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Best Short-Term Trade
July 1st, 2004

Go to Best Trades Archive

This "Short-Term Trade" was based on our volume indicators.

This week's "best trade of the week"
is a continuation of the previous weeks best trade,
where we left a QQQ Put position open.
 

NASDAQ 100 Indicator
Nasdaq 100 stock chart

NOTE: We discuss our "best trades of the week" here mainly for educational purposes. The trading examples we illustrate are based principally on our volume indicators and market commentaries. Our main intent is to show you how you can apply our volume indicators and to explain the specific correlations that exist between volume surges and the movement of the indexes. We do not mean to imply that you should follow our exact trades, but rather wish to suggest that you may make use of our volume analytics to develop your own trading style. We also urge you to paper trade before committing your money to the markets.

Security Return
Put #1 (QQQ August (QQQTL)) 0.00%
Put #2 (QQQ August (QQQTL)) +37.50%

Total Profit:

+$3,375

 

NASDAQ 100 Indicator
Nasdaq 100 stock chart

VMA:

Our Volume Moving Average (VMA) is a key indicator that we use abundantly in our charts and technical analysis. The VMA refers to the volume of a security, commodity or index averaged over a given period of time. The intervals used in calculating a particular VMA can be as short as a few minutes or as long as several years. In calculating the VMA, we use a so-called "simple" moving average, where as the newest value is added, the last variable of the series is simply dropped, but all values are given equal weight. For example, a 5-minute moving average consists of the last 5 volume bars, each representing the volume activity of one minute, that are summed up and then divided by. After the next minute has elapsed, a new value is added to the 5-minute VMA, and the oldest value is dropped from the calculation.

All your trades appear to be based on options, but since I dont trade options, can I still use your volume indicators?

Yes, absolutely! You can also trade indexes, for example, since we apply our volume indicators to the major U.S. indexes. We do this because indexes best describe the mood of the market as a whole. Regardless of what you trade, a particular index or sub-index, stocks, options, or futures, most trading vehicles tend to move in concert with the broad market. As a rule, the market dictates the direction of a particular security it is never the other way. It therefore makes sense to get a good grasp on what is happening at the index or stock exchange level, and we have found volume analytics to be an excellent vehicle to make that determination.

In last weeks "Best Trade of the Week", you left a trade open. Why was this not the case this week?

This week, we did not receive a strong volume signal that would have prompted us to leave a trade open. We would like to remind you that options trading is very risky. We believe it's often better to make fewer trades; also, we initiate trades only in the presence of strong, unambiguous signals.

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
Buy Put #1
06/23/2004
We noted a large selling VMA surge to the upside, which came to a peak by 12:15, however, the only impact of this selling VMA surge on the market was to cause a temporary slowdown in the market's advance. This selling volume to the upside did cause a small move down in the market. During the market's continued rally, it encountered further selling volume to the upside at 14:15. By 14:30 the market's rally continued once again and with even more gusto as the market moved up even more rapidly. During this late afternoon rally the market generated even more selling volume to the upside, which came to a peak at 15:15 and at the end of the day. Despite all the selling volume generated throughout the day, the market was still able to close near its highs for the session.
Buy Put #2
06/30/2004
As the market moved higher, it encountered some selling volume to the upside at 12:45 and at 13:30, but this selling volume had relatively little impact on the market other than to slow its already slow advance. However, by 14:15, as the Fed made their rate announcement, the market quickly sprang to life, initially moving sharply higher and generating a substantially large selling VMA surge to the upside in the process.
Sell Put #1,2
07/01/2004
Immediately after gapping lower this morning, the market continued to move lower. The market's decline continued at about the same pace throughout the remainder of the morning hours -- even a moderately large buying VMA surge to the downside at 11:15 caused a barely noticeable change in the market's trend. By 12:15, the market generated a moderately large buying VMA surge to the downside, the initial impact of which was to cause the market to begin moving higher. However, this move up was rather short-lived. As the market began to decline once again, it generated a huge buying VMA surge to the downside at 14:00

These are the trades which netted the returns shown above:


Date
Trade Strike Expiration Contracts Contract
Price
Amount Profit
06/23/2004 Buy Put #1 $38 August (QQQTL) 75 $1.65 -$12375  
07/01/2004 Sell Put #1 $38 August (QQQTL) 75 $1.65 +$12375 $0
06/30/2004 Buy Put #2 $38 August (QQQTL) 75 $1.2 -$9000  
07/01/2004 Sell Put #2 $38 August (QQQTL) 75 $1.65 +$12375 +$3,375

Total:

3,375

 

2004
Date Indicator
March 14, 2006 QQQQ Options
March 10 2006 Trading QQQQ
October 12, 2004 Options Trading
September 25, 2004 QQQQ Options
September 18, 2004 QQQQ Options Trading
September 10, 2004 QQQQ Options
September 9, 2004 Trading  Options
September 7, 2004 QQQQ Trading
September 2, 2004 QQQQ
August 31, 2004 QQQQ Options
August 19, 2004 QQQ
August 18, 2004 Options Trading
August 15, 2004 QQQQ Options Trading
August 5, 2004 QQQQ Options
August 3, 2004 QQQQ
July 31, 2004 Trading QQQQ Options
July 21, 2004 QQQQ Options
July 14, 2004 Trading QQQQ
July 13, 2004 Options Trading
July 1, 2004 QQQQ Trading
June 23, 2004 QQQQ Options
June 20, 2004 Options Trading
June 6, 2004 QQQQ Options Trading
May 30, 2004 QQQ Options
May 25, 2004 QQQ Trading
May 20, 2004 QQQQ Options Trading
May 16, 2004 QQQ
May 12, 2004 Options Trading
May 09, 2004 QQQQ
April 29, 2004 QQQQ Trading
April 22, 2004 Options Trading
April 18, 2004 QQQQ Options Trading
April 10, 2004 QQQQ Options
April 6, 2004 S&P 500 Options
March 28, 2004 Options Trading
March 14, 2004 QQQQ Options
March 7, 2004 QQQQ Options Trading
February 29, 2004 Options Trading
February 22, 2004 QQQ
February 15, 2004 QQQQ Trading
February 8, 2004 QQQQ
February 1, 2004 Options Trading
January 25, 2004 QQQQ Options Trading
January 18, 2004 QQQQ
January 12, 2004 QQQQ Options

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