Profiting Huge Off $0.20 Moves

So many times I try to find the ones that devil, but many times you might miss your entry point, got in too soon, or got out too soon. Notice I left out got out too late. The goal is to take profits quickly, you should never allow yourself to get out too late. But many times the problem is you got in too early.

In the situation where you got into early, is often times better to take the loss where it's at don't worry about dollar cost averaging to make it better. Moreover if you do happen to benefit by dollar cost averaging and buying more when you do find the proper bottom, then the inflection point where you bought the first group at is probably set at the correct price and where you need to exit from the correct entry point. That sounds like a lot of mess, so let me give you an example.

Today JP Morgan appear to have topped around 114.70. I'm in money by buying 115 strike puts for $0.60 each. I made sure I sold them when JPMorgan got down to the point that it had hit in the morning around on 114.20 at which time I sold those for $0.95. So that was a quick profit a $350 minus commissions. So JP Morgan went back up close to that earlier Mark of 114.70 when I bought the same put options for $0.60. But there was a problem in that JP Morgan wasn't done going up.

JPMorgan topped in the afternoon at 115.07. at this time those put options were worth $0.38 a piece. So I bought more. And I had a large amount with intentions of selling at $0.60. It appeared that JPMorgan stopped at 114.68 so I exited the position at $0.56. my average cost was $0.52 on 50 put options for a profit of approximately $130. That certainly beat being down $700 in that transaction.

That would have been mad if I didn't take that profit and JPMorgan went straight back up. It did go up right after I'm foot that profit however it did go down further and those put options would have been worth $0.68.

Many Opportunities to Profit

I typically narow in on one or two stocks daily to profit from options. I feel it is best to know a stock so good that you recognize patterns that occur with it on a daily basis. I like using JP Morgan, I quit using Alphabet, Verizon is a fun one to make money on daily, Boeing is another one that moves and looks predictable,... I could go on and on. You can make money with options based on news for the day too.

Apple

Apple got a justified downgrade today based on limited device sales moving forward. That only makes sense if their service revenue is based on products that you get free other places and I could go on from there, but the point is Apple was set to open lower and probably fall further today. It failed to move up at open, so it was profitable to buy put options with a strike price of 200. You would have made a nice profit if you sold them when it reached 198. You could have made some money with 200 calls if bought at the bottom and sold when it peaked around 200.34. I did not investigate the options on it, but should have. See my chart to the right.

Boeing

Boeing has continues to have negatice news as a result of the grounding of the 737 Max. If somethinng makes the market negatice, Boeing likes going down with it.

Boeing had some nice movement up from the opening price, but failed to go hgher on the retest which would have been a great opportunity to buy put options. Call options could hav been purchased at the bottom, but it most likely was not going to reach the morning highs like JP Morgan.

I strongly believe and found that holding an options day trade for more than 90 minutes creates a losing position. 

JP Morgan

JP Morgan opened lower from Friday's close. It found a bottom at 112.50 and shot up from there. It came within penny's of break even for the day. If you bought 114 call options when it wsas at 112.50 at .35 and when it made it close to break even, you could have sold for .55 at a nice profit. At that peak, you could have looked for a place to buy 113 put options and wait for it to come close to the morning bottom.

Timing Summary

• Apple
• downside 25 minutes
• upside 1 hour and 20 minutes
• Boeing
• downside 1.3
• JP Morgan
• upside 20 minute
• downsie: from 11:20 to 3:05

Summary

It doesn't take all day to day trade. The key is to recognize when price is going to be spring loaded in one direction or the other, Do not expect it to continue throughout the day. Take profits quickly and do something else for the rest of the day.

Hopefully my blogs show you that there is money to be made with the market, but hopefully you understand there is a level of risk and if you don't time your entry and/or exit points correctly, you may be luck to break even or escape with a small loss.

Be paitent

Take quick action

Prepare to exit quickly if you are wrong

Prepare to exit quickly if you are right

And most important, sign up for a free papertrading account with Think or Swim, ETrade or Schwab. Learn the strategies and don't waste money.

