Options Trading Newsletter - Issue #140 11th Hour... [Options Today - Butterfly on QQQ ]
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Options Trading Newsletter - Issue #140 11th Hour... [Options Today - Butterfly on QQQ ]
11th Hour... [Options Today - Butterfly on QQQ ]
11th Hour… [Options Today - Butterfly on QQQ]
Have you ever wondered why we wait till the last minute to get things done? You are not alone. Like many, I find myself procrastinating too. But is this always a bad habit?
Contrary to the popular believe, procrastination isn’t always detrimental, as long as you eventually complete your task. It’s procrastination that leads to missed deadlines that it becomes a problem worth reevaluating. This dilemma is not only about time management but also about understanding our work habits and motivations.
Effective time management often comes down to two key factors: planning and experience. The more familiar we are with a task, the better we can estimate the time it requires. However, complexity plays a significant role too. Complex tasks can be intimidating, leading us to avoid them until we have no choice but to face them head-on. And when time is short, the increased stress can compromise the quality of our work.
So, what's the solution? It's essential to realistically assess the time a task will take. If it's a large, complex task, start early. For less demanding tasks, it's okay to prioritize other things first. But remember, even the best planners sometimes find themselves working late to meet deadlines.
How you manage your time is deeply personal. Some people need to clear tasks as soon as possible, while others, like myself, often wait until the end. Understanding and respecting your work style is crucial, but so is recognizing when it might be hindering your productivity.
Procrastination is a common challenge, but it's not insurmountable. By being aware of our tendencies, planning effectively, and adapting our strategies to fit the nature of our tasks, we can overcome the pitfalls of last-minute rushes. Remember, it's about finding a balance that works for you, and sometimes, that means stepping out of your comfort zone to manage time more effectively.
“Success isn't always in the starting time, but in the perseverance to end strong."
SPX (4514)
It’s another crazy week for the market as it went into celebration mode after the release of the CPI data on Tuesday. CPI came in lower than expected 3.2% vs 3.3% and that alone gave the market enough reasons to gap up on opening and close almost 1.9% higher for the day. November alone, the market has gone up by 7.6%!
The market went more or less sideways thereafter for the rest of the week. Wednesday release of PPI of -0.5% vs 0.1% expected gave the market a reminder that not everything is that great. The current level also is showing some resistance at 4512 level and the gap last Tuesday may need to be filled at one point. A retracement back to 4400 level will cool down the market to allow it to confidently move higher.
MSFT went into limelight towards close on Friday, with the news of Sam Altman getting fired as the CEO of Open AI.
All the Magnificent 7 have breached their previous highs and there would be at less attractive levels for now based on risk versus returns.
Trade range for the week is 4450 to 4600.
NDX (15837)
NDX is again up 2% for the week pushed higher after the CPI announcement which is in favour of the Fed’s fight against inflation. For now, rate hike was paused and if the CPI comes lower, the rate will continue to stay put at the Dec Fed meeting and start to come down in June 24. Lower interest would mean higher valuations for the tech stocks.
NDX is now testing the previous July 23 high of 15932. The next level up would be the all time high of 16,764.
I believe that it is a matter of time NDX reclaims the all time high but probably not this year. As the market is all hyped up for the Santa Claus rally which started way way early, I doubt it would have the momentum to continue all the way without any retracement along the way. Similar to SPX, there is possible that the gap up needs to be filled soon.
This week, NVDA will make its announcement on Tuesday.
Trading range for the week is between 15500 to 16200.
HANG SENG INDEX (17616)
The better than expected US CPI lifted the HSI way higher than it should to 18174 last week. The bounce was short lived and could not be sustained. It is now trading below the trendline again and possibly testing the lower band sometime again.
The lower support now at 16500 and resistance at 17750.
OPTIONS TODAY [Butterfly on QQQ]
Longshot trades are great to trade once in a while. Because of the low risk high returns, we can use it to test your short term price thesis for stocks or ETF.
This time, we would like to do a 1 week Butterfly on QQQ expiring on 24 November. As this is a short week due to the Thanksgiving holidays, we do not expect big movements in the market.
Price action wise, we see that QQQ is testing the previous high resistance at the current level. It closed below the resistance level last week. There is also a gap between $378.54 to $383.18 which could be filled sometime. As we might see market softer this week due to the holidays, there is possibility that it could be filled right away.
Expected move for 24 Nov is +/-$5.21 which means trading range $391.25 to $380.83. Our directional bias is to the downside for this week, and we will use a butterfly strategy due to the low cost. As we are going against the overall bullish market direction, I do not want to pay higher to enter a counter trend trade.
Trade Entry
Sell 2 Put at strike $380. We choose this based on the 1 standard deviation expected move and also the highest open interest strike level.
Buy 1 Put at $378
Buy 1 Put at $382
Total trade price $0.14, with max profit $1.86. Max loss is $0.14. Risk to return is 1:13x.
(recheck entry on opening today)
Trade management
No real trade management required. Close the trade for profit if it gets into the profit zone $378.14 to $381.86. The closer to expiry the higher the profit if it stays within the zone. If not mistaken, this Friday may be a half trading day session till 1pm.
OPTIONS TODAY [POST EARNINGS PLAY - BEARISH ON AMD]
The force is too strong and we went into a total loss for this trade. The market retracement did not come through and AMD went higher to close at $120.
OPTIONS TODAY [OIL PLAY ON XOP]
We entered the trade at $1.10. At the same time, because oil price had a sudden drop last week, we entered another Bull Put Spread to take advantage of the down move. Oil have quickly rebounced the next day after the drop.
At the same time, we picked up some micro crude futures (MCL) when it dipped on Thursday and now nicely seeing the gains coming in.
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DISCLOSURES
Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options: https://www.theocc.com/components/docs/riskstoc.pdf
MYstyework is an Online Financial Literacy Educator and materials provided is solely by MYstylework and is for informational and educational purposes only. It is not, nor is it intended to be, trading or investment advice or a recommendation that any security, futures contract, transaction or investment strategy is suitable for any person. Trading securities can involve high risk and the loss of any funds invested. MYstylework, through its contents, does not provide investment or financial advice or make investment recommendations. Investment information provided may not be appropriate for all investors, and is provided without respect to individual investor financial sophistication, financial situation, investing time horizon or risk tolerance. MYstylework is not in the business of transacting securities trades or an investment adviser.