spread, we eliminated option #3 and settled for a wash. This is why going forward, we are going to present spread opportunities vs. straight puts or calls when appropriate.
Zentrader started out in July 2008 as a way for me to share my nightly research, provide trade ideas, and keep a trading journal that kept me accountable and systematic in my trading. This experience has been good to me as I have built invaluable long-standing relationships. It’s also been therapeutic for me by helping me organize my thoughts, and I’m finding the longer I trade the markets, the more ways I need to detach myself emotionally and relax my mind as the internet’s ability to deliver endless information can be a blessing and a curse to a trader. I believe that to have longevity with investing, one must find ways to calm the mind and trade from a detached point of view.
As this site is nearing it’s 4th year of daily updates it’s worth noting that there are many different voices that contribute to the Zentrader identity. This is no longer a space where it’s just my opinion of what the market is doing and the stocks/sectors that I’m focusing on as it is a place where my peers in the trading community can come together and share their unique insights in whatever field they have chosen to specialize in. This has always been my plan all along to build a community of alternate investing styles and engaging personalities that come together with the one goal of helping everyone more successful in trading.