I'm just starting with 4,000 in a stock account so will see how I do. Margin account with options approval. Thread Disclaimer. This thread is for entertainment and education purposes only. Nothing is this thread should be understood or considered as investment advice. Nothing in this thread is a recommendation to buy or sell any investment vehicle, such as, but not limited to, stocks, bonds, options, securities, future contracts, or commodities. Futures, stocks and options trading involves substantial risk of loss and are not suitable for every investor. The valuation of futures, stocks and options may fluctuate, and, as a result, clients may lose more than their original investment. All posts, ideas, opinions and forecasts are for informational purposes only and should not be construed as a recommendation to invest, trade and or speculate in the stock or option market. I am not an investment adviser and am not giving investment advice! It is strongly recommended that you consult a legal financial advisor before investing your money in a financial instrument.
I decided to start with QID as its price is a lot cheaper than QQQ. October 9 - Buy 50 shares of QID @ 37.66 Cost 1883.23 Basically with interest rates going up and market going down, I figured would be good time to short the market. Also as the chart above shows, volatility is way up which tends to mean big moves, I estimated support for my shares at 37.16 and resistance at 38.86. My trade looking good after hours.
October 10 - Gap up at open due to overnight selling in the Nasdaq Looked like QQQ was heading higher to me, which would mean QID down, so I decided to hedge and buy a QID put option. Oct 10 - Buy QID Nov 18 - 38 strike put option. Cost 134.00 At close 10/10 Account Value 3136.61 +136.61 Stock + 200.77 Option -43.50
If you had a bigger account though, you wouldn't want to risk it all in one trade, so your return one not be the same. You'd have more trades going on, unless you are using it to gamble more and trading your entire $20K in one spot.
I'll keep going unless I lose money. I figured they would gap the market up. I wish markets went 24/7 for everybody so gaps would not be possible anymore. Gap up in markets, like Nasdaq.... which results in Gap down in inverse ETF like QID So I am out of all positions at moment. My basic plan now is buy 50 shares of QID at ...... Well lowest price I can. Gap down at open tells me buying pressure on Nasdaq. So if I was guessing I would guess QID drifts down over course of day. Monday, who knows.... maybe gap up again lol. So I'm watching the minute charts in QQQ and QID as well as overall markets. I try to think like the billion dollar hedge fund managers. If they want to sell big again they need buyers. So they would want to make it look like market is recovering. So nice up move in markets today. Sell off would be after hours if it was going to happen...or in dark pools imho. The question would be how high does market drift up...so inverse ETF's down.... The 50% retracement in QID based on the low of 35.20 and high of 42.98 would be 39.09. Price is actually close to that now at 40.11 But my rule of thumb is anything is possible. So they could also drive this down to close the gaps.... at least the 2nd one that happened on October 10th. But as this chart shows.... that much of a drop now seems pretty unlikely. I try to have market tell me what moves to make, not go off of opinions. So my plan now, which could change, is to watch this all day. If it keeps drifting lower, buy 50 shares at end of day if it looks like low to me. Then next week, if it keeps going down, buy another 50 shares at some point AND BUY A PUT! I try to play hedged at all times. Or if QQQ takes off like a rocket today I could just buy the 100 QID today with a put purchase as well. Watching and waiting.
Oh something I didn't mention is put prices go down if stock moves up and go up if stock moves down. So I will go over a few scenarios. Say I buy QID now at ...oh shoot POP.... Wasn't expecting that..... OK.... say I buy 100 now at 40.68... The price of puts is.... QID Nov 41 = $251 QID Nov 40 = $189 So I could buy 100 shares at 40.68 and buy the Nov 41 put @ 251 That's one possibility. Whats my max loss not including commissions? I got a (41.00 - 40.68 = 32) $32 profit on stock/option locked. So most I can lose on this trade is $251-$32 = $219 plus commissions. This getting too complicated but basically there is a lot of options as far as how I get into a trade like this. 1. Buy 100 shares now with put. 2. Buy 100 shares now.... wait for stock to go up some, then buy put cheaper. 3. Buy 50 shares now.... stock goes up or down buy 50 more shares... buy put. 4. Buy 50 shares now and put.... wait to buy other 50 shares. 5. Stay at 1 put for each 50 shares. (make money up and down,) Etc Etc... Each one has it's pluses and minuses depending on how good you guess what stock price is going to do. But it's possible if you guess correctly to get into a trade with zero cost.... Like if you buy 100 shares..... stock rises 4 or 5 points..... then you buy the put....as one example. Buy 50 shares and put, stock price drops 4 or 5 points.... then buy other 50 shares as another. Buy put.... stock drops 4 or 5 points, then buy stock. But yea if you guess wrong, your costs and possible loss goes up. Note: the above is all about BUYING the put, NOT selling PUT to open position.
