One basic rule

Try to Buy at resistance levels .THIS IS THE SAFEST WAY TO PROFITS. Wait till the stock comes closer to the moving average and only then buy it. Especially if there is a big capital involved.

Suppose the stock is moving in a range like appl now at 260 but at that range, but if it moves to 280 and you are not sure if it is going to go up or down, then you have straddle the options.

If you do not STRADDLE, then it means that you are taking a GREAT risk and many times you lose money. If you did a STRADDLE then you would not lose any money if the market pulled back to the resistance level of 260.

So always know what the resistance level is. Try to buy at that level, with more number of calls. One can even straddle at that level too , but one can bet that on buying calls and also 1/2 number of puts.

But any level above 670 or 680, IF THE MARKET IS RANGE BOUND YOU HAVE TO STRADDLE. straddling is safest method to protect capital.

Game over

http://screencast.com/t/mGEZDEo8M

http://screencast.com/t/RW6IPkQsRG

Down jones is down 100 points. What a bad day for me. I lost all my best and I am down 40 percent. So I decided I am out of the markets for now.

Big mistake was to buy too much WEEKLY options. It was just gambling. Anything can happen in the stock market. This is a lesson for me.

I should have got the 1 or 2 month options but still they are risky but not as bad as the WEEKly options.

Weekly option is down to 1.46 when I sold. I bot for 3.71. More than 70 percent loss.

Its all screwed. I will just live with what I have. Bad idea to get into OPTIONS without proper risk management. As the rule goes do not risk more than 1 percent in any trade. It should be applied for OPTIONS specifically. These are too dangerous instruments.

I am learning not to be greedy. Not to take high risks. Anything is possible in stock market. Not to take big positions in options.
Losses in Stocks was really not bad. One has to stick to a trending stock till the trend is over. That is the only way to make money. If you use options use 2 month expiration. Do not use options more than 10 percent of portfolio.

Lesson learned by losing. Hmmm too costly.

cost price for weekly options AAPL

20 contracts for average of 3.71, 675 weekly call
5 contracts for average of 9.0, 670 weekly call.

I am going to wait.

I understand what can happen. There is resistance at 270. So the stock  can go down a lot more but the chances of going up are more, talking probability.

Volume was low today around 7 million shares. It is a tight consolidation at 270 range. Anything can happen. But since it is in an uptrend the probability of going up is high rather than down ward.

Lets see. I have to roll over everything tomorrow anyway.

Roll over Weekly AAPL options

One has to just roll over weekly options. I know I am in a loss situation but that does not matter.

The consolidation goes on to a maximum of 6 days, it can be longer but usually 6 days. Now today is the 3 rd day for AAPL.

It is very important to be in a position when AAPL takes off 10 points. The weekly 675 option that is now ranging from 3.5 to 4.5 ie as AAPL moves from 673 to 675 intraday.

My average on this option is 4.01 . That is a good average price for this option. I have to roll over the weekly option at that price or what ever is very close to it so that I do not lose money.

Roll over on Thursdays. If deep in the money then buy closer to in the money options. Do not worry about the fluctuations. I know it is too high but that is the risk I have taken when playing with options.

Like last week options, If I just kept the 660 and 665 options as it is I would have got all my losses back by this time.

The day to sell the weekly options is the day when apple moves 10 dollars. Just wait out, it will happen. If it does not happen just roll it to the next week.

The plan for option Apple trading

Since Apple is in uptrend, it is good to buy CALL options. Since the action is not guaranteed to be this week, it is better to buy 1 or 2 month expiration IN THE MONEY OPTIONS. Either September or October.

When to buy?

Since AAPL is showing consolidation at 675 range, I would wait for a down day around 1 percent down. I would average down option price from 675 to 670. The average should be around 672-3.

Then I would wait for it to to higher. Since the resistance is at 670, I would get a max pain loss of 15 percent loss.

If i get lucky and if the stock goes to 665 range that would be a great buy.

So this is the plan for this week of option buying.

I should have done that today. But I did not have a plan. I was doing weekly option super volatile trading. But it is time to go long with 1-2 expiration during consolidation and to average down.

One has to go by Intraday moving average to understand the intraday mood of the market.

AAPL IS HOLDING GOOD AT 675

I should buy some call options for different months more money in october options. The volume is low today and it has been study. Good sign.

This stock can go to 700 in 2-3 weeks. So buy and hold options.

No problem. Can get a good deal tomorrow. if it keeps steady, just buy it and forget it for 2 weeks.

Options are volatile and one needs to be hold them even with 30 percent loss. Hmmm

thats a lot but the trend is upward.

The DELTA of the stock  options is 0.5 AT THE MONEY. So if apple stock moves from 270 to 280 or 10 points the options is going to move 5 points. That can be a very big change if it is a weekly. For a weekly that could be upto 70 percent change.

For a 2 month expiration it could be like 30 percent range. So for a account of 25 K, it can come down to 17 thousand. Thats a 7 k down. But one has to be ready for it in this case only because Apple is showing uptrend.

Going down 7 K is an extreme situation usually it is around 20K on a down day.

I am just being ready for the reality that can happen. Talking in probabilities. One cannot think that it is going to be only one side. Anything can happen so one has to be prepared for the worst.

On the good side, if apple goes up 10 dollars in 2 weeks, Options go up 30 percent. thats like 32k in the account.