QQQQ with chart

No real tracking for yesterday, just didn't take the time.

Today I tracked the next week expiry puts (Jul 30) for the QQQQs and noted how their price reacted to the various time and ETF price factors given that today was a Friday... expected range bound day for a number of reasons.

I took one trade and tracked it until after lunch and notice one large factor that affected my decisions to stay in the trade. I bought the 45 strike puts for 41 cents as the price of QQQQ neared the Primary Pivot Point expecting a move down from that level. I should have been more observant of the moves thereafter while keeping in mind that I expected a range bound day, basically a lot of small up and down moves.

Here is the chart for the day with the correct trades marked.

I held the trade through the down, the next up and even through the third test of the high of day at $45.80. I closed the trade just as I saw the price get ready to kick up past the final test of HOD at about 1350h. My exit timing was good to minimize the loss... considering that I was still in the trade.

The interesting part is that the option price kept eroding away over the course of the day. I bought at 41 cents and each time the ETF price approached the same price level as where I bought I noticed that the option price had not regained the entire 41 cents. At one point it would only see 38 cents. This tells me that, like leveraged ETFs held over more than one directional move, the options have some similar reaction... even if it is for a completely different reason. This changes slightly how I will look at these options in future.

So, looking at the chart I plotted the trades that I should have made based on the numbers that I saw while I was holding this one lethargic trade over the day. The puts were the 45 strike and the calls were the 46 strike. These gave me low priced options in the 50 cent area.

Trade # 1 was in at 0.40 and out at 0.47, 12 contracts at 0.07 = $84

Trade #2 was in at 0.37 and out at 0.50, 13 contracts at 0.13 = $169

Trade # 3 was in at 0.35 and out at 0.47, 14 contracts at 0.12 = $168

Trade # 4 was in at 0.36 and out at 0.59, 13 contracts at 0.23 = $299

Less #133.60 in commissions leaves $586.40 in profits based on a $500 startup amount.

This style of playing is right in line with my old Counter Trend Positioning style of trading on a much shorter time frame. What I was missing was the confidence to go ahead and exit the trades when I saw the small profits and re-enter the opposite trade and again capturing smallish profits. The thing is that these small profits add up really quick as I would have doubled my $500 in one day and I have to realize that taking a 7 cent gain is not a bad thing... it just sounds to small to take at the time.

Jeff.