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Chart of the Week:
QQQ Options for
August 27, 2003


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Our short-term trader has made some trades based on our advice and analysis, he was able to make two promising trades that could lead to a tidy profit.

NOTE: This chart of the week is mainly intended for educational purposes. We don't recommend that our customers follow these exact trades. We suggest that you develop your own trading style and try doing some paper trading before using our volume analytics.

Security Return
Call #1 (QQQ October) +31.8%
Call #2 (QQQ October) +29.6%

Total Profit:

+$7,500

The past week has been an excellent week for any traders following our Market Outlook and our volume signals. Last Thursday we saw a large buying VMA surge to the downside, which signaled the market will move higher in the short-term, but selling volume countered this move on Friday. As the week progressed we didn't see much volume at all, but on Tuesday we saw another moderately large buying VMA surge to the upside that caused the market to move higher until Wednesday when we saw a second selling VMA surge to the upside, which in combination with Tuesday's selling volume may cause the market to move lower in the short-term.

This chart will be an excellent example of how mid-term options traders can use MarketVolume's volume charts to make several successful trades during a single week.

Motivations behind Trades: The main motivation for the purchase of QQQ call options last Thursday was because of the large buying VMA surge to the downside, which MarketVolume's Market Outlook suggested would cause the market to move higher in the short-term. On Friday, the market moved higher in response to the previous day's buying volume, but in doing so it generated a moderately large amount of selling volume to the upside. Because of the selling volume it was a safer move to close all open QQQ call options instead of holding onto them for a longer period. During the end of last week and the beginning of this week there was relatively low amounts of volume, which make it difficult to confidently trade based on volume signals. On Tuesday we saw the first large buying VMA surge to the downside, which was an excellent signal for the market to move higher in the short-term. As a result of the buying volume more QQQ call options were purchased. By Wednesday there was more selling volume to the upside, which in combination with the selling volume seen at the end of Friday could cause the market to move lower in the coming days. Because of these two selling VMA surge the remaining QQQ call options were closed.

How can this chart be used by me?
Our main reason for publishing these charts is to allow our members to learn by another trader's example  how they can make trades based on our volume signals and Market Outlook. Members can gain a better understanding of how to enter and exit the market, based on when a signal is generated. To learn from these charts, you don't need to trade the specific security mentioned in this publication, but whatever security you feel comfortable with. The principles for trading NASDAQ 100 index options will not change when trading something like S&P 500 futures.

Should I try to paper trade before trading options?
Yes! We suggest that anyone who is new to our signals and analysis try doing some paper trading to start, at least until they are comfortable with interpreting our signals.

I trade the S&P 500 / SPDRs. How does this apply to me?
The S&P 500 and NASDAQ 100 indexes have generally the same behavior. If you overlaid a chart of each of them during a short period such as this one, their general dynamic would be the same. Because of this, you can trade S&P 500 index shares, and options.

Why did you trade QQQ options?
Generally we trade options, and in this case QQQ (NASDAQ 100 index shares) options because they offer a high return, but are less risky than futures for the NASDAQ 100 index. One can trade NASDAQ 100 index futures, QQQ stocks, QQQ options (as we did), or even NASDAQ 100 options on futures. There is a wide array of trading vehicles that are tied to the NASDAQ 100 index, and it's mostly up to the individual trader as to which is preferred to trade.

Conclusion: Our mid-term options trader was able to make use of our Market Commentaries in combination with our Volume Signals in order to make several successful options trades. The first trade was rather cut and dry as there were two very clear volume signals to support entry and exit points. The second trade was not as clear-cut as our mid-term options trader decided to assign less weight to the first selling VMA surge and did not close on that point, but the second selling VMA surge was enough for him to close all his remaining call options. Overall, when one is trading options, it is best to choose the most liquid strike price so that any open positions can be quickly closed at a moment's notice.

The same principles mentioned above work for trading S&P 500, S&P 100, Dow Jones, and other indexes.


To see more details about the motivations behind the above trades and trade details, sign up for a Free Trial today (no credit card information will be collected) by clicking on the following link:

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2003
Date Indicator
December 21, 2003 QQQQ Options
December 14, 2003 QQQQ Options Trade
December 7, 2003 QQQQ Options
November 30, 2003 QQQQ
November 23, 2003 QQQQ Options
November 9, 2003 QQQQ Options Trading
October 31, 2003 QQQQ Options
October 24, 2003 QQQQ
October 17, 2003 QQQQ Options
October 10, 2003 S&P 500 (SPX)
October 3, 2003 QQQQ Options
September 25, 2003 QQQQ
September 16, 2003 QQQQ Options
September 11, 2003 S&P 500 (SPX)
September 5, 2003 S&P 500 (SPX)
August 27, 2003 QQQQ Options
August 15, 2003 QQQQ Options Trading
August 4, 2003 QQQQ Options
July 28, 2003 NASDAQ 100
July 25, 2003 S&P 500 (SPX)
July 12, 2003 NASDAQ 100
July 2, 2003 NASDAQ 100 (NDX)
June 27, 2003 NDX
March 28, 2003 NASDAQ 100 (NDX)
March 11, 2003 NASDAQ 100
March 4, 2003 NASDAQ 100 (NDX)
February 12, 2003 NDX
February 4, 2003 S&P 500
January 29, 2003 S&P 500 (SPX)
January 24, 2003 S&P 500
January 22, 2003 NASDAQ 100 (NDX)

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