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August 16, 2012 / redman59

Bullish Setups for Thursday 8/17

Some setups I like to long the long side.  All are buys above today’s (Wednesday) highs except for REGN and FRAN which I prefer on pullbacks.  Notes can be found on the charts.

**FFIV – flagging, like this for move above todays highs w/target of 102.50

**FOSL – like this for 3 points on move above todays highs, target the 200sma

**FRAN – looking for pullback to 30 but like the structure, maintains base after breakout, keeps testing 32, break & hold targets 34

**HOT – flagging after a near 18% run off July lows, bounce today of MA converged MA’s

**REGN – top holding in IBB but like strength & lack of volume in base, like on pullback to trendline

**CSTR – maintains high short float but like the pattern forming

 

**DNKN – ascending triangle at bottom, big volume on secondary offering but price not affected

10 Comments

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  1. Carlo / Aug 16 2012 6:51 pm

    Good evening, I am curious if you executed any of these trades today? If so do you mind walking through one? Initial risk profile, stop Loss, profit target etc. Did you trader via options or stocks.

    Thanks

    • redman59 / Aug 16 2012 9:32 pm

      Carlo,
      No I didn’t execute any of the trades as I was absent for much of the trading day. I didn’t get to my trading screen until the last 30 minutes of the day. I know some of the charts had profit targets on them. If I did play these I would have played them with options unless they were illiquid. My favorite stock going into today was FFIV for the setup and the 100 dollar roll and that’s why I posted that at the top. It now looks to be at some resistance though so the move I liked is exhausted for my liking.

  2. Carlo / Aug 16 2012 9:35 pm

    Thanks, FFIV defiantly had a strong day. Would be curious to know what options trade you where looking at if you where able to trade today.

    • redman59 / Aug 16 2012 9:42 pm

      For trades like these where I’m looking for quick moves of 1-4 days I play them with Single/Naked orders with deltas of 65-85 depending which is more liquid

      • Carlo / Aug 16 2012 9:47 pm

        Single meaning outright puts or calls and naked meaning selling the puts or calls? Higher delta means the options are closer to being ITM? And you pick these because they can capitalize closer for a pt to pt move? Still growing my options knowledge

      • redman59 / Aug 17 2012 9:42 am

        Some people use Single/Naked meaning the same but either way both are BUYING to open and not SELLING to open so max risk would be the debit unlike if you were selling to open, then margin would be required. Yes those deltas mentioned would be ITM and would capitalize more on a pt to pt move. Example 65 delta, with all else being equal, would gain 0.65 cents on the option for every dollar move in the stock. Glad to hear you’re growing the option knowledge though. Probably 85-90% are options.

  3. Carlo / Aug 17 2012 9:46 am

    AWESOME thanks for this clarification. I would be more then willing to hear any books you recommend for furthering my education.

    • redman59 / Aug 17 2012 10:28 am

      3 books I believe cover options well:
      1) Trading Option Greeks by Passarelli – gets you to learn about the greeks and how they affect the options, also introduces spreads

      2) The Volatility Edge in Options Trading by Augen – the book on volatility in my opinion, provides awesome concepts on how to use volatility (little more advanced but must read for truly understanding volatility)

      3) The Option Trader’s Hedge Fund: A Business Framework for Trading Equity and Index Options by Sebastian & Chen – ties it all together into a business framework & also provides option strategies as well, Sebastian’s blog at OptionPit.com is a great read for understanding options and strategies

      ***I get no discounts or gratuities for recommending these, just good books IMO that can go beyond what you can find for free on the internet

      • Carlo / Aug 17 2012 10:36 am

        Interestingly enough, I own #2 and was thinking about picking up #3, the optionpit is a great site defiantly advanced but that’s the best way to learn. Glad you can recommend #3 I am more willing to spend the dollars now. #1 I will research and look at purchasing also. Thanks…. One thing that confuses me about options is which type of trade to structure based off what we perceive from the chart. (spreads vs standards buys etc)

      • redman59 / Aug 17 2012 11:33 am

        Good deal, Augen’s books are great for the outside the box thinking. Yes I would say that the OptionPit blog can be more advanced but a free go-to IMO for volatility or skew analysis. A great read for income trading/delta neutral trading and not so much for directional. As far as trade structure I believe that can be boiled down to timeframe and/or risk. Example if I am looking for long holds I would prefer vertical spreads over single/naked orders as the vertical reduces your theta and vega over the other. Or if you wanted to make it really cheap and have a profit zone (ie. stock @120, upside zone 140-160) you could go with a Butterfly trade and it would be rather easy to manage and the P/L would be less volatile. For myself on day/swing trades (1-4 days) I usually just go with Single orders as my stops are relatively tight.

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