Day Trading After President's Day

The market was poised to go up on Tuesday and it ran up for a quick pop before settling down. I charted Alphabet (GOOGL) as I waited for it to come down to 1116 when I bought 2 1135 calls at 4.6 each. They ran up to 7.2 before falling for the next couple of hours. Once again, I should have sold there, but didn't.

Alphabet went higher in the afternoon, but those call options were never worth as much as that early morning. Take a look at my chart below:

I turned off the trailing stop and sold at 5.27 because I felt the indicators were pointing to a reversal. It did reverse after going higher. I would have benefited by using a trailing stop order. I grade myself an A on entry point, C- on not utilizing a trailing stop and ending my trade earlier.

On Wednesday I took a different stance. When Alphabet moved up to 1129, I bought a couple 1120 Put options with a cost just below 5. It did move down and bounced off of 1125 where those Put options were worth 5.5. Then Alphabet moved higher, but never past 1131 and suddenly moved sharply lower right after I texted a friend saying I expected some downward movement this afternoon after 2pm. 

On that downward movement, my sell order triggered as I placed a trailing stop order to sell to close once the price hit 5.5 and the trail buffer was .5. It triggered so quickly and I missed out on almost 500 because it flew down to 1122 before bouncing up. At that bottom point it would have been worth 7.9. If I placed a larger buffer on the trailing stop of say 1.0, I probably would have received 7 or more.  I wish I turned off the sell order to wait fore post Fed announcement reaction.

After the Fed Minutes were announced at 2pm, Alphabet went down sharply to 1112 at which point those Put Options were worth over 12. This created 2 learning lessons:

1. Place a larger trailing buffer to avoid too early of a close on profits when trading Alphabet. Better than placing a larger buffer would have been placing the trailing stop to trigger when Alphabet trades below 1118 or 1119. That would have captured the goal as it was where I say Alphabet trading down to.
2. Be more patient and wait for a better entry point. I thought I was being patient, but I paid 300 too much for the options. I could have been up over 1000 by buying one additional Put Options.

Take a look at my chart below.

I grade myself a C on entry point, and a C on exit. Exiting for a profit is the goal, but I should have targeted the trading price of the stock to get to 1118 before entering a trailing stop and probably would have received closer to 1200 per contract.

Day Trading with Paper Money

I have grown frustrated with Charles Schwab and their lack of comprehensive mobile trading software. I decided to try some alternatives, so I first tried ETrade over a year ago, so my period of discounted trades have come and gone. I did find that TD Ameritrade provides as many tools if not more than ETrade and they provide a free paper trading account.

With TD Ameritrades free paper trading accoun, I bought 5 Tesla 320 call options with February 22nd expiration when Tesla was traded down to 309 as it appeared to bounce off 309 about an hour earlier. I was feeling good about this trade since it closed at 311 on Wednesday.

In an account with real money, I was actually short (sold with expectation of profit by depreciated premium) a 280 strike Put Option with a March 1st expiration that I sold the day after Tesla reported earnings when it was at 307. I felt good about that strike price going to 0 because Tesla just bounced off 280 in the previous week and it didn't appear to want to move lower than 300 the day after earnings. The premium was still high because it was the day after earnings so I received over $814 for a strike price 27 points away!

As Tesla moved up for the next couple of days, the premium fell. When Tesla moved up to 324, this option that I was short was worth around $320. Tesla moved between 318 and 324 before moving lower on this past Wednesday when I bought back the Put Option for $226 as it appeared that Tesla was going to move lower. I decided that I took most of the time depreciation out of the option and would cover it so I could sell another one when Tesla moves lower.

More news came out after Wednesday's close that would negatively impact Tesla's stock price so I felt good about covering the Put Option that I was short on and hoping to find another time to sell the same strike option. That time came on Friday when the FANG stocks opened higher and moved down quickly. Tesla opened lower and moved up slowly. When shorts were in control of Tesla in the past, Tesla would move lower on Friday. This time it didn't want to move lower and kept trying to move higher.

When Tesla was at 305 on Friday, February 15th, I sold another 280 strike Put Option for $585 with a March 15th expiration. I like this expiration because it shows a level of recent support which means that even if Tesla moves lower over the next month, it will be affected by time decay on top of negative option movement since I expect Tesla to move back up to 320 in the next week.

Unfortunatly, I checked my paper trading account with TD Ameritrade after the market closed on Friday and found that the trailing stop order I placed Thursday afternoon for the 320 strike 2/22 expiration Tesla calls executed Friday morning at 9:33 am when Tesla was trading at 304.

I clearly would not have wanted to sell it there and creates a new learning lesson. Thankfully it was with paper money and didn't hurt financially.

LEARNING LESSON: Do not place a trailing stop with a GTC (Good till Cancel) ever without an additional trading condition like price. You may not place an order and not monitor it and expect to profit.