When to Take Profit and Run

The market moves up over time, but during the time, there are many little upward and downward movements. Many times there are more downward movements than upward movement. Some say the market takes the stairs up and the elevator down. There are opportunities in both directions and sometimes the same day with the same stock.  It might not be profitable to play both directions as you might miss an entry or exit point killing profit.

When you do have the right trade, it is important to take your profit quickly as you

can not assume the stock will reach a similar level later in the day. Some of the most profitable trades only take 15 to 20 minutes as was the case with Apple on Friday. I was expecting a quick drop as it ran into resistance on the upside in the morning. I made the perfect entry as you can see on the first chart.

Expecting further downside instead of reading the price movement, I did not sell on time. I held until it turned into a slight losing position. After looking at the total picture, I don't know what I was waiting on since the put option actually doubled in value in that short time from 10:20 to 10:40am.

You can't expect it to go up for ever and you can't expect it to go down forever. 

There are signals that indicate a stock has made it's full run up or down and will change positions. This goes back to the point in my blog the other day in taking your profit and don't look to give it back. The house always wins in the stock market too. Your broker charges a commission and not a percentage of gains or losses. Maximize your money, because they are going to make money either way. The longer you trade successfully, the more money they make which is a good thing as long as you are making more money than you are paying them. When you invest properly, you should always make far more than what you pay them.

Reflection

Friday is the same day I made the great day trade on the stock that broke out. I knew that was going to be short lived and should expect other trades that make sharp movements to be short lived too. Apple moved just like that stock I don't care to remember the ticker symbol of with the exception that Apple moved in the opposite directions.

Sharp movements will have some spring back movements from the bottom to the

point they might not revisit that bottom. Based on the signals, you could have bought in the opposite direction with call options on Apple and I would have bought call options that expire next week instead of this week to allow the opportunity to hold over night if I wanted, but also because 205 calls were not going to be worth anything unless Apple broke well above 205 which was not expected at the end of a holiday week. And 202.50 calls expiring 7/5 cost too much. Therefore I would have bought 205 calls with 7/12 expiration date and here is the chart for illustration of entry and exit points.

The 2 charts of Apple are the same, just written up different. You can see how Apple took the elevator down quick and slowly worked up for the afternoon only to take another short trip on the elevator downward. One more chart I could have drawn up would have been when it capped at the top and made the movement downward. At the top, a 205 strike put could have been bought for around .20 and when it was at the relative bottom near close it was worth 1.11 approximately. There was a risky, but nice 5 to 1 return on your money in 30 minutes.

So Cheap You Buy the Stock

While watching my favorite day time show on CNBC, the Halftime Report, they ended with final trades. Brian Kelly sounds like a fool most of the time between his predictions of BitCoin and Roku, but Friday he said CRBC. I typed it in the chart and a large green candle appeared as you can see the chart to the right. Starting at 7.40-7.50 range was interesting to me.

I quickly bought 500 shares at 7.67 and it continued to run up as you can see in the next chart. I have see plenty of run ups like this and many times they hit a ceiling after a quick run. Sure enough that is what appeared to happen as it failed to go above 8.40. I quickly sold at market for 8.22 for a modest profit of $280 in about 10 minutes.

As expected, it slowly bled away for the rest of the afternoon to finish up at 7.85. Due to the rapid movement, low stock price, limited coverage, I would not recommend trading options on a stock like this. You could do it and probably make way more money, but you could also be stuck holding it into a losing position due to lack of buyers after you paid more than it was worth due to lack of sellers when you bought your options.

I attempted to buy put options on the downside when I realized it wasn't even going to retest the peak. When it was trading for 8.10, I bought 5 7.50 7/19/19 put options with a bid of .05 and ask of .10. At market, the order filled at .10.

I then placed a sell order with a limit of .20. The options bid went up to .10 and the ask went to .20, but came down to .15. By the end of the day, I sold at market price for .13. Not enough profit to really be concerned with considering the risk.

Without research, you might be asking why didn't I buy $8 strike put options for next week or even with a $9 strike price. The first expiration date available was 7/19/19 and the strike prices were 5.0, 7.50 and 10.0. Given the limited options available, you know the volume is not that high. Sellers are in control on the way up and the buyers are in control on the way down.

