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 Nasdaq in a month?

Up more than 5% 
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Best Short-Term Trade
January 18st, 2004


Go to Best Trades Archive

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

Nasdaq 100 stock chart

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".

 
 

 
BOW Newsletters
2002:
NDX and SPX
2003:
S&P 500
2004:
QQQQ and S&P 500
2005:
QQQQ Options
2006 (first part): -
QQQQ Options Trading
2006 (second part): -
QQQQ Options Trading
2007:
QQQQ and SPY Options
2008:
QQQQ and SPY
 

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