I still have more time with the paper trading account with TD Ameritrade and expect to practice with it more this coming week.

Schwab Needs So Much Improvement

After leaving the investment company that I was with for over 12 years and my father passing away, I decided I was going to actively managed my families funds. I have experienced some good and some bad as I started with Charles Schwab. Initially I was very impressed with the tools available through their website and trading tools with their computer software, StreetSmart Edge, and mobile application along with investing with artificial intelligent portfolios in ETF's with no fees. Unfortunately I have found the real truth elsewhere.

I have shared my experience trading with a friend. I recommended he use ETrade due to their tools and didn't recommend opening an account with Schwab. I decided to stay with Schwab so I can manage my mother's account and participate in lower transaction cost. Unfortunately Schwab has me very frustrated because their mobile application is horrible and does not provide the ability to use trailing stops. Only the full blown StreetSmart Edge, which is only available on a Windows 10 PC or a Mac, is capable of doing complete entry and exit strategies on the one platform.

I do have a Windows 10 computer that is awesome, but would like to be able to be free and not attached to it at all times during the day trading. I use my Samsung phone and tablet for doing work
and would prefer to use it for trading also. The mobile application is extremely slow and I have found using the mobile website to be better for some things. Charts are not practical on a mobile device through Schwab. I have had a tendency of using Yahoo Finance (not instant updates) or ETrade to view charts with indicators through the day when I am mobile.

When I am mobile, I have found that I can access my computer at home via a remote desktop application and use the StreetSmart Edge software on my home computer through my mobile device. This is not fun as my connection with the internet is strong for the most part, but may lose connection with my computer at  home or experience a lag that causes me to miss clicking on the correct button at the correct time. The mobile device only views a portion of the home computer's screen which makes it difficult to click when you are actually moving the screen and vise versa.

So the next step was to find a Windows based tablet or laptop that I could use for trading and everything else. Costco has a current sale on a Surface Pro 6 bundle with type cover and stylus bundle, so I took advantage of it. The Surface starts up very quickly and works great. When I logged into StreetSmart Edge, I loaded my saved layout after connecting to my TV as an extended wireless monitor. It was fast, but blown up!

I have 4 different company charts on the 2nd screen, but I could only see 2 and a half of the charts. On the main screen, the chart I have to the right was hidden under the account details and watch list. After further investigating, the TV was set to 150% and the main screen of my tablet at 200%. So I changed both to 100% and the display on the TV looked perfect, but the tablet screen print was so small I could not make much out. This was not working out too well.

In another attempt to try to make it work is using the browser version of StreetSmart Edge. I already knew that the it would not work in Chrome as I tried it on a Chromebook in the past. I also tried it on Firefox. It said that it works in Internet Explorer, so I figured it would work in Microsoft Edge. WRONG!!! This is really bad since Microsoft is trying to get rid of Internet Explorer for good.

On top of that, Schwab's StreetSmart Edge software is buggy. The later in the day, it slows down. I have called their technical support, got someone in trading who had to transfer me to someone in technical support, and then they want you to install a browser add on so they can look into your computer. They have backed up my StreetSmart Edge layout, wiped StreetSmart Edge clean and restored my layouts. This typically works better for about a day. After that it is slow again.

I have tried to find different ways to salvage my relationship with Schwab, but ultimately it feels like they don't want to be in a relationship with me as their tools have not improved and actually worsened. I have tried to make an egg into an orange and it has not worked. I feel insane doing the same thing everyday expecting a different result.

I don't know why it has taken me so long to finally come to the determination about wanting to leave
Schwab. I know that ETrade and TD Ameritrade have the tools available on all platforms that are available on StreetSmart Edge with very little to no lag time. I have an old ETrade account and opened a paper trading account on TD Ameritrade. I will contact Schwab first to find out what they are going to do to improve on the situation. I will then contact TD Ameritrade to see if I can negotiate lower sales commissions.

Profitable Options Trades on Friday

Friday marked the end of a long week of earnings. This also marked a year anniversary of when negative fluctuation began. We received the same news as last year from the FAANG companies of Apple, Amazon, and Google (Alphabet) where they produced strong earnings, but mentioned higher cost. This year it is different as we have a Federal Reserve that appears to be easing, trade war is simmering and stocks were far over sold in the last quarter of 2018.

Moving into 2019, companies started quickly providing earnings warnings. Apple was the first to do it on the first day of trading on January 2nd. They went down hard and shot up after that. Apple was the only one to actually drop after the warning. Skyworks went up after the warning and up further after annoucing lower than expected earnings. That doesn't make sense to me.

What also doesn't make sense in how Alphabet goes down either the day after announcing earnings and again for the rest of the week. Alphabet did report earnings on Monday, went down some on Tuesday despite falling hard on Wednesday and Thursday. I did see it bottom early on Friday and bought a call option expiring the following Friday. Check out my chart to the right.