This strategy is used by day traders and penny stocks. It is not practical if you don't have the cash to pull it off. It is important to have some cash available when opportunity arises. I had the cash available to buy 1000 and probably should have done it and would be up $560 in just that trade. If you only bought 100 shares, made your entries as I did, you would be up only $56.

Opportunities like this happen almost every day. You just need the right scanners, or chat rooms with someone recognizing it as it happens.

Better Entry and Exit Points to Profit

When day trading options for profit, options are typically the most expensive at market open due to time until expiration is the greatest the whole day and uncertainty in direction equals a higher premium. The stock that you are watching could move in the direction you expected and the option probably won't be worth more because the directional movement made up for the loss of time until expiration and uncertainty.

I typically trade options on JP Morgan, but today I also attempted to trade options on Tesla and Apple. I am writing this blog as a learning lesson of patience to avoid doing what I did today and make more consistent profits moving forward.

Tesla

Tesla reported record deliveries in the 2nd quarter of 2019. This should have been expected as Elon Musk stated in the 1st quarter numbers were deflated due to many of  the deliveries not making it until the 2nd quarter. Either way, the stock shot up nicely in the after hours and fell today during the shortened trading day. If you bought put options with this expectation near open, you would have been disappointed, especially since the stock did not move substantially lower. Please refer to my first chart:

This provides the greatest example of why you you don't buy options near open. Looking at the next chart, you had to wait only 30 minutes until 10am to buy the put options and you would have had a better target of 235 strike price. I even drew on the chart where is the best place to sell them.

Hindsight is 20/20, so it is always obvious when looking at the chart after the fact. The key is to see the chart, wait for the retest to buy your options and have your defined stopping point in mind.





Apple
Apple looked interesting today and with the drop in JP Morgan, I was expecting Apple to have a bigger drop towards the end of the day and I was wrong. As you can see on my graph, there was a point where it could have gone either way and I was expecting it to go down thinking the upside movement was exhausted. I think I stated this already, "I was wrong."

The break in trend was going to determine the direction for the afternoon. It broke to the upside. Since we can not read the mind of the market without our artificial hindsight, we must wait for the breakout, wait for the retest and then buy call options. I am quite proud of how I have drawn on these charts today and hope that I can be more patient to be able to recognize the pattern and profit larger rather than making the wrong decision.

I hope these help me do better and help you as well. Making 300 to 500 a day can be done easily if you are patient, wait for the right opportunity and get the direction correct.

Holding Until Tomorrow Rarely Works

In the second half of my blog yesterday, I discussed buying Verizon call options when I realized the shares were at a short term floor. Yesterday I also noticed that JP Morgan was at a short term ceiling at $114. I bought put options on JP Morgan yesterday for just under .60 on 10 113 July 5th expiration. I didn't sell when I should have when the options were trading for .85. Instead I held the options over night while JP Morgan closed at $113.80 on Tuesday.

This week is a shortened trading week with the markets closing at 1pm on Wednesday in celebration This is why I title my blog "Day Trading with Options." Don't hold options that expire in the same week over night because you will be disappointed more times than profitable.

for Independence Day on Thursday. The US markets will reopen on Friday, but holding options long that expire this week is investing suicide and here is why... Those 113 put options closed Tuesday at .47 while the stock closes slightly up at 113.80. On Wednesday, JP Morgan opened near 113.20 and those put options went down to .32. I did not panic and decided to wait and target a selling point near yesterday's high. I placed my limit order to sell at .80 and it got hit while JP Morgan stock price dropped to $112.30. Not only was the option out of the money yesterday when it traded for .85, it was 1.20 higher than where my options sold today.

Typically, you may buy back the same options you  had the prior day at a lower cost even if the stock moves in the direction of expectation due to the loss of time until expiration. 

This brings me to my 2nd point of the day... Many times we sell at the right time and made a profit for the day and we are looking for something else to buy. This is one of the biggest things that hold back traders from staying profitable on the daily basis. At the time we sell, it doesn't mean that the stock you were following is going to reverse position and it doesn't mean that something else is going to reverse position. When a trader does this, they typically are not buying at the right time and set themselves up to take a loss. Then because we got in at the wrong time, many traders will hold this losing position too long. Stops must be in place to exit when the trade isn't going your way.

