stock option trading rules

The Google monster gobbles another insect company up!

Google Inc. (GOOG @ $466) as you should know put in a bid for $3.1 billion for Double Click which could help increase the companies growth and monster advertising machine. GOOG is recently priced way below its target of the $550 price range and its PEG score is trading about under 1.00 which most analyst would consider it a bargain stock. Last year GOOG’s earnings were great and the stock sky rocketed up 35 pts and within 4 days dropped almost 40 pts. What does this mean? Maybe much of the stock price was already amped up into earnings and the stock price did reflect the earnings data which made the stock hype immediately start selling off. GOOG is the #1 tech/internet stock for the past 3 years. Although I can currently see the price steadily moving up with a strong trend I also feel GOOG will be hit the hardest when the next fly-by-night tech/.com’s come again. It isn’t like GOOG isn’t worth $466 and it does have billions in cash so it isn’t going bankrupt any time soon. Google is also doing the right things as a growing company to keep market share, sustain growth, and be around a very long time. But when the market does turn (maybe this summer?) I think GOOG is going to be hit hard again down to the low $400’s to possible $350’s to shoot back up to over $500 when the real investors step in that will drive the price back up. Also recently Google.com is starting to create a more personalized look for users like Yahoo.com uses. In away I think this is a bad idea, but also it could help generate more revenue for the giant if yahoo.com users would switch entirely to google.com if google.com gave that personalized web-home experience.

Earnings this week have been good so far expecially with McDonalds (non-tech) MCD @ $48. I previous said around 5 months back that MCD was a buy @ $43. MCD has steadily moved up the charts and showing positive growth for the giant franchise real estate/fastfood company.

Earnings I’m anxious to hear about is GRMN, AAPL, GOOG, BA, NTRI, and RIMM recently we already know increased profits. Bad news for AAPL that again they are delaying their new software Leopard and iPhone. I already know of many people ready to buy the iPhone regardless of price young and old. It is going to be a success. I hope they fix ANY and ALL bugs with it before it becomes internationally distributed. I know a select amount of individuals that do have ongoing problems with their iPods crashing or freezing and for the most part Apple had worked to satisfy those customers head on. Another company to look at for is Sears Holding Co. (SHLD) for retail sales outlook. Luxury retailers have been doing well again this year too. Many economists say the market will be a volatile choppy one and so far the waves have been pretty large. Look at NYX with it trading over 100 then down to 80 then back to 100 again. I’d consider that a sweet trade if I’d only focused on it. My concentration has been rather off the past 6 months and I need to get back into just focusing on stocks I previous traded before that I know much more about.

So far this year I’ve definitely ventured off into the hard rocky dangerous path by choice. It has helped my increase my goals faster, but also has worsened my ethics and rules for proper trading to live a long traders life. I’m slowly crippling myself the way I am trading and if I don’t start really pushing healthier trading habits I will die.


Follow up on WTVI.PK (Wi-fiTv.com) and other stocks.

So far I was at least right about choosing to sell when I did. Sure I could of made a bigger profit, but that wasn’t my goal. My goal was to get in and get out. If I’m wrong will all my profits be gone and my initial investment? Highly likely. If Wi-FiTV.com Feb 19, 2007 shows a good product I plan to buy back in at a higher price because then I feel the company has some to generate money with. I actually like the idea of it being the first Hispanic video social site. This is more interesting then being the first wi-fi tv like site since there aren’t any sites offered services to hispanics out there. I’m not surprised to see WTVI traded over 75 million shares today, which many of those selling off the stock because if they were all to buy it would of been in the teens (cents). If you have already sold pat yourself on the back. If you are holding on for dear luck well then to the best to you. I hope you make a million bucks, but I’m not sorry if you don’t.

Since I’ve been on the mid-watch and stayed up just to finish this post I see WTVI did another press release (of course themselves not an outside source) on updating there site here. This is definitely going to spike the penny stock again. I notice it says “1000 new personal pages”, but what about just uploaded video in general; is there a limit? A standard in $25,000 stations? I really don’t think they get it yet. There is nothing about formatted tv shows or anything new to keep visitors on the site. Personal pages are only as good as the site is. I’m curious what the site will show in its “sneak preview”. I think a lot of investors currently buying shares aren’t even young enough to “know” what a good social internet networking site is to a young person. This is a problem. Hahaha. It’s even funny. If you are an investor do you have a myspace.com page? a youtube.com page? a friendster.com page? a hi5.com page? AIM? hahaha..well if you don’t then sign up and test it out and compare it to wi-fitv.com after Feb 19 then you will know if you have a great investment or not. Here are some charts below (click to enlarge).

WTVI Weekly Stock Chart

WTVI weekly stock chart

WTVI Daily Stock Chart

wtvi daily stock chart

Other stocks I’ve been watching I think are about to move up are MA, CAT, and BA.
All three companies are in an accelerating growth sectors either breaking a large downtrend or
slowly pacing its way up through solid earnings growth.

