By Don Fanstone, Member Kitchener/Waterloo User Group
Option Blog March 8, 2015:
Finding Optionable Trades:
Dr. DiLiddo gave us insight into finding profitable option trades in his commentary of March 6 this past weekend.
Dr. DiLiddo looks for stocks that appear in the Midas Touch Watchlist on the Homepage that are exhibiting price gains accompanied by high volume.
Stocks that appear in the watchlist days in a row with major price change and high volume initiate a search to determine why the action is occurring.
For most of us, we read about takeovers after the fact.
Per Dr. DiLiddo, there are ways to anticipate significant change in a stock`s price if you use VectorVests full capabilities.
Option Trades since Feb. 27th.
Bought 10 AVO July 17 Call Options at $5.00.
Avigilon has been a volatile stock to say the least. Currently in a loss position on this position having given back the profit realized from my previous trade.
With expiry out to July, there is time to effect a course of action before taking the loss. Buying the July 17`s may allow a breakeven in the $20 -21 dollar range.
Kroger (KR) This trade (July 65`s) had gone into a negative position without apparent reason. On March 5th, the company announced a significant earnings beat and recouped all of its losses and added a healthy gain. Kroger is one of the top retailers in the US. Kroger is a good long term option holding. It would be prudent to follow the MTI as this point in time before taking a position.
I encourage all to read Lee Lowell’s book “Get Rich with Options”, go to VV University and watch the Video on Options, and read Dr. DiLiddo’s article in the Views Manager under Special Reports, and attend the VV Options Course.
Understand Options Before you begin to trade, there is much to learn.
Trades since Monday Feb. 23:
Feb. 23 Sold 10 IPL July 27’s @ $6.65. Bought Dec. 22/14 @ $5.00 Profit $1,650
Feb 23 Sold 5 ENB July 52’s @ $9.70. Bought Feb. 4 @ $11.95 Loss $1,125.
Feb 24. Sold 4 CNR June 70’s @ $16.70, Bought Jan. 20 @ $12.65 Profit $1,640.
Feb 24 Sold 10 CNR June 72’s @ $15.00, Buy Nov. 26 @ $13.00. Profit $2,000.
Feb. 24 Buy 7 CTC.A Aug. 110’s @ $15.55 Sold Feb 26 @ $22.70 Profit $5,005.
Feb. 26. Buy 5 SWKS Aug. 75’s @$17.07 US. (Open Contract)
Feb. 26 Buy 10 AVO July 21’s @ $5.00 (Open Contract)
Feb. 27 Buy 10 MIC July 28’s @ $4.70 (Open Contract)
Comment:
The MTI is nearing a top in the USA and in Canada, see the one year MTI graph.
Read Dr. DiLiddo’s Feb. 20 and Feb. 28 comments on the US market.
This is not an ideal time to be adding Call Options or Buying Stock Long with the expectation that the markets are going to move up strongly.
Follow Dr. DiLiddo’s advice, don’t sell everything, be aware and be cautious.
DISCLAIMER: Options trading involves risk and is not suitable for everyone. The information contained in this Blog is for education and information purposes only. Example trades should not be considered as recommendations. Options training is strongly recommended before placing any trades. VectorVest offers a basic options course online and occasional intermediate options workshops in Canada each year.
Hi Don,
As per your recommendation, I’ve read ‘ Lee Lowell’s book “Get Rich with Options”, I’ve watched the videos on VV but I haven’t taken the Options Course (yet).
In your commentary above, could you explain the 2nd paragraph beginning with ‘With expiry out to July……………….”
Also in the ‘Trades since Monday Feb. 23:’ section can you explain how you figure your ‘profit/loss’ numbers if you buy in one month and sell in another month. I thought if you buy in one month and want to close the trade you have to sell the same contract not a different contract(obviously I don’t understand something).
Could you take one of the above trades and explain it in detail?
Thanks
Gerry
I can’t say enough about the beginners option course. I didn’t trade options before this course and now trade them regularly and profitably.
Also love the wisdom and time spent on this Don. I find it excellent.
Gerry:
Thanks for your comment and well done on reading Lee’s book and watching the videos. The VV Beginners Options Course will explain most of your questions.
With expiry “Out to July”, I mean that the original option purchased in February had a July 2015 expiry date, being the third Thursday in July. When you look up Call Options on the TMX site for Canadian Options, you will find different expiry months. Buying Call Options to realize capital gain, you’re best served by buying a Call Option that has 6 months before expiring. In the case of AVO, I am a believer in this companies fundamentals, and am hoping that the stock price will rise before the date of expiry to profit from this trade.
A Call Option purchased in any given month, and having an expiry date 6 months hence can be sold at any time, being the same day, the same week or the same month or waiting till the date of expiry. Call Options lose most of their time value in the last month prior to the date of expiry. Usually, it’s wise to not hold Call Options up to the date of expiry during the last month of their life.
I hope this answers our question, if not ask again and I’ll endeavour to do a more complete explanation.
Don
That’s great! Thanks Don
Gerry