Just before 11:00AM, I set buy stops on a TS option and on SKF as suggested in my post on Friday. Both executed and started toward the positive as the day fell apart. I am placing a sell-stop on SKF after the first 40 minutes of trading today. I never recommend any trades during the first 30 minutes of the day unless you plan to hold for 10 minutes - quick profit on a mover.
It's doubtful that my United Airlines options will pan out by February's expiration, but my total investment is less than 1/2 my normal sell stop for the equity itself.
As I suggested before, risk should be kept at a minimum until we know if the bear market is here to stay.
It looks as though we have another negative day in the making. I'm standing pat, until I see some volatility. Without movement there is no money.
Daze Trader refers to my style of trading. I am rarely in anything for more than a few 'days'.
Futures are up slightly, and world markets are still in the red, though I don't see any triple digit losses. We have New Home Sales today and, again, Obama is going to open his mouth, which could be another disaster.
Wednesdays are usually consolidation days, but I think today will be different. We are down about 600 points on the Dow, and I think that Obama's comments on banking had a lot to do with that. Is this drop a change in sentiment? Or was it just a combination of some bad news from the banking sector along with the president opening his mouth on the subject. Time will tell.
If we start out strong, I am looking at Gold and Silver as the prices seem to have started back up.
Yesterday SVA sold off on a Trailing stop. Not having gone up very much, it turned out the same as if it had been set as a normal stop-loss order.
For the most part, I am out of the market, keeping only small cap equities and limiting risk with options. I will have more ideas as the market becomes more volatile. (which is where I grow my portfolio).
Note: The change column describes the most recent day's change in value.
Although the day close in the green yesterday, sentiment seems to the downside. Myself included, there are many traders on the sidelines waiting to see if the bears will take over or if this is just a momentary glitch in the unsupported rally since November.
My guess is that the markets will surprise us again and head upward. For protection in either direction, I have set a trailing stop on SVA. I gave it .25 cents to the down side and it's trailing by .50 cents to the upside. If the bears take over, the loss will be tolerable. If there is a decided bull run, the sell stop will be adjusted upward with the price.
As I mentioned in previous posts, sell stops on QTWW are dangerous. I have always made money on this stock, and it will run again. There is nothing fundamentally wrong with this company and it is always good for a volatility play. The trick is, you have to watch it because the spurts are quick and unrelenting. Like my friend at chribstrades, I usually sell early to my own detriment.
Oil is now right now, yet SSN is recovering from last month's public offering, yet it hit .30 yesterday.
The market is flat to choppy today. So far the Dow is up 52 points yet most stocks that I usually watch are down quite a bit. This inverted action has been the norm as of late.
Nothing new today. We are waiting to see if UAUA drops into February in order to grab some profit on the put options. Also, I am adding a trailing stop to SVA in case there is downside follow-though.
SVA - sell stop - 6.69 - trail by .50 - Good Till Closed.
Well yesterdsay the dow dumped another 213 points. I sold SOLF on a trailing stop at 7.95 and I picked up a healthy chunk of QTWW at 0.96 - Now nearly 50% of my portfolio.
Today's actions is anyone's guess. I would say caution will provail and the downside will extend. But, I have been surprised so many times (as I was Tuesday) when all indicators point to a lower open and we jump to new highs. Nothing has been rational for the last 3 months or so.
I will update ideas after 10:00 a.m.
SVA has survived so far and has even climbed to.7.28 during this tailspin in the last 2hours. I am thinking about putting a trailing stop on SVA in case things go haywire in either direction.
QTWW is droping big time, though all the news of late has been very positive. I have seen it drop upon good news and run up 60-80 cents on bad news. QTWW is like that. No sell stops on QTWW, it's too easy to get burned that way. The price changes radically with very small trades, especially in the last 5 minutes of trading*. I am planning to buy another chunk. target .89 or lower.
QTWW is trading at .92 now at 2:30.
-Near the end of the day I will set a limit buy at .05 below current price.
UAUA is surprisingly resilient to the 500-point dive the Dow has taken over the last few days.
On a sharp decline it has hit 12.68. Today's decline is slow and, with the price of oil dropping, it has climbed to 13.78 at one point. I own put options, strike 8, February on this one, so if oil does rise along with the falling market - ching ching!
- QTWW last minutes of trading.
Note that trades of similar size effect the price of the stock quite differently.
Left - a purchase of 1900 shares - no effect at all.
QTWW will run up. Here is a clue: Whey you see a large spike in volume 900k to 2m at once, then the run will start. Note that trades of similar size effect the price of the stock quite differently.
The Dow dropped 220+ points at its low yesterday. The drop came a day late according to my expectations, but I knew it was coming. Most investors have the feeling that the current market should not be as high as it is. We'll see where it takes us today.