MA Daily Stock Chart

MA daily stock chart

CAT Daily Stock Chart

CAT daily stock chart

BA Weekly Stock Chart

BA weekly stock chart

BA Daily Stock Chart

BA daily stock chart

To end this post I found this really interesting news article on CPTH.OB talking about cellular phone subscriber growth in India. I was actually searching if Idea cellular has a stock symbol and was traded, but from my research and knowledge it doesn’t (If I’m wrong let me know!). I’m almost 100% certain I’ve come across this Critical Path company years ago researching stocks. Looks like it has plummeted to a super low. If this article is correct and reliable then CPTH could easily having a great quarter now that Idea Cellular is its biggest customer. They should make a profit with all those subscribers and turn into a profitable company again. I’m going to email the company and see what their plans are. It currently trades at $.13 cents. If Idea Cellular was publicly traded I’d really be interested in it. Another broadband service in India currently traded that is receiving tons of growth is SIFY. See charts below. (Click to enlarge)

Telecommunication Plays in India:

CPTH Weekly Stock Chart

CPTH weekly stock chart

SIFY Weekly Stock Chart

SIFY weekly stock chart


50/50% earnings report scenario – The great idea continues – Update

Well guys it seems I have a bit of depressing news on my research and option practice plays on my 50/50% earnings report scenario play…Out of 5 earnings report only 1 worked to receive a +27% gain in 1 day, which was Wells Fargo earnings. Even on my higher priced stocks around $50 the movement wasn’t anymore then 2-3% so the options BOTH went down interesting enough if the stock moved up or down, which doesn’t make any sense to me. I bought next months options (Feb 2007). If I don’t buy far out of the money then I’d have to have a large movement in the option to just break even where as out of the money possibly with a higher priced stock the movement could be a bit more volatile moving the option faster. So far in my practice plays I haven’t see a profitable trade to my liking.

I really belive this type of trade can work. I just need to fine tune it. Apple Computer’s earnings is tomorrow and I know with all the excitement behind it will either pop high and go higher or tank. What I did learn from my practice plays is that it has to be modified in the direction you want it to work. So if I think AAPL @ $97 will go higher after earnings then I should buy a higher pecentage of Call options and a lower amount of Put options for the insurance just in case I’m wrong. So this is exactly what I did going into earnings 75/25%.
If I’m wrong I feel it was a profitable chance worth taking. I feel even if I only make at least +$300 its profitable. Today after hours I’ll see what happens with AAPL.

As for now the 50/50% play hasn’t worked like I dreamed it would. I suppose every trader would of been doing it. I am going to keep doing my research practicing this play in my log book for every name bran company name until earnings season is over to see if I can fine tune it down to make it work or at least see how my options change before and after earnings.

cheers – fn


I call this the 50/50 Earnings Report Scenario

The past couple of days I’ve been trying to figure out how to make a safe small trade that could potentially increase my chances of making it to $1 million in my 10 months goal is what I call the 50/50 earnings report scenario. You take a very volatile stock and buy 50% Puts and 50% Calls way out of the money to earn well over 100% the day before earnings is annouced. If the stock pops very high or low based on a surprise beating wall street analysts or missing analyst estimates you can make money either way. Because 50% of your money will be worth $0, but the other even 50% of your money could double making the 2 trades together profitable.

Say you take Apple Computer Inc. which has had a great year and expected to beat earnings with major increasing sales with new iPod units and iTunes music download service. Let’s also not forgetting the growing market share they are taking in their thriving computers sales of their newer computers. Apple’s price has been up and down on positive and negative news. Its also possible the stock could tank even if the earnings are good, believe me I’ve seen it happen with GRMN.

This time I’m going to play it cool. I’m going to play this earnings game smarter. Since I have received a fat profit with the stock this month I am only going to take a small bit of the profits to go through earnings. So say if the new price targets on AAPL are $110-120 and the price of 1/12/07 is $94 and I expected it to mildy go up 5% that would be around +5.20pts, but I expect AAPL to jump with this bullish market at least 10% making the stock open around $105 at least. If that did happen my way out of the money CALLS would be well over 100% and I could sell out being in the trade less than 1 day. Same options for a PUT. Say AAPL misses or beats but tanks 5-10% down to $80-85 I could still come out a winner. No matter which was the stock moves fast I will be write. If this trade works I could practically use it on every stock that reports earnings.

The math behind it for you to understand is this: The 50/50% earnings report scenario.

If I buy $500 worth of calls for .15 = 30 contracts
I also buy $500 worth of puts for .20 = 25 contracts

AAPL reports earnings = The price jumps up or down 10%
With $500 into 2 trades one will be practically = $0
But the other will be worth at least $2,000-3,000 more.

