Invest and Trade Profitably with Jon Johnson

Education Center

On some of your plays you are taking some profits before the target stated when the play was entered. Does that mean you feel the play cannot continue with the uptrend? I notice that you often take a partial gain and that leads me to believe you still think it will move higher. Can you explain why you do this?

August 30, 2000

Depending upon the kind of market we are in, our strategies can shift to accommodate any changes in movements that stocks tend to have. For example, if our usual strategy with options in a steady market is to let the play run until our stated target is hit and then take money off the table, […]

You always point out the delta when buying an option. Is it better to have a high delta or a low one?

August 30, 2000

An option delta measures approximately the change in the option pricefor every $1 change in the underlying stock price. For example, if a calloption has a delta of 50 (it can also be shown as 0.50), for every $1 theunderlying stock moves up or down, the option will move, all other thingsequal, 50 cents. A […]

I look at after-market activity for the previous day and pre-marketdata before I start the new investing day. I see shares moving 10% andmore up and down in post and pre-market action on ECN’s, usually with lowvolume. What is the best way to take part in Pre- and Post Marketactivity?

August 30, 2000

Trading before and after the open and close has improved with moreefficient trading systems and better liquidity. Anything to help match uporders helps, and with more individuals participating it has helpedliquidity. One of the problems with trading outside ‘normal’ hours isthat there is no market maker; orders have to be matched based on size andprice. […]

I buy stocks and options, what proportion of stock to option for the same equity do you advise?

August 30, 2000

That depends upon each situation. We like to buy stock in our IRA’s and other retirement accounts; options in our trading accounts but we also buy some stock there. It is a personal decision based upon the investor’s goals, amount of money to invest, etc.

As an active trader/investor I always watch overall market first and then dial into individual stocks long if the market is friendly. Step aside when market is mixed and short when the three big indexes are in sync going down. Someone recently said, “Remember a stocks price=~50% market, 25% Sector and then 25% actual stock.” Are you aware of this? or do you have any way to validate these numbers?

August 30, 2000

We teach in the seminars (and we repeat here from time to time) something of the same thing but slightly different. We say that 75% of the stocks follow the overall market. This makes sense when you think about it. Stock prices are driven by earnings and when earnings are expanding overall, stocks rise overall. […]

I have noticed that the NASDAQ weekly is having trouble with the 50ema crossing the 200ema. Do you pay heed to this or is this not of consequence?

August 30, 2000

Moving average crossovers are a technical analysis tool that can be useful in predicting advances or declines in the movement of a stock or index. A crossover simply describes the movement of one moving average crossing over a second, with one being shorter (faster) or longer (slower) than the other. Crossovers can give buy or […]

I notice there are great discrepancies between the average volume and target volume from stock to stock. Does this target volume vary day to day depending on market conditions and proximity to the buy point?

August 30, 2000

The target volume for any play on the reports is typically going to be a lot higher than the average daily volume, because it’s that huge demand in buying that is what will push the price past resistance, giving it that explosive move that starts the next run. We want to see lots of buyers […]

In the Economy section you refer to the “ECRI” that comes out every Friday. What do the letters stand for and where is it reported? Thanks for the discussions on “supply side economics”, it’s making some sense to me now.

August 30, 2000

ECRI is the acronym for Economic Cycle Research Institute. It is a private entity that studies various aspects of the US and other world economies such as acceleration and deceleration and inflation prospects. The Conference Board puts out the LEI (Leading Economic Indicators) made up of a basket of 10 indicators. ECRI looks at several […]

How long do we hold a stock?

August 30, 2000

We will hold stocks as long as they are making money or are continuing the pattern/move that made us inclined to buy into it. Even for solid, well-performing stocks, the market can throw you a fast one when you least expect it, so our basic rule is that if the stock fails to make or […]

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