buying weekly options is stupid idea for consolidation phase of stocks uptrend or downtrend

these are the most dangerous for consolidation phase. Within 1 week, the value of the weekly option can go down a lot more than 60 percent.

How do you know that 6 days is for certain the stock is going to move in the desired direction. One does not know. That is the reason why there is no point in buying the weekly options when the stock is consolidating.

Another point is about rolling over the weekly options , which is again a waste of money for buying and selling transactions which can be a lot if one is buying big positions.

What a waste of time and money!!!

Weekly options is a horrible idea. Even buying 1 weekly option is a waste of money. That means selling weekly options becomes a good idea. 

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.

Typical Intraday price action AAPL

http://screencast.com/t/b8lclXjBtm0

I am reading an important book about the psychology of trading and the mistakes we make due to it. It is clearly evident in my trading loss problem.

First of all one has to learn to think in probabilities and learn to think that anything is possible. When I comes AAPL and option buying, I did not realise the volatility range options can take. The closer the date the more volatile the trade becomes and the risk.

I bought the october options, which are not that volatile like the weekly. When I started last week I bought 2 contracts of weekly first with out looking at the IV, implied volatility.  I guess at a price of 674, the IM must be like 35 or so but the price was 11 dollars. Then immediately after buying the stock started to like and during a huge sell off the price came down to almost 650 then closed at 655. But the market recoverd the next day.

Anyway, now when I bought it, I got into the trade because I thought it was the right price and there will be sustained buying during the bull trend. But there are too many variables and any thing can happen during an intra day trade. And that is the reason one has to be very careful buying the Weekly because unless the price is right one can get into a lot of losses. So how do you know your price is right. During the consolidate phase the price varied from 650 to 670. Now one has to first
find find out the range one is willing to purchase the stock. One should also accept that this is going to happen for sure that the the stock can move in either direction. But the important point in trend analysis is that there is high probability of the stock moving up in 1 week or two weeks but not on a particular day. One should be willing to hold the stock for 2 weeks for the stock to move up. And if one is invested in options one should have the willing ness to hold a atleast 20 percent paper loss because of the volatility of options.

Anyway, I sold everything and got even because my buy points were to high and even the best range price was not meeting my options buying points. So I cut my losses and retained my capital to get into a better trade another day.

Unfortunately there was some good news about apple winning the court case and the stock now moved to 675 after market.

There are plenty of opportunities, nothing to worry. But one has to have strong guts to understand that probabilities work in 1 week or 10 days but not on a day to day basis and that is the need for holding the options or buying options 2 months to expiry. If one is buying a weekly one has to make sure that the buy point is close to the lower range of the consolidation range.  Otherwise it can show 20-30 percent paper loss and one may sell it.

It is hard to buy closer to the lower point but one should try. One should understand that after a big move in the uptrend, the stock may go either direction. One has to hold the options with strong guts unless the stock is coming down. But if the stock is moving in the consolidation range one has to hold the options for at least 1 week. I know it.

Still, I made a mistake because of the wrong buy points. Any way I will try to buy better next time and learn to hold for a week or more. Unless there is a top or some problem with the uptrend. I knew the chart showed uptrend but was not strong enough to hold paper loss and bad buying points.

I am learning from my mistakes. Since no one know for certain in short term range but one can know the trend for sure in 7 to 10 days one needs to have patience and also one needs to buy at good buying points so that the there is not too much paper loss and one can easily hold for 1 week without stress.

Greatest Reward

The Greatest reward, I have even seen is with the weekly stocks. If one can get into Apple weekly stock when the stock is down 1-2 percent when it is consolidating on the uptrend one can get intraday low point and get it at the right time then, one can expect it to move 3-4 times.

I have seen this happen in the intraday trade. This was the most amazing thing I have seen. One has to be a master of INTRADAY chard reading and just follow the 30 day moving average. Just follow the moving average. Only shoot the arrow when one understands the chart and when the charts behaves the way it behaves in the standard model, one can buy the intraday options may be purchase with 5 thousand dollars.

I have seen a 2 dollar intraday weekly option go to 8 dollars. It is highly speculative but if one can master it and follow the charts and do it once in a while this can give great rewards.

Of course, as humans we make mistakes but as humans we can also exceed our mistakes with disciple and study.

Trading weekly strategy

I am keeping 5k reserve so that when the market gives a jerk to AAPL when it comes down 10 points then I am going to dive in and buy some weekly and sell the same day after the stock recovers.

For buying the weekly using the 30 day moving average is a must. If done properly, this can give great profits in a single day or a couple of days.

Also I have seen that during an uptrend some days AAPL can lose 10 points expecially early in the morning. That can be a good time to buy the weekly at cheap price and hold it.

Buy the weekly on the day of selling and look at the moving average. Until the stock is sitting below the moving average do not buy. Once it starts to settle down and starts to emerge out of the average, that is the exact time to buy.

If done properly on the correct days, it is a major weapon. 

One has to be super super careful. If one does not do the right thing than burning your hand can be very painful.

lost trading weekly options

lessons to learn

1. After 2 days of rally the AAPL share closed at 665. In the morning it opened at 674. There was tremendous volatility in the options and the weekly option ITM I bought was 665 for 11 dollars. The main problem was I did not put a stop loss immediately. This is a horrible mistake when it comes to options especially.

There was selling and profit booking and the stock came down within 2 hrs to around 660 then came down to a low of 650 and closed at 656.

This was my first option trade after a long time and I was not cautious. Options can burn you if you do not have a stop loss especially when it is so volatile after 2 days of rally.

It is advisable not to buy any weekly after 2 days of rally because it is already highly priced because of high volatility. Then the options expire in 2 more days. Now I have to take loss because the options closed at  4 dollars. I got a loss of  700 per contract. Any way I had only 2 contracts and I put a sell limit on it at 6 dollars on it. hopefully the stock move up tomorrow and I can get some of the losses back.

weeklys are good when the rally starts but can be overpriced after 2 or 3 days of rally. I think it is not worth buying it at that time.

A good idea would be to sell weekly far out of money and make a lot of money. that is the easiest thing to do for extra cash.

There should always be atleast a 25 percent stop loss on options or a 500 dollar limit. To lose more than that is not worth it. These are very important for money management.

I also bought a next month option at the same strike price but it declined only 15 percent. This is because weeklys are very volatile and decay fast with time.

graph for 3 days
http://screencast.com/t/j6TlRAgB