Summary of the math:

You take your profiting trade minus your loosing -$500 trade = Up +$2000-2500.
I call this the 50/50% earnings scenario trade. Now, if the stock doesn’t move at all you can just sell out of both positions most likely for a even trade with minimal losses except commission costs.

On January 16 I will buy into my positions and on January 17 after Apple Computer reports earnings I will either be +2,000 to add to my goal or just broke even and sell out of my trades.
I really do not think breaking even will be it with all the enthusiatic investors behind AAPL.

cheers, FN


How to become a millionaire in 10 months – Updated

This blogging was on:
HOW TO BECOME A BILLIONAIRE IN 20 MONTHS BY TRADING STOCK OPTIONS
HOW TO BECOME A MILLIONAIRE IN 10 MONTHS BY TRADING STOCK OPTIONS

Below are the revised rules:

FIRST THE RULES:

RULE #1 – Your monthly trading cash has to earn 100% compounded for 10 months starting with $2000 in your account. You can start with lower just add on 5-10 more months starting with as little as $300.
RULE #2 – You can only buy a stock option price out of the money or below $2 if it is right next to a known positive event (Apple Mac Expo or earnings). If not then only trade in-the-money.
RULE #3 – Your stock has to be volatile enough to move $1-3 in less than 1 trading month.
RULE #4 – You can do 1-4 trades a month for the next 10 months and your 1-4 trades will equal 100% a month. As soon as you hit your 100% goal, even with 1 trade, stop trading and start researching and practicing your next trade for next month. Try to trade less than 50% of your trading cash to do 1-4 trades making 50-100% each to reach monthly increase goal.
RULE #5 – You can not add money to your account. It makes it easier to lose money and if you don’t add money you really know where you are at with you goal.
RULE #8 – You can trade any type of option, stock, ETF, or index fund in your account.
RULE #9 – Remember to extract big gains for taxes next year. (MOST IMPORTANT RULE)
RULE #10 – Greed is a killer. So if you are 200% for the month on your option I’d consider selling and getting out of your house, turning off your internet, and accept a smaller % gain next month because you are further ahead.

IF YOU HAVE BETTER RULES, SUGGESTIONS, ADDITIONS LET ME KNOW.

I’M STARTING Nov 2006, LETS SEE HOW FAR I PERSONALLY GET!

NOV 06 : +17,000 – Pulled $15,000 out to pay off second mortgage.
DEC 06 MONTH 1: $2,000 – Down @ $1,700 12/14/07
JAN 07 MONTH : $6,000 – Up @ $7986 1/12/07
FEB 07 MONTH 3: $12,000 – Up @ $39,724 2/24/07
MAR 07 MONTH 4: $24,000 – Down @ $31, 645 3/15/07
APR 07 MONTH 5: $48,000 – Down @ $20,980 4/20/07
MAY 07 MONTH 6: $96,000 – Down @ $9,786 5/21/07
JUN 07 MONTH 7: $192,000 – Down @ $5,790 6/18/07
JUL 07 MONTH 8: $384,000 – Up @ $8,625 7/24/07 Added $2,000
Crap, I just broke rule #5.
AUG 07 MONTH 9: $768,000
SEP 07 MONTH 10: $1,536,000 @ +$26,400
OCT 07 MONTH 11: @ +21,100
NOV 07 MONTH 12: @ +1,300 (actually account amount, holy shit. Yes, I got whiped out with a very very risky trade. Knowing the DJIA was falling into the fall months would of helped a bit on not buying risky out of the money Calls for NOV 07 expiration).

Updated 11/20/07 =D So here I am again starting with $1000 basically. I’ve made my monetary trading goals for 2007 and pretty much lost it all too. Hmmm….”easier said then done” they say. But if you are a great trader, keep losses to a minimum, and you are up for the challenge you might be able to pull it off. I’m not quitting. I’ve got years ahead of me. One year I WILL BE SUCCESSFUL. I can do it. I just need to trade better and more consistent.

CONTINUE FOR 10 MORE MONTHS TO BECOME A BILLIONAIRE

DO YOU HAVE WHAT IT TAKES? DO YOU LIKE THE CHALLENGE?

Here are some positive articles on becoming a millionaire and then billionaire:

https://financeninja.wordpress.com/2007/01/14/how-to-become-a-millionaire-in-10-months-updated/

http://www.themoneytimes.com/articles/20070721/how_to_become_a_billionaire-id-106849.html

http://www.fool.com/investing/small-cap/2007/07/21/how-to-become-a-billionaire.aspx

http://www.businesslyceum.com/BAM.html?id=SarahSilva

http://ezinearticles.com/?The-Easiest-Way-To-Become-a-Billionaire&id=82914

http://search.yahoo.com/search?p=how+to+become+a+billionaire&fr=yfp-t-501&toggle=1&cop=mss&ei=UTF-8