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.

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.

Patience Leads to Profit When Day Trading

Money can be made on the market going up and down daily especially with options. There were sharp movements today with Boeing, JP Morgan and Home Depot. I tend to stick with these few stocks because they have decent daily movement and you can profit nicely with as little as $500.

Boeing

Boeing had more news over night as the FAA found another problem that needed to be addressed with their max airplane before being allowed to fly again. The stock moved sharply down almost 10 points from Wednesday's close. It popped at open, went down, came up a little and retested that low before rising up for most of the day. It had a sharp move up around noon as shown in a 1 minute chart.

What I have noticed it that when it has a sharp move up, it make get another move higher, but will have a sharp move downward by the end of the day. That is exactly what happened at 3:45pm when it was announced that Southwest Airlines is canceling their order of the max jet. This is too late in the day to expect to happen, but it has shown to happen multiple times in the past month. You could look at Wednesday's chart when it was moving up and then sold off in the afternoon. If only you held those afternoon puts until Thursday. But we don't do that when day trading options because it could have easily had good news that moved it up to 390 similar to what happened with the banks today. I drew up some notes on a chart for you to study.

JP Morgan

Today's movement with JP Morgan was similar to yesterday, but quite different in the pattern. To start the day, JP Morgan opened higher than yesterday's close. There might have been a moment near open when you could have bought calls, but I don't like it because there was no guarantee that it wasn't going lower as a retest. It ran straight up, topped and sharply moved downward. The move offered no retest of the peak and no retest of the lower areas as it moved sharply up from the bottom. I did not trade these movements because they did not show good entry points for day trades.

The afternoon high was not as high as the morning, but it did show that it was peaking around 109.30 as it moved downward before coming back to that area. When it was at 109.24 I bought 109 puts at an average cost of .43. I went to the bathroom while monitoring the stock on my phone and saw it went slightly higher for the second peak at 109.36. Unlike yesterday, I did not lose 10 cents an option this time. This was true mainly because I bought 109 puts that were closer to being in the money compared to yesterday when I bought 108 puts that were still 50 cents out of the money in the afternoon.

I was not worried because every time JP Morgan touched 109.36, it went down quickly and did not hold that price. After the second time, the stock started falling. I bought 3 more when it was at 109.31 at .41. I was hoping to be able to sell these options for .8 or .9, but realizing that they expire tomorrow, I knew the premium was going to decrease based on the less time to expiration. I decided to target my exit based on the morning drop and utilizing the Pivot Point of 108.65 from my trading software that displayed the Pivot Point.

Sure enough, JP Morgan made it to the Pivot Point of 108.65 which was slightly higher than the morning low. At this point my put options appeared to have topped out at .70. I placed my limit order for .75 and lowered to .72, but the stock appeared to make a reversal, so I finally got it sold for .69 which created a profit of $320 on my 13 contracts.

That might have been a good point to buy calls for the next day if I did not mind holding options over night. But that is not what I do. JP Morgan moved sharply to 108.90 before closing around 108.80 and those options would have been worth around .60. After the close, the Federal Reserve announce the results of their stress test and JP Morgan along with all of the other US banks moved upwards big time. JP Morgan moved almost 2 points higher. They also announce dividends and stock buy backs.

Friday Expectations

As we enter the weekend of the G20 summit and escalation of trade meetings, the market should open higher on optimism and on the back of the great bank news. It would be awesome if the market would close on the highs of the day, but given that it is also that last day of the quarter, we might see an afternoon sell off that drops us just above the flat line. We might not have a sell off, but just because Alphabet is near it's low point for the week doesn't mean it will automatically head higher and stay there. Buying expiring options is dangerous on Friday, but as long as you are making sure they are in the money, you can make money doing it. Buying options for next week is a safer bet and does not require you to buy so close to being in the money to make profit.

Make More Money Waiting

Making money with the stock market in the long term is a buy and hold strategy utilizing stocks with great dividends like Verizon. When you day trade, you must wait for the right buy signals. If you are not disciplined, you will be buying early and late and selling early and late. When you see certain patterns, you have the tendency to buy expecting that pattern based on the day of the week or just plain wishful expectations.

Not waiting does not only shorten your earning potential, it can cost you for your day profit and create a loss you can't dig yourself out of for the day. Let's break down expectations and timing utilizing JP Morgan activity for the day.

Initial Move for the day

The first movement of the day may not be more than a reaction in the opposite direction from the prior day's movement. If this is the case, the theme is likely to continue from the prior day. Alphabet (GOOGL) was a perfect example of this today.

On the other hand, some stocks like JP Morgan go up and come down in the same day which ultimately create net gains for the day. Today looked similar to yesterday for JP Morgan as it moved sharply up from market open. When that happens, you wait for the pull back to  a near open price to buy calls for the upside. On my chart drawing, I mark it with a yellow "A."

Now you are going to let this run until you get 2 consecutive red candles which designate resistance when looking at your daily chart with 5 minute intervals. This is not the time to sell as it must retest the top. When it does, it typically goes slightly higher. You can sell at this mark or place your trade when it retest that mark again. You will know it is a retest when it reaches the same spot, but the stochastic lines have peaked at a lower mark. The second way is based on peaking in the price chart with space between the top of the Bollinger Band (B).

Secondary Movement of the Day

When you have noticed the top has formed. You locate the first out of the money put option and buy at or near the lowest price of the day. Once you are in on the opposite direction, you must be patient and withstand upward movement as long as it doesn't move dramatically above the pre-established ceiling for the day.

