NCM - Stage 4
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     vesta
Member
Username: vesta
Post Number: 30
Registered: 05-2003Rating: N/A
Votes: 0
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| | Friday, January 23, 2004 - 02:45 am: |  
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Hi Bundy and others.
While im still feeling my way around the options area I wanted to check thoughts on buying Puts for NCM
As a recap my notes/rules thus far are
1. Trade with the trend. Buy Calls in an Uptrend after a retracement - perhaps using slow stochastic as an indicator as well as support lines. Buy Puts in a downtrend after an upwards retracement.
2. Get out if losses hit 20% immediately - don't hope for a few cents more
3. Invest between $2000-$5000 for someone of my starting bank if I feel comfortable. Smaller amounts really dont cut it and brokeridge eats profit.
4. Buy ATM or ITM options which are more pricey but lower risk profile and provide more buffer if underlying stock moves against you. Also by paying more for an option there is a better chance of the option value not rocketing past the 20% loss point on a slight move against. i.e potential for large slippage is reduced.
5. Buy an option in series at least 4-6 weeks out (Bundy) - no less than 4 and longer than 8 is paying for time value not needed.. 4-6 weeks is perfectly adequate - and certainly NEVER less than 3 weeks because time decay really kicks in then - increasing exponentially from then to expiry.
7. Buy into liquid stocks only open interest at least 150
8. Buy an option that has a lower Implied Volatility than the historical volatility of the share or a price which is less than "fair value"
Ok thats more for me than anyone else and if you spot some problems with the above rules let me know.
I think NCM is now into a weinstein stage 4 pre-empting the perceived end of gold price uptrend in 6 months time. It has broken below previous lows and has crossed the 30 week MA.
As it is in a retracement, would now be a good time to buy FEB or March PUTS on NCM if they can be purchased at the right price. Lower IV than HV.
Thanks again for the lessons and kind input of everyone
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bundy
Member
Username: bundy
Post Number: 218
Registered: 03-2003Rating: N/A
Votes: 0
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| | Friday, January 23, 2004 - 07:17 am: |
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Vesta
Just a word of caution - I don't want to temper your enthusiasm - but the reality of options trading is that it is highly leveraged and, as with all leverage trades, your profits are multiplied - but so are your losses.
So, for example, if you were to buy shares in NCM at the current price of $11.85 and the price dropped 20 cents overnight - you are looking at a paper loss of 1.7%.
However, had you bought calls, you would be looking at about an 18% loss on opening.
If a stock is in a trend - up or down (even sideways) - there will be plenty of opportunity to get in there and trade options with the trend and take nice profits.
There is no need to be precipitous - the price for getting it wrong is too high.
Hasten slowly!
---
Bundy
Good judgment is gained through experience.
Experience is gained through poor judgment.
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vesta
Member
Username: vesta
Post Number: 32
Registered: 05-2003Rating: N/A
Votes: 0
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| | Friday, January 23, 2004 - 12:03 pm: |
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Hi Bundy - Thanks for the feedback.
Are you saying for NCM that it is too early to identify a trend change hear. I was thinking the clear drop below previous lows (Support Line Drawn) and 30wk MA was an ominous signal.
That being said would you recommend waiting for further downside and then a retracement before a put opportunity or simply a good red candle from this current rally (at least thats what I think it is)
Vesta
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palace
Member
Username: palace
Post Number: 218
Registered: 06-2003Rating: N/A
Votes: 0
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| | Friday, January 23, 2004 - 01:58 pm: |
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hi vesta
why not wait until that last swing low is taken out?
around 11.10
mick
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