Premarket, Asia was down and European markets seem to be gaining. Oil is up slightly and so is premarket trading. Jobless claims have risen unexpectedly. There could very well be some downside today as well.
SVA was a trade idea taken from a blog I follow at chribstrades, which was one of the few positions in my porfolio which did not drop significantly in yesterday's bloodbath.
After close, this article came out with some good and bad news - Sinovac Biotech (SVA) To Offer 8.65M Shares.
Normally when a company offers more shares on the market, stock prices drop significantly due to fear that each share you own will be worth less. I bought UAUA a few months ago in the mid $6 dollar range after the fallout / sell off. I held it into a new 52 week high.
In January 2010, Sinovac received the fifth purchase order for its H1N1 vaccine, Panflu.1, from China's Ministry of Industry and Information Technology, or MIIT, under the national purchase plan. Under this purchase order, the Company is required to deliver an additional 8.57 million doses of Panflu.1 (15ug/0.5ml) to the Chinese central government, of which 2.33 million doses are expected to be delivered before March 15, 2010, and the balance 6.23 million doses are to be stockpiled by the government in Sinovac's warehouse facility. In aggregate, Sinovac has received orders of Panflu.1 from the Chinese government for a total 21.06 million doses, and 10.23 million doses of Panflu.1 have been delivered to date for the Chinese vaccination campaign. In 2009, Sinovac completed the expansion of its production line used to manufacture the seasonal influenza, H1N1 and H5N1 vaccines, thereby increasing its annual production capacity by approximately 60%.
The Dow dropped 100 points in the first six minutes of trading, eliminating that long crawl up that we had yesterday. It is as if Tuesday never happened. With all the positive sentiment related to the two major buy-outs yesterday, today those who bought in, are dismayed.
A few stocks that have been gaining this morning.
I usually buy performing stocks when the market dips, as was my strategy for C yesterday. The market didn't dip yesterday and C gained some ground. Today C dropped a bit but is gaining in spite of the gap down and downward trend first hour.
RDN broke out early on, in spite of the gap down, and may be worth buying if this is truly a dip.
If this is an extension of the downward trend we had seen last week, then we should be joining the crowd, looking for a good candidate to short.
I already own puts purchased when the Dow neared 10,700 a week or so ago..
Watching the action before the bell, I suspect a negative start, if not a negative day today. World markets overnight were all inthe red (except HK which dipped heavily last week). Oil is down at 76 and change.
That could turn around if Kraft (KFT) finalizes their bid for Cadbury (CBY). Watch CBY jump if that is the case.
Other big news on Citibank (C) which is reporting a huge loss due to plans of paying off Uncle Sam.
I had thought of shorting C until I looked at the Call volume which is unusually high. Consider setting a buy stop on C at 3.45 in case the day forgets to continue its downside action of late.
If C drops, I will be setting a buy stop at 0.08 above current price. I will be adjusting that stop as the stock drops, hoping to catch the bottom as investors over react to the news.
Solarfun Power Holdings (SOLF) and Radian Group Inc. (RDN) both had very good runs until the market started downward. These two could recover quite nicely, if the market trend should turn around. Consider the following buy stops.
Trustworthiness - is this company that will be around? Do they have difficulties with the SEC?
Speedy execution - especially if you use Market Orders regularly.
Commissions - reasonable commissions are especially important if you make 30+ trades per month as I do.
Limits and Margin requirements - minimum account balances are required at many brokers.
The platform and ease of use - what do they offer as part of the service.
My main broker has a $2500 minimum balance, the interest is pennies per month, commissions are $2.50 per trade (stocks) and $0.50 per option contract. They offer excellent execution time, usually 3 to five seconds and the platform allows me to see every trade that occurs as it occurs.
My secondary account offers no minimum, a pricey interest rate and they charge $4.50 per trade. Execution time is not that great, so I never use Market Orders.
One final difference is whether or not they allow a wide range of stocks to be shorted. Both of my accounts allow shorting of very few stocks.
United Air Lines (UAUA) has recently hit a 52 week high of 14.07 per share. I bought both put and call options highlighted below in the option chain. Personally, I feel the stock will go to at least 9.00 per share by late February, but there is talk on the street about heavy "call volume", meaning that popular opinion says the stock will go to 20.00.
Below, I will talk about possible scenarios based on 1 option contract in either direction, referring to the the markings I have made on the option chain for UAUA - expiration Feb. 2010. ( my actual quantity will not be discussed ).
I selected UALNO, strike $8.00, for February 2010.
I selected UALBY, strike $17.00, for February 2010.
If I like I can keep the shares and hope it goes to $20.00 per share or even higher. After exercising my option, I can treat UAUA like any other stock purchase.
