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The Learning Journal of RedK Trading Options...

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  #31 (permalink)
Dubai, UAE
 
Experience: Intermediate
Platform: TOS, TradeStation
Broker: OX, TradeStation
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did my quarter analysis.. it's very interesting.. that's only the 3rd quarter i do this, and i'm putting time in the spreadsheet so it's easier in future.. just plug in the transacation report and it does most of the work for me.. need to manually edit few cells, but overall, the work is minimized.

(sorry for not showing the $ totals.. but the learning is mostly in the split %)

here's what's curious, in the previous Q, i had a big unrealized loss from QCOM, which i carried forward to this Q - it was going down and i continued to use long puts to improve my BE. the realized profit on options was a 4 figure. that made me happy.

this q, it's the other way around.. good realized profit on my sale of QCOM, and a modest 3 figure profit from option trades. i wasn't focused, for one. i was putting time more in improving and simplifying my setup (that investment should pay back later) and i also deviated from my rules by doing some weeklies. also it was a short Q since i stopped trading mid-sept.



lessons learnt (again): focus on what works (noticed i do better long PUTS than CALLS .. interesting!), keep it simple and stick to basics when it comes to indicators (i'm down to only 1 momentum + trend indicator now + price levels. hope can find a way to program that with my next broker), trade stocks on breakouts, there's good money in there too (why not!) and on good signals. avoid the weeklies and intraday (not for me) ..

can't wait to be back. so much to do, so much to learn.
RedK

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  #32 (permalink)
Dubai, UAE
 
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My account is now fully transfered .. but i'm not trading.. still haven't found my next reliable platform, and spending sometime testing some of the possible solutions to port my setups to..

here's what i was working on before leaving ToS...



if i don't find something that allows me to use these setups i developed during the past few months, i guess i'll just go back to simple charting, MA crossing and just trade stocks on that .. so far, i haven't got the feeling that "I'm home" that i had when i was using ToS .. so funny !

the search continues,
RedK

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  #33 (permalink)
Dubai, UAE
 
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summary of my 1.5 year short experience with TDAm & ToS posted under another thread.. no hard feelings

https://futures.io/thinkorswim-programming/8854-thinkscripts-7.html#post271509

recovering from a trader's block.. now i look at different charts and indicators than my usual ones, but "can't see trades" .. i know it's a temporary thing. earnings season coming fast, things should start to shake & move, better get back in shape quickly,

RedK

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  #34 (permalink)
Dubai, UAE
 
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OK.. decided i can't stay on the side lines any longer.. so made 2 simple trades this week, trading with no indicators.. just looking at some price charts and price levels.. both positions currently open

- long INTC after earnings price action.. i love the stock, beleive it has potential, and love the dividends .. it seems stabilizing and ready to move back up.. just a gut feeling.. plan to hold for few months and have a mental stop loss, will do covered calls if it stagnates. too early to evaluate the overall trade.

- AAPL volatility play with OTM cash-secured Put .. 1 contract of the expiring weekly and only for over-night. earnings "shock" went well, and I hope to close on profit. was ready for the other scenario (take the stock) at my BE price below $590 and that was my case to go for the trade..

happy to be back in action,
RedK

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  #35 (permalink)
Dubai, UAE
 
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my AAPL Put play went well.. placed order to buy back the PUT an hour before market open - since yesterday earnings, i kept watching the AH/pre-market price move in reaction to earnings to try to understand which scenario will unfold (buy back on taregt or if i will take the stock). target got hit in first 30m from market open, and order executed .. bought back the PUT for $0.4 ..

happy it went in that direction.. AAPL seems to find resistance at $610 .. and move down is possible before a recover .. the results of the Q are positive, but seems the market spirits will so their magic first before a direction is decided.. so will wait and see before going in again (taregting a long CALL this time)

not sure what's the right way to calc return on a cash-secured PUT.. won't make sense to base it on the buy back value vs original sell value - that would give like 95%.. but the risk - and real capital invested is the money you have to tie to secure the trade, which is a lot different amount.. if someone can share the right way?

week 1 after come back to trading is encouraging. want to look at this as a new phase and try to keep my trades clean.. no impulsives, no rush, well-planned.. new start.. will see how this goes.