More stock market weirdness to be aware of... QID just popped from 40.68 to 41.10...... so price of puts should have dropped right? There were at: QID Nov 41 = $251 QID Nov 40 = $189 Now at: QID Nov 41 = $260 QID Nov 40 = $195 THEY WENT UP! Why? Because volatility went up... that's another factor in price of options. That happened in my last trade too. I bought stock and put option. Had a profit in BOTH as stock price went up which makes no sense on the surface. Put prices usually go down as stock rises. And yea that's true overall. But in the short term, the opposite can happen.
Today's Trades. #1. Where I bought 50 shares of QID stock at 40.68. Gaps mean different things but always show after hours buying or selling pressure. Today's Gap was clearly not a "Breakaway" gap as we had on October 10th. But it was a gap so showed "BUYING" pressure after hours. (This is confusing but this is an inverse ETF of QQQ..... so the actual gap was up as QQQ chart shows. #2. Is where gap got filled as is common on charts. Breakaway gaps, however, often never get filled. Actually at #2 I thought QID would go up at close. Up to where #4 is. My plan if stock got to #4 area was to buy another 50 shares and buy a put option. That up move would have given me a nice "discount" on the cost of the put. But then as I showed on other charts, the 50% retracement or pullback on the recent gains would be 39.09 on this stock. Got as low as 39.78 at close. So when I saw stock moving like it did at #3 I knew selling (Buying on the Nasdaq) was winning out so had no choice and had to buy the put for downside protection there. I really wanted to get the put cheaper but price did not go up at end so I was stuck at my price of 2.77 on the thing. There's basically two possibilities here as this chart will show: Is #11 (#11 is actually higher than #13) a long term market top or just another stop on the un-ending up trend? The odd numbers are market tops and the even numbers are market bottoms. The question is, is 13 the same as all the others? Maybe it is and maybe it's not. Here's some things this chart shows. Almost every time the market went down, that low, or support, was never broken. There is one exception and it's that down move between #1 and #3 I did not put numbers on. But the rest of those even numbers, the supports, were never broken. This changed on #13. There is also a well known chart phenomenon called 1, 2, 3 tops and bottoms. It is basically looking for major market tops and bottoms. For example, look at that top resistance that comes after #2. It is slightly below #1. For this to be a 1, 2, 3 Top, the price would go down from there and the signal to "sell" would be the price breaking though the support or low established by #2. That would be a 1, 2 ,3 Top. For example in Top #3, #3 is the 1, #4 is the 2, #5 is the 3.... what to happen next for it to be a market 1, 2, 3 Top is for the stock to drop below the support price established by #4. Instead....the price bounced off #6 and went up to form new tops eventually. #11, #12, #13 shows a 1, 2, 3 Top. The price fell below #12 support, and #10 support, and below 8 support as well looks like, so there is some evidence in the charts we hit a long term high, or market top, on August 30 at 187.51 on the QQQ. So that points to being in a bear market. But who knows. Time will tell. In markets, anything is possible. Have a relaxing weekend!
Basically in this trade as it now stands, own 50 shares and one put option, you lose money sideways though the loss is limited and fixed. You need a big move up or down to overcome the cost of the put and to turn a profit. Where this trade currently sits. Stock at 39.78 Bought 50 @ 40.68 Stock has a loss of $45 Option has a profit of $31.50 So currently a loss of $13.50 plus commissions This is a hedged position. If stock goes up, stock makes money and put loses money. If stock goes down, stock loses money and put makes money. If stock was at $100: Stock profit of $2966 Option loss of $277 Profit = $2689 If stock was at $1 Stock loss = $1984 Option profit = $4000 Profit = $2016 If stock was at 40.68 Stock worth same. No profit or loss. Option worth $32 Cost of option was $277 Loss of $245 plus commissions. Note this trade ends when put expires which in this case is November 16. But I plan to change it up depending on what market does.
