Profits Only, Please!!!

I have spent the last 2 years trying to figure this day trading with options thing out. I hit an ultimate low this past Tuesday and felt lost. With options, there are opportunities to make money on upward and downward movement. The 2 biggest problems is timing and expectation. You can be a little off with timing and may still be alright if your anticipation of the movement is correct.

Timing

How long will a move last? When will there be a change in direction? The key is going in direction of strength. There are upward and downward movements all day everyday. The overall market is inclined to move upward, but not every stock is going to move in that direction at the same time. Therefore it is best to look for the right times to buy calls and do not buy puts until there is a fundamental change. Many stocks look like they are changing direction when they are just gearing up to make a stronger move in the same direction. JP Morgan is a perfect example of this over the past month.

There are times of a bear market or recession. During that time, call options will not make sense and you should only buy put options. This occurs when there is a fundamental change in the market such as bank failure, rise in interest rates, decline in earnings, disaster, war...

Expectations

Most of the time, it is not realistic to expect a higher high. Many times a new high is not that much higher than the previous high. Many times a stock is approaching a new high but fails to reach it. I could keep going because there are so many reasons why a stock might change direction. There are times when a new trading range is established and that is when the new high is not only past, but blown away. This happened this year with Disney, Microsoft, Walmart and Home Depot.

How do you get timing and expectation right?

As I have mentioned many times, you do not want to buy options in the morning when the market opens. It is important to wait and recognize what direction the market is going and what direction the stocks you are watching are going. There are really 2 types of movement: Bounce and Breakout.

Bounce

Stocks will bounce off of a resistance level either on the upside to signal a move downward or on the downside to signal a move upward. Some days, mainly on Tuesday's, there is a V movement. It might happen early or midday, but either way is the harder one to trade because it doesn't double test the spot it moved off like a typical day. Sometimes this bounce doesn't happen until late in the day and sets you up for the remainder of the week. Boeing is great for having limited downward movement and making a clear bottom before moving upwards for most of the day.

Breakout

A stock breaks out when it has a sharp movement followed by additional green candles in the same direction. When there is a breakout, it is important to wait for a movement in the opposite direction before trading in the direction the stock wants to go. You should expect 2 more sharp upward movement with minor pullbacks after you enter.

Whether you are trading calls or puts, on stocks or ETFs, it is important to get the direction correct. One stock is independent of others and just because one goes up in a sector, doesn't mean they all will. The opposite is true about downward movement.

Do not get greedy!!!

Take your profits, but don't be alarmed if there is a retest when you see your option prices go back to where you bought it. If you picked the wrong direction, get out quickly to trade another day. Do not trade too many different contracts that make it difficult to keep tabs on and end of losing more money. Practice the KISS method. Keep It Super Simple. It's OK to go small until you are comfortable with your decisions. Small wins are always better than a loss. Huge losses will have you finding another career quickly.

Let Do This!!!

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.

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.

Patient Day Trader Follow Up

The past 2 days I have analyzed some day trades for profit in my blog. I specifically looked at trading JP Morgan call and put options. I have used Charles Schwab for trading in the past couple of years, but am transitioning to E-Trade as they have more powerful tools to use. E-Trade allows you to actually view the charts on the specific options. Obviously you can not trade options based on stocks without having an idea of the stock movement and direction or you would not know if you should buy a call or a put option.

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Initial movement on Wednesday was to the upside. I did not like this trade because there was no retest before just shooting higher. If you timed it perfectly, you could have bought the 109 calls for .7 and you had better have sold them for just under 1.00 or this trade would have been an ugly loser quickly and would not have broken even.

If you were the patient investor, you could have waited for a great opportunity with better signs in the afternoon when JP Morgan peaked around 109.30 and you could have had a nicer chart of the option to base your trade.

Now when you look at the chart of the 109 put on JP Morgan, it was at it's lowest point at the morning peak. What was really interesting is the value was the same later that afternoon although the stock was lower than the morning peak.

As I mentioned in yesterday's blog, the Pivot Point on the graph designated 108.65 as the proper exit point. That was where the put was it's highest value in the afternoon of .70 which is a nice profit from .4.

Thursday was similar to Wednesday. There was morning move up followed by a sharp move downward. From the bottom, it moved up, but not to the level it was at in the morning spike. I gave much more detailed writing on this chart of the 109 put option on JP Morgan.

Friday was a little scary, but you could have made bigger money if you were working with options that expired that day as long as you stay at the money on purchase at time of purchase. 

• JP Morgan opened at 111 and spiked up to 12.56 approximately. At that time the 112 put options that expired 6/28/19 were worth .16 to .19. If you were to buy them there, you could have held them for it to come down to where it started at 110.97 and sold them for 1.05. 
• After bouncing from 111, JP Morgan ran back up and peaked at 112.22. At that point, those put options were trading for .18 again. I bought 13 just under .22. 
• JP Morgan moved down slowly, jig sawing from 111.90 to 111.75. At that time I received a call from Charles Schwab Derivative desk telling me that I better sell them or they will be forced to by 3:30PM. 
• I was thinking I should be able to sell them for at least .60 and triple my money. I got nervous and didn't want to sell for a loss. I placed my limit sell for .38 and .40. It just appeared that it would not go down further. I lowered my limit to .35 and it was still teetering between 111.72 and 111.88. I lowered my limit to .32 and it got sold pretty quickly. 
• After that JP Morgan dropped quicker. I saw those put options were worth .4, then .5, then .6 and finally .85 when JP Morgan reached 111.12. At this point, around 3:30pm, JP Morgan shot straight up for the rest of the afternoon. Those put options were worth .2 by the end of the day. 