Expedia was a big mover after reporting earnings on Thursday after the close. I saw it run up near it's
52 week high and when the market opened on Friday it came straight down. I noticed that it bottomed just above 129 by 9:45am to I bought a couple 132 calls for next week. I failed to sell them at the peak as I was greedy and expecting it to go higher. I would have been up 260 if I sold them when they were worth 4 a calls. I have that chart to the right also.

The third trade I took part in on Friday was Boeing calls. I bought next weeks 405 strike calls near open. I should have sold when it peaked quickly to take a quick profit because that is typically what Boeing does on a Friday. Or I could have bought a Put near the quick morning peak and sold it for a profit when it bottomed around 11:30am. That time would have been the best time to buy call options on Boeing as it went
straight up from there. I sold my calls earlier than I noted on this chart because I sold them at 1pm and did not expect it to go higher from there. If I held until close, I would have made the same profit as if I sold in the first 10 minutes of the day.

That brings a huge reminder to take your profits early and do something else for the rest of the day. The stock of your choice must go higher than previous morning high for your option less than 2 weeks out not to depreciate due to time decay.

/As usual, I hope this helps someone. I am still trying to refine my skills and be profitable in larger amounts every day. My main issue is buying too early and not waiting for a confirmation on the proper entry point. I did it on Alphabet and Expedia on Friday, but failed to do it correctly on Boeing which made taking the largest profit not possible since I got burned earlier when the MACD and the Stochastic Indicators peaked and I didn't sell.

IMPORTANT LESSON: Many times you can profit in less than an hour. You will not make more by holding longer. This is not a job and you do not make more watching it go down. You actually lose and will lose twice as much as you could have gained if you don't get out at the right time. Take your profit and run!

UGAZ and DGAZ will go to 0!!!

UGAZ and DGAZ were brought to my attention this past November by a friend. At that time, UGAZ
was moving between 130 and 150. I asked him if he sold when it went back to 150 and he said "No." UGAZ went down below 110 after that and continued lower. At this date UGAZ is sitting at 27. I bought some when it was at 44, more at 42, more at 40, more at 38 and sold half when it went back to 42, sold more when it went up to 62. Thinking it would go up, I bought as it was going down. I got out and gave up the gains I made on it. I then took a step back and evaluated UGAZ as an investment.

I saved a picture of UGAZ chart from BigCharts.com and if you look at where UGAZ began near 70,000 and you can see it went in a straight line down to 20,000.

Question: Where is the huge jump it had at the end of 2018?

Answer: It is so miniscule on this chart that is doesn't show up. You do see the volume shoot up because everyone was chasing the money and many got slaughtered being pigs.

For those who would like to know what is UGAZ:  UGAZ provides 3 times the percentage return of Natural Gas on a daily basis. DGAZ provides the inverse (opposite) of that return. So if Natural Gas goes up 1%, UGAZ goes up 3% and DGAZ goes down 3%. If Natural Gas goes down 1%, UGAZ goes down 3% and DGAZ goes up 3%. With that in mind, after seeing the ugly chart of UGAZ, you would expect DGAZ to be the opposite and shoot through the roof.

Initially, DGAZ did shoot straight up as UGAZ went straight down, but over time they have normalized and went straight down together. To understand this, we need to take a step back into the math class. Many familiar with investments understand that down 30%, then up 30% does not bring you back to where you started. Instead you are still down 9%. It actually takes a 42.85% positive return after a 30% drop to break even as shown in my calculator screenshot to the right.

Next we should look at the underlying asset that UGAZ and DGAZ is based on which is Natural Gas. A chart of Natural Gas is not easy to find, but futures on Natural Gas can be charted easily. If you bought a future contract in 2008 on Natural Gas for this March 2019 the cost was much higher than today. Futures are similar to options and carry a premium based on the time factor. If UGAZ and DGAZ are based on the futures, it only makes sense for them to go down when you compare them with the next chart.

Looking past the charts and thinking about an investment into an ETF (Exchange Traded Fund), most all ETF's are available to trade everyday AND have the ability to buy and sell options on them. UGAZ and DGAZ are not option-able ETF's. Looking at the charts you can see why when they go straight down anyone could make money selling calls and buying puts if they were available. As long as you traded them far enough out, but not too far you would almost be guaranteed money.

Based on the preceding factors, you probably understand why I come to the conclusion that UGAZ and DGAZ are not investments as they will go to zero. You are probably wondering why are they traded on the open market if they are so bad. Velocity Shares is a popular mutual fund investment company who makes money selling you on the idea that you can get 3 times the return of the underlying asset. If they collected $80,000 per share back in 2008, they have plenty of money to pay out as it is designed to go down. That sounds like a Ponzi Scheme to me! They are not the only mutual fund company that produces these types of products.