RedK

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  #36 (permalink)
Dubai, UAE
 
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short week, and i'm closing early anyways.. no trading for me tomorrow ..

closed INTC position for 3% gain .. original plan was to hold them thru the dividends. but one of my rules is also to take profit early when you're happy with it.. so i did it with a twist .. i set a tight stop to book 3% gain from buy price, which got executed today @22.25, then sold Nov 22 PUTs (cash-secured). case for the trade is, either i get assigned and get in again with INTC, or it continues its move up and i keep most of the premium in maybe less than 15 days, then i can open another trade to follow the move if it continues.

sat thru a webinar by Price Headley - he explained a method/setup using Wm's %R , and referred the audience to his 5-hr online course ($100), in which he also combines that with his Acceleration Bands .. the Wm's %R set up is interesting & easy enough .. new learning.

i feel coming back slowly .. but happy.. less trades more focus while i rebuild my trading desk and tools.. no rush .. fewer & better is not a bad strategy.

to next week,
K

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  #37 (permalink)
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I am trading options and have run in into similar issues as you. Weekly options and intraday trading is not for me. Sorry for taking comfort that others struggle with me.

Keep posting and good luck trading.

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  #38 (permalink)
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tpurchal View Post
I am trading options and have run in into similar issues as you. Weekly options and intraday trading is not for me. Sorry for taking comfort that others struggle with me.

Keep posting and good luck trading.

absolutely no issues .. we're here to learn and take comfort from each other's experiences .. .. the important part is to keep improving, and not let setbacks dampen the energy, effort and learning..

trades for the week:
INTC cash-sec PUTs: obviously won't go up .. and i now expect to be "assigned" and take the stock at around 3 to 3.5% lower price than market (from my BE).. that was the 2nd scenario, and in that case, i'll hold it for few months and sell some Covered calls against it .. and i'm fine with that and was prepared for it.

NVDA: another earnings-play/IV around NVDA with cash-sec Nov 12.5 PUTs overnight..
that was a close call.. NVDA's earnings were OK but market responded negatively to the weak outlook, and then they got some analyst downgrads today.. the trade managed to squeeze around $350 .. i attached a chart showing where i opened and closed the trade.. and although with such a trade, you want to open the trade at a price low (and close at the highest after earnings), i wasn't watching the action all day, and took the first point i thought will be a good day's low .. turns out the rest of the day was full of action.. but today post earnings, i sat patiently (on fire) since the open watching where the price is going. patience paid back around $140 (price moved up then down then up), and i'm happy the indicators i was looking at were telling that last move up is reversing and big wave down starting (as the analyst downgrade news came) and i managed to get out quick.. avoiding a nose dive that would make the PUTs well ITM .. feels as if i steered a car on a slippery road, and glad i managed to avoid a loss (pheww!)...
STO @ $0.37 (stock @12.82), BTC @ $0.20 (stock @12.74) .. though i closed with stock at a lower price than open, the trade still benefits from the shrinking IV impact .. my expectations was the stock would climb to $13+ on positive earnings with couple percentage points - the PUT would be almost worthless then.. but .. it hardly hit 12.9


QCOM: wanted to do the earnings play, but wasn't sure enough .. kept looking at it on the earning's day .. then the day after .. turned out i missed a great trade. no regrets. more will come. will keep an eye on it though.


so got some action going.. things worming up again..
K

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  #39 (permalink)
Dubai, UAE
 
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goot time to journal new technical learnings for me during past few weeks ..

#1. William's %R (from William %R - ChartSchool - StockCharts.com

Developed by Larry Williams, Williams %R is a momentum indicator that is the inverse of the Fast Stochastic Oscillator. Also referred to as %R, Williams %R reflects the level of the close relative to the highest high for the look-back period. In contrast, the Stochastic Oscillator reflects the level of the close relative to the lowest low. %R corrects for the inversion by multiplying the raw value by -100. As a result, the Fast Stochastic Oscillator and Williams %R produce the exact same lines, only the scaling is different. Williams %R oscillates from 0 to -100. Readings from 0 to -20 are considered overbought. Readings from -80 to -100 are considered oversold. Unsurprisingly, signals derived from the Stochastic Oscillator are also applicable to Williams %R.

in reality, Wm's %R reflects where the closing price is within a Donchain Channel (Highest high/lowest low for an N period).

