Tuesday, June 24, 2008
Stock market, stock trading : NDX, QQQQ Nadaq 100 trading ( Pre market)
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Stock market: stock trading, NDX (nasdaq 100, QQQQs):
(New readers. Welcome and read after the PS below. I got special things for you. Email is emailfinancialtraders@gmail.com ).
As I wrote yesterday, nasdaq is the weakest of the three majors (Nasdaq, Dow and SP500). In the pre-market of June 24 we would have a gap down at open.
Here is how I plan to play it:
1. If it races up immediately after the open, I would start shorting when gap has closed.
2. If it opens, and starts a bit in there, I would play it with half normal size at the sign of a morning bottom with the idea of a price rise after the morning bottom to close the gap later in the morning.
3. If point 2 turns out to be the correct scenario, then I would offload towards closing of the gap, and then I will short.
Plans may change of course, but I just wanted to give my initial thoughts.
UPDATE:
9:48AM: It is scenario 1. that took place, but I missed the entry on the QQQQs. The price raced up from pre-market price to "close" the gap, but it barely closed it. I was not quick enough to get in. I was shooting for a touch of 47 before getting in, but the highest it reached on my screen is 46.99.
Now I am on the sideline. The balance point is now around 46.70 to 46.75. Not good for shorting nor for going long.
I might consider selling a straddle. Therefore earn time value if no movement, or covering the call at day bottom, and covering put if price goes back up to 47 area.
10:24AM: With NDX at 1894, if I had a short position, I would take my profits now (or at least part of them).
UPDATE 2:
11:10AM: shorted XLF with a very small position at 21.65. Looking for it to go back to 21.40.
A few minutes later: Got stopped out of XLF at essentially break even. This is a sign of strenght for XLF. The rally of the DOW and financials may have just began!
11:18AM: With NDX at 1914 I am starting to scale in aiming for NDX to go back to 1900. (Half normal position size as financials seem to be headed higher today).
11:32AM: NDX at 1905. 9 points profits.
11:56AM: with NDX at 1921, I am shorting it.
UPDATE 3:
3:25PM: with NDX at 1903, I took profits on latest shorting.
Just to add that when I shorted NDX earlier today, I sold in the money calls on the QQQQs. When QQQQ when down (from 47.25 area to 46.78 area), the intrinsic value of the call went down with it.
At around 3:25PM, I sold ITM puts. This means that I have canceled out the instrinsic value.
The resulting position is a short ITM Call and short ITM put. This is known as a GUT strangle.
Therefore I have legged into a gut strangle, but starting with selling the ITM calls, and then to bank the profits by cancelling out the intrinstic value, I sold the ITM puts.
So I am still keeping a position, which is theta positve (earning on passage of time) and vega negative (sold volatility). Therefore I will be earning some time premium.
It is a profitable day, but it could have been more profitable if I entered at 46.99 on shorting the QQQQs rather than my order which was at 47.00 and did not get filled. After that I did not want to chase it.
If I have entered, I would have banked my profits as I wrote about (with QQQQ at 46.50 area), and probably would have gone long as I would have had profits to support me in entering on the long side.
The way the QQQQ behaved is however close to my vision in the morning before the market open. I do not feel good that I did not play it as I perceived it, but a profit is always better than a loss.
So there was some missed opportunities, but those of you who played it as I described it at the beginning of this post before the open, could make around 60 NDX points.
Happy trading
PS: New readers: email me at emailfinancialtraders@gmail.com . I will add you to my list to the by invitation blog and also share with you trading secrets. Empty emails are fine. What whatever you please in the subject and the body (including nothing).
email is: emailfinancialtraders@gmail.com
(New readers. Welcome and read after the PS below. I got special things for you. Email is emailfinancialtraders@gmail.com ).
As I wrote yesterday, nasdaq is the weakest of the three majors (Nasdaq, Dow and SP500). In the pre-market of June 24 we would have a gap down at open.
Here is how I plan to play it:
1. If it races up immediately after the open, I would start shorting when gap has closed.
2. If it opens, and starts a bit in there, I would play it with half normal size at the sign of a morning bottom with the idea of a price rise after the morning bottom to close the gap later in the morning.
3. If point 2 turns out to be the correct scenario, then I would offload towards closing of the gap, and then I will short.
Plans may change of course, but I just wanted to give my initial thoughts.
UPDATE:
9:48AM: It is scenario 1. that took place, but I missed the entry on the QQQQs. The price raced up from pre-market price to "close" the gap, but it barely closed it. I was not quick enough to get in. I was shooting for a touch of 47 before getting in, but the highest it reached on my screen is 46.99.
Now I am on the sideline. The balance point is now around 46.70 to 46.75. Not good for shorting nor for going long.
I might consider selling a straddle. Therefore earn time value if no movement, or covering the call at day bottom, and covering put if price goes back up to 47 area.
10:24AM: With NDX at 1894, if I had a short position, I would take my profits now (or at least part of them).
UPDATE 2:
11:10AM: shorted XLF with a very small position at 21.65. Looking for it to go back to 21.40.
A few minutes later: Got stopped out of XLF at essentially break even. This is a sign of strenght for XLF. The rally of the DOW and financials may have just began!
11:18AM: With NDX at 1914 I am starting to scale in aiming for NDX to go back to 1900. (Half normal position size as financials seem to be headed higher today).
11:32AM: NDX at 1905. 9 points profits.
11:56AM: with NDX at 1921, I am shorting it.
UPDATE 3:
3:25PM: with NDX at 1903, I took profits on latest shorting.
Just to add that when I shorted NDX earlier today, I sold in the money calls on the QQQQs. When QQQQ when down (from 47.25 area to 46.78 area), the intrinsic value of the call went down with it.
At around 3:25PM, I sold ITM puts. This means that I have canceled out the instrinsic value.
The resulting position is a short ITM Call and short ITM put. This is known as a GUT strangle.
Therefore I have legged into a gut strangle, but starting with selling the ITM calls, and then to bank the profits by cancelling out the intrinstic value, I sold the ITM puts.
So I am still keeping a position, which is theta positve (earning on passage of time) and vega negative (sold volatility). Therefore I will be earning some time premium.
It is a profitable day, but it could have been more profitable if I entered at 46.99 on shorting the QQQQs rather than my order which was at 47.00 and did not get filled. After that I did not want to chase it.
If I have entered, I would have banked my profits as I wrote about (with QQQQ at 46.50 area), and probably would have gone long as I would have had profits to support me in entering on the long side.
The way the QQQQ behaved is however close to my vision in the morning before the market open. I do not feel good that I did not play it as I perceived it, but a profit is always better than a loss.
So there was some missed opportunities, but those of you who played it as I described it at the beginning of this post before the open, could make around 60 NDX points.
Happy trading
PS: New readers: email me at emailfinancialtraders@gmail.com . I will add you to my list to the by invitation blog and also share with you trading secrets. Empty emails are fine. What whatever you please in the subject and the body (including nothing).
email is: emailfinancialtraders@gmail.com
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