A year ago there was huge news on people losing money when the VIX (Volatility Index) spiked up. People got fat and happy since the volatility was so low for so long, they got caught off guard when volatility spiked since their ETF was invested in a multiple of the inverse volatility. Investments like this are pushed and sold appealing to people's greed factor. They are not good to put your money and are very dangerous. You should never invest in one of these if you are looking for something to buy and hold for the future. Please do your research before investing.

Trading After Amazon Earnings

On Thursday, after the market close Amazon reported their fourth quarter earnings. They beat their earnings expectation, but due to increase expenses as stated on the conference call, and drove the price down largely. It attempted to make her early recovering, but just think further and further.

Like last year, when Amazon and Google disappointed on their earnings, the whole market came down. It is extremely important to make sure that you get out of your trade in a timely fashion. When you get too greedy, you end up losing more than you gained.

I got out of my puts on Alphabet missing the right time and
costing me $600 on Thursday. I didn't make the same mistake today which was very important because it was the day of expiration. I did make money on alphabet 1130 calls, but lost a little too much on a 1135 call that I didn't sell promptly.

Alphabet's normal trading on Fridays consist of going up sharply, retracing down near the low the day, going back up and falling short of where it peaked earlier, and going down for most of the rest of the day. Very good money can be made with puts and decent money can be made with calls on Fridays as long as your problems with your execution and don't fall in love with your holdings.

From my chart above you can see where I recommend positions. This is the typical movement of Alphabet on a Friday, but the past 3 out of 4 weeks it has not moved in the typical pattern.

Then there was Tesla. After reporting fourth quarter earnings on Wednesday afternoon, we didn't get a big movement in either direction. I believe it would have fallen further if Tesla reported a loss in the 4th quarter of 2018. Since Tesla reported a slightly lower than expected profit and already came down so sharply in the prior week, it should back up to trade above 330 next week. I bought 2 315 February 8 calls on Tesla within the first few minutes of Fridays open.

I don't like holding options over night because you don't know what will happen by the next day let alone after a weekend. Typically you can buy the same calls on Monday unless Tesla opens considerably higher. Hopefully I can benefit from Tesla running up to 330 early Monday morning and I can sell then.

On Thursday morning, when I saw that Tesla was not going down, I decided to sell a covered 3/1/19 Put with a 280 strike price for $800. I picked that strike price because it bounced off 280 at the bottom of the most recent drop before the earnings release. Therefore I expect it to go up and this option expire worthless on March 1st, but if it does go down by then even in a larger market decline the level of 280 should hold for Tesla. I found this strategy makes more sense than being subject to risk of holding on the stock.

I got fed up with UGAZ and it's strange movement that don't make sense. I did find that Antero Resources Corporation (AR) does make sense as it is a company in the Natural Gas field with positive earnings and does have options available on it. AR his a 5 year low on Thursday below 10 and it bounced when UGAZ didn't. UGAZ went down further on Friday, but AR went up. When AR was at 10.21 on Friday, I sold 5 3/15/19 10 strike Puts. I might decided to buy this stock also, but at this point I feel I can make a high probability profit even if it doesn't go much higher by expiration.

I had been following someone on YouTube recently who discusses options trades, but I have found him making some dumb errors that didn't make sense. I am not saying that I am an expert, but to sell an out of the money naked call option 5 months out on Boeing the day before earnings has to be the dumbest move I have ever seen. There is a possibility that it goes down and he might be able to buy it back slightly over what he received on it. There is a probability that Boeing blows through that 400 strike price before the next earnings call, especially if there is a trade deal done, but definitely by their next earnings report.

This year is starting to look like last year in terms of the market movement, but this year is quite different. Last year the market had a large amount of volatility due to over inflated market after the next tax bill was passed, companies wrote off more expenses in the fourth quarter of 2017 to take advantage of the higher tax break, emerging markets were declining, new Fed Chairman Powell starting moving interest rates too quickly and trade tariffs were affecting everyone when nobody was expecting them at all.

This year is different because the Fed chairman has learned how to talk without disrupting the stock market, we might be getting closer to a trade agreement, and consumers are about to experience some of the largest tax refunds ever. Amazon's warning of higher expenses might have spooked investors Thursday and Friday, but it is the same thing that Google did last year when everything reversed course. It was pointed out on CNBC's Options Action on Friday that Alphabet appears to be in a head and shoulders pattern, but you could say that about so many companies that I broken out after hitting a 52 week low and bounced to move sharply up. Typically these 52 week lows have been 50% of their all time highs. Alphabet is the one FANG member with probably the highest diversity along with the lowest growth movement. I don't see Alphabet moving more than 100 points lower, but I also don't see that coming until it have moved 300 points higher.