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Our short-term index options trader traded QQQ options
for this week’s "best trade of the week", but could instead have
traded NASDAQ 100 index shares or options using the same method.
This trade was based on our volume indicators and our Market
Commentary.
NOTE: We discuss our "best trades of the week" here mainly
for educational purposes. We don't recommend that you follow
our exact trades. Instead, we urge you to develop your own trading
style and to paper trade before committing your money to real
trades. Our volume analytics will help you do this.
|
Security |
Return |
| Put #1 (QQQ
February) |
+36.84% |
| Call #1 (QQQ
February) |
+30.00% |
|
Total Profit: |
+$7,325 |

Even though the trades shown above were not entirely without
risk, they resulted in a profit of $7,325
How can this chart be used by
me?
Our main reason for publishing these charts is to allow our
members to learn by another trader's example how they can make
trades based on our volume signals and Market Outlook. Members
can gain a better understanding of how to enter and exit the
market, based on when a signal is generated. To learn from these
charts, you don't need to trade the specific security mentioned in
this publication, but whatever security you feel comfortable with.
The principles for trading QQQ shares will not change when trading
something like
S&P 500 futures.
Notes:
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.
In the following, we would like to show
you the motivating factors that led us to take above trades. For
this purpose, we have created what we call a
'Table of Trade Motivators':
|
Trade |
Volume Motivation |
Market Outlook on Members Home
Page during the trade |
Buy Put
#1
01/09/2004 |
By 12:15 the largest selling
VMA surge of the day peaked. |
We still believe that the market
may continue its pullback in the selling volume to the
upside. |
Sell
Put#1
01/13/2004 |
During this descent, the market
encountered a moderately large amount of buying volume to
the downside, which was focused into two peaks: a moderate
buying VMA surge at 10:30 and a large buying VMA surge
at 12:00. The |
we don't believe that the
accumulated selling volume will have any real influence on the
mid-term market, as the < mid-term market is quite bullish and
is likely to continue on its current uptrend.
|
Buy Call
#1
01/13/2004 |
During this descent, the market
encountered a moderately large amount of buying volume to
the downside, which was focused into two peaks: a moderate
buying VMA surge at 10:30 and a large buying VMA surge
at 12:00. The |
we don't believe that the
accumulated selling volume will have any real influence on the
mid-term market, as the < mid-term market is quite bullish and
is likely to continue on its current uptrend.
|
Sell
Call #1
01/13/2004 |
During the market's late morning
and early afternoon advance it ran into a very large selling
VMA surge to the upside. This selling volume surge began at
11:30, but quickly came to a peak at 12:45. |
The fact that the market has not
reacted, in the short-term, to the accumulating amounts of
selling volume to the upside leads us to believe that there is
now a chance for there to be a mid-term correction |
The principles discussed above also apply when
trading the NASDAQ 100, the S&P 100, the
Dow Jones, as well
as other indexes.
Following is a detailed
list of the actual trades made by our investor.
These are the trades which netted the returns shown above:
Date |
Trade |
Strike |
Expiration |
Contracts |
Contract
Price |
Amount |
Profit |
| 01/09/2004 |
Buy Put #1 |
$38 |
February |
100 |
$0.95 |
-$9500 |
|
|
01/13/2004 |
Sell Put #1 |
$38 |
February |
100 |
$1.3 |
+$13000 |
+$3,500 |
| 01/13/2004 |
Buy Call #1 |
$37 |
February |
85 |
$1.5 |
-$12750 |
|
|
01/15/2004 |
Sell Call #1 |
$37 |
February |
85 |
$1.95 |
+$16575 |
+$3,825 |
|
Total: |
+$7,325 |
We welcome any questions or comments you might
have regarding this "best trade of the week". |