in Headley's webinar, he uses a 30-period Wm's %R to identify setups for a confirmed trend (up or down) which i found very interesting. once the %R hits the oversold/overbought levels and stays there, that means a trend move in that direction starts. we can also use the retracement to these levels (usually -20 & -80) for points of entry or add-to-position ..

so i played with the concept a little further after sitting throu Headley's webinar, as i really like to use Donchain channels. so here's what i would do to Wm's R%:
  1. Smooth it a little bit to make it easier to follow, while not causing signal lag. best was to use a WMA(3) of the closing ... mathematically the same as a WMA Smoothing of 3 for the final Wm's %R
  2. the chart in my previous post shows how i did this on TC2000. just add the smoothing and hide the original %R line [quick note, in the above chart, the %R lower study is not in sync with the Donchian channel on the price plot as they have different look-backs, 5 for the Donchain, 14 for the %R - hope this won't confuse anyone]
  3. change the scaling to a more readable scale: i would change the 0 to -100 to 100 to -100. then slightly tweak the overbough/oversold levels to -25/-75 (they become 50 & -50 on the new scale)
  4. show the zero line (reversal). i'm surprised how many of the old indicators ignore the significance of a zero line.. for exmaple, in this case, the zero line (-50% in original Willima's %R) is when the closing price jumps from one half of the Donchain channel to the other, indicating a change in overall price action reversing to ther other side (from bears to bulls and vice versa)
  5. add signal with the logic to buy at the crossing of the 0 line upward, hold as we hit the 50% level into the overbought zone, then only sell on a crossing of the 50% line going down (Headley recommends entry only when the %R crosses into overbough/oversold zones and confirms with a retracement to the OB/OS level, then goes back in the zone)
  6. Headley considers the area between -20 and -80 as "no man's land" .. so that's chop or indecision.. i would still honor that .. with the slight change of taking the crossing of the zero line (the -50) as a sign of a trend starting.. so an early start, but the same exit as Headley's .. i would also use a 15-period vs Headley's 30 .. but then that really to be tweaked based on U/L and aggregation...

once i get my hands on a scriptable platform, i would put these thoughts in an indicator.. .. but thought to share here if others would like to "leverage" (yes, please do steal these thoughts )

this strategy seems to work (google BigTrends or Price Headley).. what i also liked is that Headley used this system (which then also incorporates his Acceleration Bands - but i didn't like them much), to trade *Options* .. and that's where i want to be. in all cases, i liked the concept as a good Momentum indicator and will add from now on to my core set..

#2. Moving Averages (again) ..
I'm looking at better formulas for MA's .. i want something that tracks average price movement with less lag, based on sound mathematical basis (and not voodoo ratios that come from nowhere). in above chart, i use simple MA's of close & open and they work very nicely. i lost trust in EMA, started using WMA exclusively, and thinking now of ways to improve the "weighting" of the WMA.. but that's a topic for another day. an interesting thought, can we use Fib levels in the weighting of an MA? (WIP)

Am I lost in technical analysis?
no.. i'm still focused on a core set of "concepts" to track & represent trend (basically based on MA's - most trusted are SMA and WMA - many concepts are generated from this and you can represnt these in tons of ways), and Momentum (price position within a price channel - either a Donchian or MA of hi/lo), Bull/Bear action and who has control (like DMI), and price levels (Donchain is my favorite) and S/R .. all my work and trading will evolve around a setup that shows these studies (or a subset of them)
i still use these but much less often: Keltner, BB, Stochastic & SMI, Regression, Fibs, vol profile, RSI, MACD ... as more or less, they are correlated with my core set.. but can sometimes provide a different perspective or help predict a key level (like Fib) - so basically i'm on the same track since i started that journey


does that make sense? learning continues....
K

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  #40 (permalink)
Dubai, UAE
 
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sat thru this today .. found it while i was researching ADX/DMI

Sharing here for later reference and for others interested in ADX/DMI .. i have couple of thoughts around ADX/DMI and will be working soon on an update from the previous version i posted here on the Elite section (as soon as i get a chance). the concept is amazing, but i beleive the indicator can give more insight - by changing the way it's visualized - it's very restricted the way it currently is .. i started on that track with K_DMI, and will take it frutehr..

streaming webinar by Dr. Charles Schaap

Schaap's ADXcellence slides from CBoT seminar

RedK

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