I want you guys to burn this date in your head and mine too, every year at the end of October almost every single time, the market gets hit with Money Market Fund Mgrs taking their yearly profit (especially when it a 60% profit) for their clients, now this not the hedge funds. But every single 10/30 (latter part of day) and 10/31 we have a major sell off.
being I was so busy with the blog and trying to help, I got unfocused and had I been focused I would have remembered I post this very thing here on Wednesday 2 days ago, what is wrong with me. I got sidetracked and didn’t remember what I had just posted.

(Just cut and paste to see where I said what would happen 2 days ago) http://hotoptionbabe.com/2009/10/28/wednesday-whirling-roadmap/

I want this picture to remind you to remind me next year !!!

Hi gang
I have gotten several requests from some who wanted to see what I look for in buying options,spreads. Another topic we will have soon is Adjusting a option trade as well as in-depth look @ the option greeks.

1.Number 1 thing I do is identify an opportunity, find a low risk (cheap) high reward (rich) trade. I do that by look @ the option chain of course.

2..Then the very next thing I do is look @ the spread in the bid/ask to see what the MM’s are trying to take out of my pocket or sell or let me buy the option/spread.
If it is more than 20 cents (my rules) then I move on, you will lose $ in the slippage going in and going out. I prefer 01 of course, that also means the unlying stock/index/eft is very liquid and you can easily jump in and out.

3. Then I look at the OI or Open Interest. (my rule is no less than 500)some folks will do less, not me. I like allot more of course, this the number of contracts outstanding that are held open.

4. Then I go to the IV or Implied Volatility. This tells me how much of the premium is pumped basically with emotion. If the IV is high on the option could be earnings coming up/an event/ect. If the IV is over 30% I will not pay for a hamburger, what I am being charged for is a steak. I will then look for a spread, there are tons of spreads, but that’s another topic.

5. The DELTA, is Δ(Delta) represents the rate of change between the option’s price and the underlying asset’s price – in other words, price sensitivity. For every dollar the underlying instrument moves the delta is the rate of change that the option you buy moves. IE: Stock has a delta of 1 (1 for 1 ) delta on the 55 option is 55 and the stock is at 50, for every 1$ that stock moves the option moves .55
I will not buy an option with less than .35 or 35 but like to buy them higher but as you go up in delta the price of the option goes up because you have more real value. (more this topic……….OTM ATM ITM )

I want a a risk return of at least 100%, no less, I want my odds high. If I am right I want to make allot and risk a little.
Options give you leverage. 100/1 leverage. that’s nice, but there are many moving part as I listed above.
Now this is just a taste, there are many more things I consider ie: stock market in general, Theta (time) gamma (speed)
but for now this is a start of things you really should look for when choosing an option.

AND ALWAYS REMEMBER TO BUY AN OPTION IS A RIGHT TO SELL IS A RESPONSIBILITY/OBLIGATION ( big difference)

Now here are 2 trades I put on today TGT I have a price target of 53. I bought a December 50 call option (try to remember how to say them right) for 1.83, I did a straight option because the above critia met (really exceeded by far) all my criteria above.

UPS Price target of 58 and I bought a December 60 for .30 (the IV was so low (ie the option was fair value) now I did break my rules a bit, it’s further out of the money (lower delta) than I normally like, but it such a low risk high reward trade, that I am taking the chance.

Ok hope you enjoyed Secret Option Gal 101 ;-D

Updated trades
1. FLSR sold adjustment Nov 125 call
still have the 170’s

2. Closing out the AKAM 20 puts now bullish on stock price target of 26-27
Have the 23 DEC calls

GM everyone and hope you enjoy the Halloween theme! FSLR unfortunately was a bust yesterday, but i am holding it at this point, no adjustments right now, there is still 22 days till OPX and at this point better to hold IMHO.
Looks like Econ News was better than expected. Here is my friends Jack take on today as I was so busy with the blog. Thanks Jack!

