- Options Trading

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"Best Trade" Newsletter (September 6, 2006)

In the following example, we have based our  QQQQ options trades on NASDAQ 100 volume indicators (PVO, SBV Oscillator) and advance / decline indicators (A/D volume and issues ratios). Using the principles outlined below, you may wish to trade options on the SPDRs (SPY), ^SPX, DIAMONDS (DIA). It is also conceivable that an analysis similar to the one shown below could be used to trade options based on the S&P 500, Russell 2000, and other indexes.

For this "Best trade", "Buy Calls" trade  is opened
in order to close them 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 SBV Oscillator
September, 2006. 15-day View, 240-min VMA.
 
Chart 2: NASDAQ 100 Advance/Decline Volume Ratio.
September, 2006.  15-day View, 60-min VMA.

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
09/06/06 Buy Calls High-magnitude buying surges were noted in all market sectors. The NASDAQ 100 (1/10) PVO was 18.3%, indicating that the volume seen on this day exceeded the average volume over the previous 10 trading days by 18.3%. The (1/10) PVO for S&P 500 was 17%, for the Dow Jones Industrials it was - 16%. The biggest volume surge was noted in Amex Oil and Transport market sectors. The Amex Oil Index (1/10) PVO was 54.9%, the DJT index  (1/10) PVO was 44.1%

On September 6, 2006 we noted extremely low market sentiment readings. The NASDAQ 100 advance/decline (A/D) issues ratio reached critical levels of 0.05 at the market open and advance/decline (A/D) volume ratio reached critical levels of 0.07 around noon. This revealed an extremely bearish market sentiment, indicating the market was oversold and thus prone to trend reversals.

The NASDAQ 100 SBV Oscillator dropped below minus 33% and rallied to about that level back on September 6, 2006 (see NASDAQ 100 15-day SBV chart with 240-min VMA). This reveals that there is a big chance of a trend reversal.

We left "Buy Calls" trade opened in order to close it later if the index moves in our favor.

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

09/06/2006

Buy QQQLM Calls $39 Dec. 2006 70 $1.60

©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
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