That whole process was a little nerve racking, but I felt like I did fine. I might not

have felt as pressured if I didn't receive the call from Schwab telling me to sell the options before they do it for me. I could have made decent money if I were using options expiring next Friday, July 5, 2019 as shown in the chart to the right with 112 put options.

The next chart shows what the price movement would have been like if you were to buy 111 put options expiring July 5, 2019. The profit was not as big trading these that were just a little out of the money and were never in the money during Friday's trading session. This offers nice reference that buying out of the money options even with a week until expiration if not as profitable as at the money with this price movement. 

I hope you found this blog interesting and informative. This information is based on what I saw and I like to reflect in hope of perfecting my entry and exit points throughout the day for making profits buying and selling options. They key is that you can expect to buy at the same low price or lower, but you may not get a higher price to sell when it is exit time. 

I like to describe stock movement as a rubber band. If you stretched out a rubber band and plucked it from one end, the waves would be larger near the pluck, but in time smooth out to come back to a neutral position.

Tesla Sell the News - Model Y

Tesla announced their new Model Y last night. This new model should produce great profits for Tesla for years to come and will probably be produced much faster than anyone expects because the doubters remember how long Tesla took to mass produce the Model 3 and they are wrong expecting the same for the new Model Y.

Regardless of Tesla's future, it always trades the same on Friday's after a funky Thursday release of news whether good or bad. On Thursday, Tesla's stock ran up a little, but pretty much ended the day unchanged. The market didn't like the release of the Model Y despite the company almost did it perfectly if Elon Musk didn't stutter so much throughout the presentation. So let's break down how it trades.

Tesla opened down from Thursday's close and fell down after that. It fell quickly, had a small tooth up and fell further down. If you didn't get out of your Put options there, you would have to wait until 3pm to get out for close to the same profit. After the bid drop, Tesla moves up about half of the move before falling for the rest of the day. I would not recommend buying the morning bounce unless you were willing to sell it quick when it hits the morning top.

I recognized this pattern as it has happened many times in the past year with Tesla. I let my emotions get in the way and didn't pull the trigger properly. I bought near open, sold afraid of the bounce up, bought again when heading down, didn't sell quick enough at the morning bottom and finally I was not patient enough to wait for the afternoon bottom.

So since there is a downward Friday pattern, there is a following week pattern too. Typically, you could buy a call for the following week and be happy on Monday as it is oversold for the same reasons why it gets bought the following week. As long as Elon Musk doesn't go Twitter happy next week, I would expect to hear some good news like Tesla has produced 5k Model Y's over the weekend. I would look to buy calls near open and sell on the upside and don't play the downside during the week. You should get additional opportunities to buy more calls at a lower price the next day. I don't like hoding over night on Tesla because you will get burned.

Obviously traders are not in charge of the stock of Tesla. Algorithms and computers are in control of the trading of Tesla. Day traders only add to the fuel, but don't determine what happens with the stock of Tesla. It is unfortunate, but I write this blog in hopes to help someone, but most importantly try to improve my own trading to avoid making the same mistake and profit by these moves. I should have been up over $800 from Tesla alone, but because I let my emotions weigh more than my knowledge of the stock, I was down $200 in my Tesla put options today.

Thankfully I did not make the same mistake with Alphabet (GOOGL) this afternoon. I got in a little early and when my Put options got in the money, I did not set my limit order and missed out on half of the profit. I am thankful to be able to trade another day and hope to be more patient every day and to go with the flow while not marry my positions.

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.

Thursday and Friday Market Movement

This past week was a busy week for the end of August. Amazon is still moving to new highs along with Apple despite Netflix cutting off the Apple Store's cut of Netflix subscriptions. There are still more tariff talks as we ironed out a deal with Mexico, Canada is pushing for a deal next. Tesla has continued to move down as Elon Musk has left the headlines and other auto manufacturers are entering the electric auto space. 

Alphabet (GOOGL) had a nice move up this past week. It peaked out around 1269 which was a surprise that it went up on Thursday given that it started the day down. It fell back to 1260, came back up to 1266 and was in free fall mode until 2pm on Friday. I bought 3 1260 Puts on when it was at 1265 and sold it too soon at 1258. If I sold them on Friday at the low of 1225, I would have multiplied my money by 7. 

So that sounds good and you might say let's do that the next time it goes up. Typically Alphabet has a great week ending with a fall in the last day and a half. The next week it starts down with a bottom found on Monday. The bottom is retested on Tuesday and again on Wednesday. By 2pm on Wednesday the bottom is in and you could feel comfortable buying Calls for the end of the week. If the move is huge on Thursday without a pull back, Friday could be a similar sell off day. If Friday is an up day, buy Call options for the next week. If it is not an up day, buy Call options near the bottom at the end of the day.

Given how much Apple has run and their new iPhone announcement, I would expect to see it pull back some before moving higher. I am looking for it to come down to 222 before buying Call Options a week or two out.

Alpha Delivered!

• Today marked CNBC's Delivering Alpha Conference where we got to see Jim Crammer interview the president's chief economic advisor Larry Kudlow. The FANG erupted up and came down quickly before finding footing and moving higher. They did end the day flat. The banks moved up nicely and Boeing opened up, came down hard and took off again to the upside. 
• I found Boeing has some great morning movement this past week similar to FANG. Boeing was $3 higher in the Premarket trading, fell on its face and took off when the Stochastic indicator was at the bottom. I will be looking forward to trading Boeing next week as Alphabet options will be too expensive for me to mess with. 
  
  
  
  
• Alphabet did a typical Wednesday where it opened up, traded down and moved higher by the afternoon.