Some Random Links

Here are some random links for this week:* Dr. Brett Steenbarger had excellent posts on how one should initiate a trading learning process and how to regain trading consistency.* Adam�s Daily Option Report showed how he looked at VIX through a different lens.* Option Pundit wrote a great article on how to value stock.* Simply Options Trader shared her tricks on how to find a low risk entry here.* JMOT listed some common ways of choosing the right stock in this post.Have a nice weekend ahead....

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Stock Watch � MLM, PWR, B, PCLN, JCOM

One of my favorite setup is a bounce off a trend line after pull back. I like this kind of setup, because it usually provides a high probability & low risk entry for a swing trading. As we often heard, �Trend is your friend� and �Don�t trade against the trend�.During the recent sell-off, many uptrending stocks have pulled back to their trend line or 20 MA, whereby historically such stocks would continue their upward moves after the pullback to that line.The following are some of the stocks with potential bounce moves after the pull back, when the market starts to bounce up from the recent sell-o...

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Option Greeks: VEGA

Vega measures the sensitivity of an option�s price to changes in Implied Volatility (IV). Vega estimates how much an option price would change when volatility changes 1%.A change in IV will affect both Calls and Puts options the same way:An increase in IV will increase an option�s price, while a decrease in IV would decrease an option�s price.The reason for this is that higher volatility implies greater expected fluctuations in the stock price, which means a greater possibility for an option to move into your favor by expiration.Since higher volatility leads to higher option price (assuming other things constant), an increase in IV would benefit option buyers, but will be detrimental for option sellers (for both Calls & Puts). Whereas a decrease in IV would have a negative impact on option...

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Thank You From The Bottom Of My Heart

Investment blogosphere lost another great bloggers. Trader X and Yaser Anwar have decided to stop blogging. While not long ago, Estocastica as well as ODA125 of Options The Easy Way left the blogosphere too.I really feel sad and lost. I am one of those many people who have benefited from their wonderful insights they shared in their blogs.Frankly, though I took paid courses and spent thousands bucks for trading education, I can say I actually learn much more from all the great investment / trading blogs around than what I got from the paid courses. It�s through reading the blogs, I�ve grown and improved as a trader. When I was feeling down and devastated from the trading setbacks I encountered, it�s through reading the blogs I got encouragement to stand up again, regain my confidence and move...

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Some Interesting Stock Charts Pattern

I came across some interesting stock chart pattern. Here they are.PLXS: Forming an ascending triangle recently.UTHR: Forming an interesting bullish flag pattern. Seems like It�s testing the support at around 63.5 n...

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Update Stock Watch � CG

In the earlier post, I highlighted CG for its possibility to break out of the ascending triangle. The stock did make an attempt to break out by gapping up in the opening on 15 Jun, but it failed. However, as of yesterday, the ascending triangle pattern seems still intact with 50 MA acting as a strong support.Although in theory, ascending triangle pattern is generally expected to lead to a breakout / upward moves (i.e. continuation pattern of the existing trend, which is trending up), in reality we also saw that some of such pattern led to a breakdown instead, if the market fails to break the resistance at the upper triangle.Anyway, as we know,...

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Option Greeks: THETA

Theta is a measure of the rate of decline of option�s time-value resulting from the passage of time (time decay).Theta provides an estimate of the dollar amount that an option price will lose each day due to the passage of time and there is no move in either the stock price or volatility.Theta and the position in the market:� Long calls and long puts always have negative theta.� Short calls and short puts always have positive theta.� Stock has zero theta � its value is not eroded by time.Positive theta means that the option value will increase as the time passes, while negative theta means the option value will fall as the time passes.Therefore,...

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Option Greeks: GAMMA

Gamma measures the rate of change of delta due to a one-point change in the price of the underlying stock. In other words, Gamma estimates how much delta would change if the price of the underlying stock changes by $1. So, gamma can tell you how �stable� your delta is. A big gamma means that your delta can start changing considerably for even a small move in the stock price.Unlike delta, gamma is always positive for both Calls and Puts.Example:ABC Jun 60 Call has a delta of +0.25 and ABC Jun 60 Put has a delta of -0.75. The current ABC stock price is 50. The gamma for both the ABC Jun 60 Call and Put is 0.03.If the stock increases by $1 from...

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Stock Watch : CG Ready To Break Out?

CG has been forming an ascending triangle lately. Look at the recent price action. Seems like it�s ready to break out soon? Just watch out. :)As for me, I prefer to wait for a pullback after the breakout happe...

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Option Greeks: DELTA (Part 3)

Go back to �Delta - Part 2�.Although some people may not be totally agreeable, there is another way how we can �interpret� Delta.Options Guy�s Blog posted an article about another �definition� of delta:�Delta is the probability of the option contract being in-the-money at expiration�.I agree that this is not the theoretical definition of Delta. I still use delta data as per the theoretical definition, i.e. how much the option�s theoretical value will change when the stock price changes by $1.But I do feel that the other �definition� of delta has helped me to understand more about some �behavior� of delta.For instance:Why for ITM options, for the same strike price, the longer days to expiration, the lower the delta?Because ITM option with more days to expiration has more time to move.Options...