Don't buy something right after taking a profit.

And finally, I realized something else yesterday when looking for the right selling point to take a profit in your option trade. You can use a similar method to find the right entry point to buy your option contracts. Typically, I like to look for options that I can double my money in one day based on the same stock movement for the day. You can actually look at the high price of the option that you are looking to buy and base your entry point far below as much as half. This way if you enter at the right spot, you can expect to exit at a profitable spot.

When holding a Day is Bettter

I try to keep my trading more simple in hopes of reducing errors and maximizing profits. I made a bunch of money trading Alphabet (GOOGL) in the past, but have lost much more. I appreciate sticking with stocks that move both directions in a day most of the time. This is true most days with JP Morgan. JP Morgan runs up, comes back to where it started the day, runs up again and comes down again... and might finish up.... or down. If you are disciplined, you can make money trading the options of JP Morgan.

Daily Pattern Trading

The really cool thing when trading options is that you can get a similar price after it has made part of the move in the direction you are expecting. For example, JP Morgan traded around $114.50 Monday morning. At that peak, you could have bought a 113 strike put with the expectation of downward movement for .50. It went down and then it retested that peak when it was at $114.20. During that second peak, you could have bought the same put options for .50 again. JP Morgan then went down near where it started the day around $113.30 and you could have sold those put options for over 1.00.

Today was similar as JP Morgan shot up to $114.20, came down and back up to

$113.92. At both times you could have bought the 113 strike put options for .50. Near open they were worth .79, so you must use that as a reference point where you wold need to consider getting out. Please see my  illustration of JP Morgan for 7/2/19. If you would have bought 10 of those put options for .48 ($448 cost) and sold them for .80 ($800), you see you would have profited $350. That is not a bad day job!

The problem we get is getting greedy. When there are no catalyst involved that could push the stock lower, we don't need to expect it to go lower. Take your profit and move to trade another day. I wrote that because that is not  what I did. I should have sold at .85 and would have been happy, but I was already unhappy with myself for buying at .61 instead of being disciplined and placing my buy order for .48. It would have been executed.

When To Be Greedy

If you follow certain stocks, you know they trade in a range. Certain stable companies get a little over sold and then get a huge push the next day. It happens with more stocks than you think if you pay close enough attention. AMD comes to mind and even IQ has made it to $18 before moving sharply up to $21 in a day. Verizon is more solid that those and their options are cheap.

Verizon has sold off from the $58.20 mark a few times in the past 9 months. Most of those times it finds a level of resistance on a Friday. It moves lower on Monday, but not by much. Then on Tuesday it spikes up over $1 to over $58/share. There is a safe way to play it and an aggressive profit spiking way to play.

On that Monday afternoon, you could buy $58 strike call options 2 or 3 weeks out. This would be safer because you do have time on your side to wait for the gains. I bought July 26 $58 strike calls yesterday at .28. I placed my sell order today as it was going up to get .50 and they sold while finishing the day at .68 which is more than 2 times your money.

I am aggressive too, so I bought $57 strike calls when it was trading for $56.80 on Monday at .32. If I were more patient and noticing the pattern more clearly now, I would have waited or placed my buy order with a limit price of .22. At that price, I could have bought 15 and it spiked this morning above $58 and could have sold those calls for over 1.00. That's 5 times your money in one day!!!

The subtitle is when to be greedy. I write that because I profited on this trade twice this year and both times I sold at 2 times my initial investment instead of 4 times minimum. I hope to do better next time.

There is a possibility that it runs up higher over the next couple of days, but there is also a possibility that Trump says China lied and more tariffs are coming just to tank everything quickly.

I am quite sure that 10 years from now, there will be a huge investigation on how President Donald Trump manipulated the stock market by telling certain personal stock traders the news in advance to buy puts on the market and calls when he had favorable news. The scandle will discuss how much money his family profited by this manipulation. Then right after he goes to trial and is found guilty, he will pass from heart attack or something. It just looks like a pattern of evens similar to watching certain stocks move in the market.