Jack here,

I had a revelation last night when I was playing around with the SPX charts. I had been looking at the current situation as the following confusion of wedges and trendlines that I had been using to pick my way through the last few weeks:

However I extended the lower trendline we have been following back to last November and it became very clear that what we are really looking at is this:

Now on balance I’m still expecting a bounce from this key black lower trendline today, and if we break through it instead, then I may only have identified the key trendlines for this rally on the last day that they really meant something. Even in that event though, a retest at least of the lower black trendline as support turned resistance would still be likely. You can see that after the downward break in mid-June, there was such a retest of the trendline at the end of June.

If we do bounce today though, then these trendlines give us something very important indeed. Firstly they tell us why we topped at 1101 rather than the 1110 – 1120 I had been expecting, as it shows that the Broadening Ascending Wedge Top Pattern that SPX had seemed to be following in recent weeks was only a partial snapshot of a much larger and more important pattern, and that the top channel line had therefore been placed mistakenly high. More importantly though, it tells us the most likely location of the top of the next wave up if we do bounce, which should be in the 1110 – 1130 area depending on how fast we rally to get there. Nearer the time it would be possible to narrow that to a range of just a few points of course.

Good luck trading today everyone!

UPDATE ON TRADES
Due to the low IV on TGT I bought a straight December 50 call for 1.83
Long SPY’s 105’s debit 2.84
Added AKAM DEC 23 calls 1.30 (bought back shorts for 05 (no commish)
MCO still in 22.50/20
V long 80 Dec call
FSLR (bought back 180 short leg for 05, still have 170’s for lotto) added 1/2 number of spread positions (5) Nov 125 calls @ 6.80, sold 3 for 9.00)

Might as well put up the Bull costume for the day

Great day everyone!

It appears to me that we had a trend reversal today and I think even the GDP numbers tomorrow may not matter, I think we might see further downside.
FSLR was a lotto play and I mentioned that so hope that you took small positions, it’s still trading wildly AH’s so we will have to see tomorrow. Sometimes these stocks take you by surprise the the extended hours session. AKAM is hardly changed probably waiting for Conference call.

Thanks to all of you for your input and thoughts and tread carefully if you do futures tonight as I expect some extreme volatility.
This blog is full of wonderful intelligent people that make a great community, so I am so happy to have your support and ideas
Looks like us bears have on our party hats

Good morning Hotties (not slopers not rats, but Hotties )

I have to give credit to T K on his video, and I agree 100% it’s all about the $DXY right now, as the $DXY goes up equities go down and vice versa. Now that being said I really don’t think we get a huge short covering rally in the $DXY till next year (first part) and that also correlates what I have been saying since I was posting on ES, that the real bear raid will come first part of next year IMHO.
Now that being said let’s focus on today. The line in the sand is 1050 on SPX, if we can get through there, we could see 1043 area, but as my friend and college SpringheelJack and I were discussing, this is the end of the month. The hedge fund guys must get there books set by Thursday so be prepared for some reversal today and the buying to come in. I just want you to be prepared. The real selling should happen late Thursday Friday if it’s coming.
Here is a terrific chart by SHJack

Also here is a chart on the pivot cycles by Joe8888

We had success with both BWLD and V after the bell yesterday. We shall see how they trade today, the V calendar I will most likely close today (the November short leg) and keep the V December long leg.

Everyone grab a seat and let’s rock!!

