Education Center
After your write-up on credit spreads, I asked my broker about them. He said that I should examine the risk/reward of the purchase and then to hold them until expiration. When you buy spreads, do you always hold them until expiration?
With $5 to $10 spreads, you get your best return when you hold them until expiration unless the stock really races higher and the cost to repurchase the put you sold is small. It does not take much to hurt the percentage return. The reason you have to go into the spread thinking you will […]
Last night we talked of the IBD site that allows you to track volume for the current session as compared to the previous session.
Go to the site:www.investors.com/Then enter the stock you are interested in on the right side of the screen. It takes you to a summary of the stock. The percentage volume figure it shows you is how much higher or lower the volume for the current session is versus the previous session. It also shows you […]
On last weekend’s report you referenced large volume spikes in certain key stocks right before the close. Where can I find this information on real time volume information? Do you subscribe to a chart service where you are able to watch the volume on each of these stocks? I am unable to see volume spikes with my software on my watch list.
We were all watching trades on time and sales and on live charting that tracks volume on eSignal, a realtime quote service. There are many realtime services available that provide a free trial period, e.g., DTN.
There is a concept I do not understand and I cannot find a sample response in the Q&A section. If a stock is in an uptrend, will the average value for the 200 day Moving Average (MA) be greater or lesser than the 50 MA and will the same principle hold when the stock is trending down or decreasing in price?
Trends are powerful. Trendlines and moving averages map out a stocks’ direction, and until broken, they are powerful indicators of direction. Trendlines and short term moving averages (e.g., 10 day moving average) are very strict measures of stock direction. A stock can break a short term moving average but recover. Conservative investors will sell on […]
Can you give me some guidance on trading the QQQ? I have occasionally gone long or short depending on the market, but I find that the QQQ doesn’t seem to move as much as the market does. Today I shorted the 55 Put when QQQ was at 55. I closed at the end of the day for a profit, but it was very small. Less than a point. Logically it would make sense that when the Nasdaq is plummeting, QQQ is the place to be rather than try to hit one stock. But I do not seem to get enough bang for the buck. What am I overlooking? Would I do better with the OEX? The QQQ is cheaper so I would rather put my money there, but something is wrong with the picture. Any ideas?
The problem with the QQQ is that it has options for every point value of the index, not just every $5. Thus the deltas tend to be fairly poor unless you go well into the money. If you are used to trading on $5 option increments, however, that is not such a bad deal as […]
You seem to advocate averaging into new positions of select stocks in this market. However, what guidelines do you use for setting stops?
You are correct in saying ‘in this market.’ We are usually not ones to buy into stocks that are not showing us a great pattern that is worthy of buying into. This is one of those rare occasions, however, where another party of history is on our side, i.e., when the Fed starts an easing […]
How do you use “Trailing Stop-Loss” techniques?
A trailing stop loss is a stop loss order that is moved up behind a stock or option as the price increases, hence the ‘trailing’ label. There are two ways we know of doing this: yourself or if you have a good broker. Often what we do when we enter a position and are not […]
You noted there were only 70 open interests on JNPR February 120 calls; thus, it might be harder to trade the options. Can you explain this?
We like to have at least 100 open interests on options that we trade. The reason is better liquidity, i.e., more trades, and thus the better chance that we may be executed on stop orders that we have in place. Let’s say we have an option trading at $18 and want to place a stop […]
Is there such a thing as SDS (same day substitution) on an option? It seems that in one of my classes we were told that we can get out of having a stock that we have sold a put on, being put to us using the SDS. I told my broker that I wanted to buy back the put so it was not put to me but he said it could not be done.
Basically what happens when a stock is put to you is that you are assigned that stock. If you do nothing, you have three days to put up the money to take delivery. That means either the right margin cash (not wise in this market) or enough cash to pay for the stock. If you […]
What are you referring to by “down trendlines”, and exactly what do they represent? You seem to refer to them being of importance when a stock is in the midst of heading “upward”. Are these points of resistance?
Down trendlines are formed much the same as up trendlines, they just head the opposite way. Any line is formed by connecting at least two points. Down trendlines are formed by connecting the highs a stock or index makes. The more points on a trendline, the stronger it is. As noted in the summary tonight, […]