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Option Greeks: DELTA (Part 2)

Go back to �Delta - Part 1�Factors That Affect Option�s DeltaThere are a few factors that influence option�s Delta:a) How close or how far away the stock price from the strike price.At-the-money (ATM) options have deltas around 0.5; Out-of-the-money (OTM) options have deltas between 0 to 0.5; In-the-money (OTM) options have deltas between 0.5 to 1. (The delta values will be positive for Calls & negative for Puts).When options are deep OTM, they have a small delta, because changes in the stock price will lead to only small changes in the option price. But as the options move towards in the money resulting from a continued rise in the stock price, the delta gets larger.As the stock price moves and an option gets deeper ITM, delta will change and would be approaching 1 for Call and �1 for...

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Option Greeks: DELTA (Part 1)

What is Delta?Delta is a measure of the change in the option�s price resulting from a change in the underlying stock price. It estimates how much the theoretical value of option price will change when the price of the underlying stock changes by $1, assuming all other variables are unchanged.Positive delta means that the option�s value will increase when the underlying stock price increases, and will decrease when the stock price decreases (positive relationship).Negative delta means that the option�s value will increase when the underlying stock price drop, and will decrease when the stock price rises (negative relationship).For Calls, the value of delta ranges from 0 to 1, whereas for Puts from -1 to 0.Calls have a positive delta because Call premiums increases when the underlying stock...

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OPTION GREEKS - Introduction

The "Greeks" in options trading is known as a way to measure the sensitivity of an option price to changes in its parameters. The Greeks can help option traders to better understand the potential risk and reward of an option position. However, it is important to note that the numbers given for each of the Greeks are strictly theoretical, as they are only projected based on mathematical models.In addition, the Greeks numbers also change as the conditions (like actual stock price, volatility) change. How the various Greeks move as conditions change depends on how far the strike price is from the actual price of the stock (Deep ITM or ATM or deep...

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Getting Started Trading

Click the following links to read each of the articles:ONLINE STOCK OPTIONS BROKERS:* How To Choose Online Stock Option Brokers* List of Some Online Stock Option Brokers* My Online Stock Option Brokers (Part 1)* My Online Stock Option Brokers (Part 2)REAL-TIME STREAMING CHARTS:* How To Start A Real-time Streaming Chart in OptionsXpress* How To Detach & Clone Charts in OptionsXpress* How To Apply Stock Chart Indicators In OptionsXpressVIRTUAL / PAPER TRADING:* Should You Do Virtual / Paper Trading?* 5 Tips For A More Effective Virtual / Paper TradingTRADING EDUCATION:* Things To Consider Before You Decide To Take A Trading / Investment CourseTYPES OF ORDERS:* Options Transactions* List of Types of OrdersRelated Topics:* Options Trading Basic � Part 1* Options Trading Basic � Part 2* Understanding...

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How To Apply Stock Chart Indicators In OptionsXpress

Stock charts without any indicators / studies will look �naked�. Indicators / studies chart (e.g. Moving Average, MACD, Stochastic, RSI, etc.) help tremendously in our chart analysis.The following is the steps to apply indicators / studies in the stock charts in OptionsXpress:1. Click the �Tools� button on top of the chart >> Studies >> Apply Studies.2. A window will pop up. You can choose any studies under �Select Studies� list. There are many indicators / studies available there. After you select, then click �Add�.3. After you are done selecting the studies, you can save them for future use.If you have more that one saved studies, you can manage them from �My Studies� at the right side. Click the �plus� sign to list down all the studies, then double-click the study you want to...

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How To Detach & Clone Charts in OptionsXpress

In the previous post, I showed the step-by-step guide to start real-time streaming chart in OptionsXpress (OX).After starting the chart, you can also detach the chart and make it as a new window, and clone it so that you can monitor more than one stock chart at the same time.There are 2 ways to detach the chart:Option 1:Click the �Detach� button in the �Options� box at the bottom left corner. (See picture below)Option 2:Click the �Detach� button at the top right corner. (See picture below) There is a difference when using Option 1 & 2:Using Option 1, the detached chart actually does not �stand� by itself, although it�s become a separate...

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How To Start A Real-time Streaming Chart in OptionsXpress

In the earlier post, I mentioned that if you open an account with OptionsXpress (OX), you can use their real-time streaming chart for free. Since I�m familiar with OX charts, for the benefit of the beginners or those who have just opened an account with OX and still not familiar with it, I�d like to share here the steps to start live streaming chart in OX, so that you can save some exploring time. Hope it can be useful. :)Note:You need to ensure that you�ve install (latest) Java software so that the streaming charts will work.STEPS TO START THE JAVA STREAMING CHART IN OPTIONSXPRESS (OX):1. Click: Quotes >> Chart >> Java Charts.2....

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