UPDATE FOR AKAM
earnings after the bell, I am adjusting this to a ratio backspread, the reason I am not getting enough coin for the short leg, I will stay in what I have but add some straight puts, thus creating a ratio spread, I will double the 20 puts and now have 4 longs for every 2 short legs
AKAM
Buy Nov 20 puts
Sell Nov 17.50 puts
Debit .60
reward at or before Nov OPX 1.90
any question just let me know

FSLR Vertical Call Spread
November buy 170 calls
Sell 180 calls
debit 1.88
reward 8.22

Visa update
buying back November short call
Keeping December long call

BWLD still holding for nowOut for 1.55 bought for 1.25

CMI bought Nov 45 sold 42 for debit .53 still holding

New Trade on MCO
Buy November 22.50 put
Sell the November 20 put
debit .43
reward at or before OPX if MCO is at or near 20 is 2.07

Thank you everyone for your support!
As the blog grows I will be looking for guest hosts now and again, so keep your thinking caps on…So far looks like the Bulls/Bears are duking it out. We need to break the 1059 and close below for further bearishness.

I will be adding a Watch List Shorts and Longs on the blog this week. I also will be doing a short Bio (I want to remain humble) and there will be discriptions added for different spreads so you will be able to follow along on the one’s I do most.

FSLR is now in my book along with many of us, we know this one was a toss up, but my gut says higher, BWLD is on the books as well
via a November 40/35 put spread.

Looks as if BWLD missed their earning or their guidance is bad, right now off 3.93 so the put spread should double or more tomorrow.
VISA looks to be turning around so my Call Calender just might work nicely too.

Here are my positions now
Shorts
AMZN (one for earnings) closed the 115/110 ..
BWLD
CMi

Long
FSLR
V

Looks like a real battle today between bulls and bears, will do another update in A.M Love to you all

Morning Gang!

First of all congratulations to those who followed me on Bidu! Wow did that work out well. Now I have mentioned on several blogs that 430-440 area was my price target high, well Friday we were @ 438 so I reversed my bullish trade to a bearish one, and did that one work.

My thought on SPX is we go down to the next Fib Level of the 1051 area) and possibly even 1039 area (finally) before a bounce.

I am going in search of some trades for BWLD, FSLR and possibly more. Any suggestions keep them coming

UPDATE 10:32 (FEELS LIKE 2:32 PM)

KEEP YOUR EYE ON THE $DXY

Hi gang,
Now here is what I am doing for BIDU tonight, I have already a 410/400 November put spread. Here is a Risk graph on the trade.

You are risking 3.75 to make up to 6.25 if you are right on direction. that’s a nice return. I have a price target of 440 on BIDU which I felt we had reached and have decided to put this on.

Another one everyone is saying not to short, which means time to short it is AMZN. I have on a 115/110 put spread
for 1.15 I used the November. I say that the high volume and the movement in the stock indicates capitulation.

What a beautiful day

UPDATE 2:35PM Another tibit for those who want a low risk high return position on SPY

November 106/100 Put spread at or around 1.40 return of 4.60 possible if spy retraces to 100 area.

Good Sunday everyone~!

This week will be a very important week for us in deciding which direction short term the equity tape will go. On Friday it was a very interesting day, as we had all this quasi-positive news Amazon.com (AMZN) and Microsoft (MSFT) provided the bulls incentive to buy, but the bears ultimately controlled Friday’s session. Even a better than expected existing home sales report did little to fend off profit taking heading into the weekend. (this is the quasi part, will be home tax credit being over next month continue these kind of sales?) The majority of the sales were the under lower priced homes, we still have 8 months of inventory in housing.For the week, the major market indices lost ground thanks to Friday’s sell off, though losses were small.

I called for 1074 area  on spx last week which is what we hit on Friday, I would have liked it to close there or under for a continued bearish bias. I am posting the 30 minute  on the SPX and you can see we touch the 78.6% Fib level and then bounced.

I will be out most of morning tomorrow so please feel free to post and will have auto updating added on the blog as soon as I figure out how to get this done with disqus.

I also will be adding watch list and much more as this week goes along

Still trying to figure out how to upload a chart properly, but for now another one fo my favorite bear suits to wear.

Bidu is out with earning tomorrow the concensus is 1.80 and the whisper number is 1.90  Will do 2 different spreads on this one and you can either do both or pick your pleasure.

Now for my Bear suit