Now to determine the exit of this 2nd position of the day, you should look at where the area was that you bought the call option on the first movement of the day. It is almost safe to aim for the point to take your profit and get out. There are many days the reversal is stronger than the upward movement. It is nice expecting it, but if you enter and exit at the right locations, you make profit and are not holding like I did today just to break even.

Further Notes

The strategy works with many stocks, but not every stock has 2 sharp movements in the same day. You can say that most stocks move in one direction and give part back towards the end of the day, but then there will be that one day that it doesn't give back towards the end of the day and you were expecting it. The key is do your research, know your favorite stock tendencies, get in and out to take your profit daily.

Why I Broke Even and Didn't Profit Today

I bought my 8 initials calls at the right moment today. I freaked out with the 2nd large red candle instead of waiting for the retest as I have seen almost every day. Although the stock was higher than where I bought the calls, because the calls were out of the money, I ended up selling at a break even minus commission. I would have been up over $120 if I were patient and sold at the 2 peak.

On the secondary movement, I bought my puts before waiting for the top to form. I have made this mistake before, so you would think I would have learned, but this is why I am writing this blog. No matter if anyone else reads it, I expect it to create a more powerful memory to act appropriately in order to profit off small movements rather than break even or lose money.

So I bought these 108 strike puts in a market order at .48. If I had waited, I could have placed my order to buy them at .36 and would have bought a third more contracts. I did buy more at a lower amount, .44 which is still not .36. I did not panic although I did have 15 contracts with an average cost of .48 that were worth .36. My account was negative $200 at the worst part.

As I mentioned, I did not panic and knew the downward movement was due with all of the red candle following the peak of the day of 109.30. It moved in my direction, but unfortunately the highest these puts were worth today was .54. I did not sell there because I thought it might fall move sharply towards the end of the day. I was greedy and disappointed based on not buying at the right time. If I had bought at .36, I could have sold at .50 with a different of .14 times 20 contracts for a profit of 280 minus commission. Instead I sold at close for .48 to end the day break even minus $20 in commission.

Day Trading with Options Fresh Start Rule

Part of day trading with options is closing out your position by the end of the day. Each day goes by, the options are worth less if the price of the stock opens tomorrow where it closes today. The only time the option is worth more is when it move substantially at open the next day. Most of the time, even if it opens in your direction, you can buy those options for the same price you sold them the prior day. Therefore the odds say, you are more likely to lose money holding options over night. Like anything, holding options over night could work one time, but more times than not it will not work in your favor.

Tomorrow is a new day and as long as you did not buy options based on hope instead of indicators, you can make tomorrow twice as good as today.

Target, Walmart or Amazon?

Watching one of my favorite shows this afternoon on CNBC, they played a game, Would you Rather with Target, Walmart or Amazon. I found their discussion interesting as many of them picked Amazon, or Target over Walmart. Since they didn't ask me, I thought I would write my 2 cents.

I feel there is one winner as the other 2 are trying to catch up. The analyst on the show stated that Amazon will try to squeeze profits from Walmart and Target. I don't think they account for the high over head cost Amazon has between delivery, warehouses and employees to run those locations. Amazon clearly doesn't have the overhead of running a retail location, but that is nominal when you consider a couple other factors that retail locations allow.

Retail locations allow people to feel, touch and try. You can't get that experience online. Retail locations also have the ability to take cash and food stamps that you can not do on Amazon's website. When people use other forms of payments including food stamps, many times they buy other things in addition to food. This ultimately leads to the realization that Amazon does not cater to low income families with make up a large percentage of households in the United States.

Amazon might be a better play if you consider their business web services and video services. However, Amazon has increased the price of their Prime membership to increase profits while shrinking delivery times by a day. While Amazon collects a monthly fee for their services, Walmart provides the same delivery service with no membership.

Each company has spent money in the past couple of years to improve. Amazon bought Whole Foods for a retail food presence that also expands their Prime Membership reach for great synergy as Whole Foods caters to a more affluent customer. Target spent money to improve their stores in the past year, but I didn't really see a difference. Walmart on the other hand spent money to acquire Flipkart which is the leading online retailer in India, the 2nd largest country by population in the world. So each company has spent money to expand their businesses rather than wasting on share buybacks.

From the investments the companies made, I believe Walmart's purchase of Flipcart was the most aggressive that will benefit them the most in the long run. Walmart already has a great online presence so adding Flipkart jumped them in front of Amazon in India. Flipkart's synergy is great as Walmart's website is a marketplace where a variety of sellers also sell products like Amazon.

In addition, Walmart also has it's own brand of products they sell for a higher profit margin to comparable name brands on the shelf. And Walmart even sells low cost value based items in that are similar to what you could get at a Family Dollar, Dollar Tree or Five Below. I do realize that Target does similar things to Walmart, but ultimately Target appears to be a different version of K-Mart which eventually disappeared.

To avoid the fate of K-Mart, Target needs to improve their online presence to the point someone wants to use their app to search for things first like Amazon and Walmart. Target must create a marketplace for other sellers so their may profit from seller fees. Target must also improve their value based presence. To me, there are too many things that Walmart already does well that Target isn't in the same league as Amazon and Walmart

All factors considered, I believe Walmart is the best bargain for your investment dollars of the 3 with Amazon in a close 2nd due to their server business. Amazon could get in front of Walmart if they were to take advantage of a major retailer going out of business like Sears or JC Penny's who have locations and their own brands.

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.