Apple (AAPL) earnings are scheduled for July 22, 2014 after the market close. Every quarter, this is one of the most anticipated earning events. Why? Because when the crew from Cupertino get on the phone to discuss the performance of over the past three month, everyone listens. Apple is America’s largest company, by market capitalization – which was $440 billion as of July 13. It is also one of the most held stocks in the US – with several institutions holding tens of billions of dollars in Apple stock. Because of those factors, when Apple moves, markets can move.
How many of you have heard of the new IPO with the ticker symbol GPRO? Do you know anything about the entrepreneur who founded this company? Any idea of how he thought about the product? How long did it take him to develop the wearable HD action camera? How much did he invest in the initiation of the company? Was it offered publicly from the start?
Glossary of Terms
I have been asked about a glossary of terms many times over the years. In doing some research I have not found a standard for terms used for options trading. I have had students discuss the meaning of some terms. It seems their opinions vary based on their background and the training they have had. So below I have put together the definitions the way I use options trading terms and acronyms. I’ll take any input you might have and if appropriate I’ll add it to the blog. For now you are getting what I think of and I’ll add to it over time. This first pass is just terms that students have asked about. I hope you find it helpful:
In my last post, I wrote a little about my technical analysis journey. This post I’ll write about how I use technical analysis to trade options.
First let me give you a bit of foundation on the way I trade. I no longer buy equities. I only use options. I do not trade earnings. I consider earnings a technical, sentimental and fundamental reset. I will trade up to earnings, and I will trade after earnings using technicals while considering fundamentals and sentiment. I feel everyone should start out using trades that involve equity ownership. I am just crazy enough to believe I no longer need to. It has taken me almost six years to get to this point.
A few years ago I read a book written and published by Gil Morales and Dr. Chris Kacher with the title Trade Like An O’Neil Disciple. I’ve been a fan of William J. O’Neil’s for several decades, so this one grabbed my attention. As I read through the text, I gave it super attention and made notes about the methods that they used to generate more than 18,000% in the stock market. The best possibility was to be able to identify the Pocket Pivot setups and prepare to trade that with success.
An acquaintance of mine recently spoke at the Pepperdine Lectureships. She spoke about how two people can think they are talking about the same subject but really they are not. They use the same words, but they have different meanings for those words. She went on to give an example of what she meant that I had never heard. I’ve done a good bit of studying myself and yet I had never heard of her example. It would take WAY too much to explain her example here. It was awesome, so go listen to the Pepperdine Lectures.
Should you be legging into iron condors?
Generally, I do no try to leg into iron condors. I place the trade all at once. Trying to be “tricky” by placing the put side at the lows and and the call side at the highs usually doesn’t work. What happens is that you’ll give up nickels and dimes trying to chase a couple pennies.
To see what I mean, take your equity and try to guess where it will be in the next 5 minutes: higher, lower, or flat.
Seriously. Pick an equity, look at clock, write down your prediction and wait 5 minutes.
The Boston Marathon was in the news a lot recently. The technology involved in the race was amazing to me. I knew the name of one runner so I tracked them. It was amazing to watch the race online and track the runner I knew. One of the announcers had amazing knowledge of the elite runners. He noticed the lead runners checking their watches. He felt that they were checking their split times to see if they were on track based on their previous runs. He indicated these runners were very disciplined. They knew their strengths and weaknesses. They knew when they should run with the crowd and when they should break away. One runner had run the course many times over the past year so that they would know the best possible route to take.. They knew the shortest route to take. Of course everyone ran the same route, this runner knew the shortest path to take through that route. They practiced on a course that was at the same altitude to prepare their bodies. Their discipline is amazing.
At OptionsANIMAL (OA) the buy-rule is to only buy options with 45 days until expiration. So, the easy answer to the title question is NO. Therefore, do you see options available for less than 45 days? YES!! What does that mean?
One of the most important classes available to all members of OptionsANIMAL is Class 1.1 named The OptionsANIMAL Method. The description is as follows:
A man walks into his doctor’s office and the doctor says, “Good afternoon, how can I help you?” The man says, “I want to get into better shape. I want to be fit and I want to start on the road towards life-long health.” The doctor says, “Fantastic! But I have to ask you an important question first. How much illness, pain and injury are you comfortable suffering in order to meet your health goals?”
Does that sound ridiculous? Perhaps, but for years, I and countless others, have heard some variant on this question from investment advisors. Several years ago, I sat with my family as we met with a potential money manager. He asked us how much risk we were willing to take in the portfolio. When I said that I found this question difficult to answer, he explained that the more risk we were willing to take, the more profit we could expect, however he needed to know how much we would be comfortable loosing. He suggested that we would be “loosing” it only temporarily if there was a down market and that it would only be a bump on the road towards those increased profits. “So,” he asked, “could we tolerate a 20% drawdown? How about 30% or 50%?”