- Options Trading

Nasdaq in a month?

Up

The same as now

Down

I don't know

 
Best Trade Newsletters
Go to Best Trades Archive  

"Best Trade" Newsletter (April 26, 2006)

In the following example, we have based our  QQQQ options trades on S&P 500 index volume indicators and on advance / decline indicators. Using the principles outlined below, you may wish to trade options on the SPDRs (SPY), ^SPX, DIAMONDS Trust, Series 1 (DIA), as well as on other underlies that generally tend to move in concert with the S&P 500 index. It is also conceivable that an analysis similar to the one shown below could be used to trade options based on the NASDAQ 100, Russell 2000, and other indexes.

For this "Best trade", A trade (Buy Calls) is opened
in order to close it later with profit if the index moves in our favor.

Below you will find a Table of Trade Motivations and a chart showing the trades, including detailed trade calculations.

Chart 1: NASDAQ 100 Volume Surges - April, 2006.

Chart
2:

NASDAQ 100 Advance/Decline Volume Ratio - April, 2006.

In Table 1 - a 'Table of Trade Motivators' - we show the motivating factors that led us to take the above trades.

Table 1: Table of Trade Motivators

Date Trading
Decision
Motivation
04/21/2006   On April 21, 2006 we noted a high-magnitude buying volume surge to the index downside. The (1/10) PVO was 26.2%, which indicates that the volume seen on this day exceeded the average volume over the previous 10 trading days by 26.7%. The bulk of this volume surge occurred between 13:50 and 16:00 during a time when the index was in decline (see 5-day index volume charts using a 15-minute VMA).

On the same day we noted low market sentiment readings. The NASDAQ 100 advance/decline (A/D) issues and A/D volume ratios reached strongly bearish levels of 0.15 and 0.19 around 15:10, respectively.

04/24/2006   On April 24, 2006 the NASDAQ 100 advance/decline (A/D) issues and A/D volume ratios reached strongly bearish levels of 0.19 and 0.12 around 9:55, respectively. This revealed an extremely bearish market sentiment, indicating the market was oversold and thus prone to trend reversals.
04/25/2006   On April 25, 2006 we noted a high-magnitude buying volume surge to the index downside. The (1/10) PVO was 16.7%, which indicates that the volume seen on this day exceeded the average volume over the previous 10 trading days by 16.7%.
04/26/2006 Buy Calls On April 26, 2006 with delay we decided to buy July expiration calls.

Below we list in detail the actual trades made, along with the netted returns achieved.

Table 2:
Details of the trades

Date Trade Strike Expiration Contracts Contract
Price

04/26/2006

Buy QQQGP Calls $42 7/21/2006 80 $1.40

Fast Answers:

If one of your trades has not yet been terminated (by the time you report it as a "Best Trade), should I try to follow it?

We do not wish to suggest that you should mimic these actual trades, even if they are still open. Only follow an open trade if you are aware of the risks involved and if you have access to real-time intraday volume and advance/decline charts (you can get these from www.MarketVolume.com).  For logistical reasons, we cannot always send our newsletters out exactly at the moment we open or close a specific trade. Even if we could, it might be too late, since the market can react strongly to intraday volume surges or negative/positive sentiment readings in our A/D indicators.

©HGH Associated Traders

Important: The analysis results presented in the "Best Trade" may differ from the outlook presented in the daily Market Commentaries. Results may also differ from the trading signals generated for Exchange Traded Funds (ETFs), or from any other research and analysis efforts shared with our members. These are products developed by independent research teams, delivered to MarketVolume® members. While sharing some research results, these autonomous research teams may use different systems and may have dissimilar market outlooks.

Disclaimer: This newsletter is intended for educational purposes only – it does not constitute trading advice, nor does it make or imply any market trend predictions. This newsletter illustrates examples based principally on MarketVolume® index volume indicators and advance/decline (AD) indicators. We do not mean to imply that you should follow our exact trades, but rather wish to suggest that you may make use of our analytics to develop your own trading style.

 

2006 (first part)
Date Indicator
June 28, 2006 QQQQ Options
June 15, 2006 QQQQ Options Trading
June 15, 2006 Options Trading
May 17, 2006 Trading QQQQ Options
May 12, 2006 Trading Options
May 11, 2006 QQQQ
May 8, 2006 QQQQ Trading
April 27, 2006 Trading QQQQ
April 26 2006 QQQQ Options
April 18, 2006 Trading QQQQ Options
April 17 2006 QQQQ Trading
March 29, 2006 QQQQ Options
March 28 2006 Options Trading
March 14, 2006 QQQQ
March 10 2006 QQQQ Options Trading
March 8, 2006 Trading QQQQ Options
March 3, 2006 QQQQ Options
February 28, 2006 QQQQ Trading
February 8, 2006 Options Trading
February 2, 2006 QQQQ Options
January 31, 2006 QQQQ
January 29, 2006 QQQQ Options
January 20, 2006 QQQQ Options Trading
January 13, 2006 QQQQ Options

BOW Newsletters
2002:
NDX and SPX
2003:
S&P 500
2004:
QQQQ and S&P 500
2005:
QQQQ Options
2006 (first part): -
QQQQ Options Trading
2006 (second part): -
QQQQ Options Trading
2007:
QQQQ and SPY Options
2008:
QQQQ and SPY
FREE Trend Alerts
How much is twenty one plus nine?
Submit Email:

Site Maps: Trading System
Stock Market Info: Index Shares FAQ | Site Review | Stock Exchange | Index Trading | Sector Indexes | Technical Analysis
ETFs Trading: Trading Strategy | Trading Signals | SPDRs | DIA
Glossary: # | A | B | C | D | E | F | G | H | I | J | K | L | M | N | O | P | Q | R | S | T | U | V | W | X | Y | Z

Disclaimer
© 1997-2012 Highlight Investments Group. All Rights Reserved.
SV1n