The worst thing that could happen is a situation where UAUA trades flat over the next 35 days. Because I bought both, I would make nothing on either. I could sell them both before expiration and would lose the commissions paid.
The stock will develop a trend in the next week or so, and I will will exit one of the option positions (or just let it expire worthless).
I would not recommend buying both Puts and Calls at the same time. I have done it only because my belief is quite opposite than the consensus.
Many people say that options are risky, and that can be true depending on how a trader plays them. If you buy an options contract, you could potentially lose your entire investment. Sounds scary, but it is really no different than buying any stock, then deciding how much you are willing to tolerate regarding price drop.
I always have and idea of how much I am willing to lose when I buy a stock. Many times, I set a sell stop right after purchasing a stock. That protects capital and limits my risk.
When I buy an option, the entire cost of my options contracts could be lost. Therefore, I make sure that my total cost of the contracts is no more than I would normally tolerate when setting a sell stop.
I don't like to spend money before I have made it. For that reason, I will only cover the types of options trades that don't put large amounts of borrowed money at risk. Those being: Buying Calls, Buying Puts, and Selling Calls.
Each contract covers control of 100 shares of stock.
You buy Call options when you think the price of X stock will rise above Y dollars per share by Z date.
You buy Put options when you think the price of X stock will fall below Y dollars per share by Z date.
You sell/write Call options contracts when you already own 100 (or more) shares of X stock and you think the stock price will NOT rise above Y dollars per share by Z date.
If you are correct in your thinking, then you make money.
Y is the price per share such as $624.00 – referred to as the “Strike” price.
Z is the expiration date – options expire once per month.
If the stock price has not gone the way you thought, your option contracts will expire worthless. The option remains “out of the money” at expiration.
If you bought call options, and the stock price is well above your strike price, you can purchase 100 shares of stock for each option you own at the strike price.
If you bought put options, and the stock price is well below your strike price, you can sell 100 shares of stock for each option you own at the strike price.
If you sold/wrote call options, and the stock price has not exceeded the strike price, then you keep your stock and keep the premium paid by the buyer.
A detailed explanation with examples of each to appear in later posts.
This is sometimes called a stop/loss order.
You own 100 shares of a stock that is currently trading for $10.00 per share, and the price has been falling or you think it may fall.
You may set a stop to limit your loss in case it drops.
You may have considerable profit showing on this stock and you want to conserve a certain amount of that profit, yet allow the stock to fluctuate a bit.
Enter the Symbol, Quantity, Type (Stop), and enter 9.85 in the Stop field. Click "Sell" and confirm the order.
You will no longer own it if it hits $9.85 even if it dips and then rises again. Let's hope you picked the point at which the upside potential has been exhausted.
Note: Some trading platforms execute Sell Stop / Stop-loss orders based on the "Last Traded Price" and other platforms use the stock's "Bid" price when executing this type of order. Check with your broker to find out which execution method applies.
Market orders allow you to buy or sell the stock or option at the current price without delay.
There is a stock currently trading at $10.00 per share.
You want to buy 100 shares at $10.00 per share.
Enter the Symbol, Quantity, and Type (Market) - click "Buy" and confirm the order.
The stock will be purchased within moments after sending the order.
Note: if the stock price is changing rapidly, it may not be purchased at exactly $10.00. If the stock is on the way up, it may execute at $10.03, $10.08, or any increment (depending on volume of trading and the speed of execution at the time you send the order). If the stock is going down, it could be executed at $9.99, $9.95, $9.92, etc.
You want to sell 100 shares at $10.00 per share.
Enter the Symbol, Quantity, and Type (Market) - click "Sell" and confirm the order.
The stock will be sold within moments after sending the order.
Note: if the stock price is changing rapidly, it may not be sold at exactly $10.00. If the stock is on the way up, it may execute at $10.03, $10.08, or any increment (depending on volume of trading and the speed of execution at the time you send the order). If the stock is going down, it could be executed at $9.99, $9.95, $9.92, etc.
I follow a few bloggers and have learned how to make the markets work for me over the years. So, I thought, "It's time to give something back". As with help files, many "Stocks 101" entries on the web tell you everything you (may) already know but skip the simplest aspects, assuming one would know them. My first posts will be short and complete regarding how to use different types of orders to buy and sell stocks.
When I started trading I had to read long explanations of strategies regarding order types, but all of those pages were missing simple information on how to use orders, how to enter orders and what will happen as a result of each. I already knew what I wanted to do, I had my own strategy, but key information was missing. I won't tell you how to trade, and I won't bother to tell you if it's risky or not. Those are your choices - consider that a disclaimer.
The following posts are simple examples of trades, how to enter them, and what the result will be. We'll use XYZ as the stock symbol and some basic round numbers of that non-existent stock.
Your trading interface may look different, but the fields should be similar.