"Best Trade" Newsletter (October 24, 2006)

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 October, 2006. 1-day View, 30-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

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

Table 2: Details of the trades

In this example, we have based our  QQQQ options trades on NASDAQ 100 volume indicators (PVO, SBV Oscillator). Using the principles outlined above, 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.

What is a Buying Volume?

Simply put, that means that most of the volume surge was connected with the index while it was moving down. The magnitude of a volume surge measures by the divergence between two 2 VMAs with different settings (Percentage Volume Oscillator - PVO).

How should be invested in options?

If you trade options, we recommend you invest only a small portion of your assets - an amount that will fit your personal trading needs and risk tolerance. In our opinion, that amount should be about 10% of your total portfolio; it should never exceed 30%.

At the same time, we do not recommend that you commit more than 30% of your options portfolio to a single trade. If the market doesn't move in your favor, but indicators remain strong, you may choose to invest another 30% of your options portfolio on a second signal, and perhaps even on a third signal. By proceeding in this way, each time you enter the market in a better position, and usually the profit from the last trade will more than compensate for the loss from your first  trade.

©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.