A Plethora Of Trades
10/12/2008 11:02:05 AM
This week we use our ideas to determine the best trade for the current markets.
Here's this week's bonus issue of Stock Options Speculator. If you'd like to receive this article on a weekly basis, and get all our special reports where we identify the best options plays for Investors Business Daily and other popular stock advisory services, please click here.
As the Crash of 2008 unfolds, new opportunities present themselves. This week we'll divert a little from our previous format, but the conclusions are pretty interesting.
SOS Timing Indicator
No one knows the future. In trading we predict future movement from past actions and establish our bets accordingly. This week, as in the past, suggests a potential for a rapid advance, however, with the high volatility, normal options trading is out the window. We'll show you that as we walk though our ideas.
Stock Options Speculator uses the above indicator in the establishing of various options trades and strategies. The indicator has two frames. The top frame shows the Nasdaq Composite and the Nasdaq Advances and Declines. The lower frame shows volatility (candles) and the Trading Index (blue line). The height of the indicators (as noted) determines if call or put buying strategies are recommended.
Options Trading Ideas
Normally, we start with our primary call (or bull call spreads) or put (or bear put spreads) options ideas. However, given the fact that we've been looking for a bounce and not getting it, this week I'll show you where we are on a call and put basis alone:
As you can see from the above chart, the amount of stock price movement that you need to profit from the trade is pretty high. As for Puts:
Well, it's pretty much the same thing. Can we smooth it out by looking at spread trades? Well, here are the Bull CAll Spreads:
Still not too enticing. How about Bear Put Spreads?
More of the same... Why? Well, with the current state of volatility, implied volatilities are through the roof. So recommending pure call or put plays or even spreads are pretty pricy options at this point.
But there are ways to profit from High Volatility. They're called the Bull Put Credit and the Bear Call Credit.
Here are the Bull Put Credit Ideas:
This strategy is to realize a profit by making cash that is a net credit formed by the difference in a SOLD PUT price and a BOUGHT PUT price. While the stock goes up, the investor keeps the net credit (difference in premiums).
Let's look at Bear Call Credits:
This strategy is to realize a profit by making cash that is a net credit formed by the difference in a SOLD CALL price and a BOUGHT CALL price. While the stock goes down, the investor keeps the net credit (difference in premiums).
After all of that, I'd say that there is a way to put some premium in your accounts and would go with the Bull Put Credit Spreads until volatility subsides...
Based on the SOS Timing Indicator or other special market conditions, the above 10 trades are recommended for consideration in your trading plan.
The following risk graphs show stock price plotted against potential profitability. They're listed alphabetically.
There are toomay potential trades to show all the risk graphs for this week, however, if there are any that are of specific interest, email me during the week and I'll send them out in a special update.
Well, there are so many variables to this current market that suggests a wait and seestrategy will work best until more predictable conditions return. However, for the most aggressive players - these times truly hold some incredible opportunities. I hope I've given you some ideas to go off and face the week ahead...
Again if you like any of the trades and would like to see the risk graphs,just send me an email and I'll send it out in a special report.