Since I am now no longer real time connected I am feeling like old times, for me, when I had to press the refresh tab to get up to date quotes and not see the charts and the orders and executions flowing. It is quite a step back.
Having said that, this change will force me into an end of day mentality which should be better for the trading style I am looking at shifting towards in future.
Today I placed a couple of orders based on yesterday's closing prices plus a little bit of breathing room and was filled within the first few minutes. Straight stock plays. Nice in one sense as there is no real time constraint due to time decay at least. Small priced stocks, both less than $5 to let me buy a larger position and see breakeven earlier (commission consideration here)
I am expecting the market to rally somewhat over the next short term as the S&P is bouncing around the old gap levels from August of 2008...August 6th to be precise. The entire time since September 18th, 2009, when this old gap range was re-touched, has seen the gap range as a bit of resistance initially, almost not worth noting. Since November 12th it turned support as it has been regularly tested 4 times since.
Last week saw the S&P drop right into the range again and now the upper end is resistance and the lower is support as it trades in this really tight range between about 1070 and 1105.
While I am far from being bullish on the market I do believe that we will see a return to the mid January level of 1150 at least once more time before it turns south for a longer drop.
If I am wrong I may have to close the put sides of some of my iron condor trades, as previously mentioned. If I am right I only need to be right until February expiration and even then I can still be wrong as long as the market does not sell off too strongly over the next few weeks.
Jeff.
Questrade, My direct access discount broker.
Showing posts with label gap. Show all posts
Showing posts with label gap. Show all posts
Friday, January 29, 2010
Wednesday, December 2, 2009
Long term gap fill in SPY, corresponding SPX reference
In September, October and November SPY, (and the underlying S&P 500), have ratcheted up in waves. No, I am not going to even think about getting in to Elliot wave theory... I don't much care for that as it is VERY subjective. Each wave has peaked mid month and pulled back to bottom out at the end or beginning of each month. Of course a pattern like this can be taken advantage of but there are a number of factors that preclude even trying to place such a wager.
Going back in time a bit, October 3rd 2008, the market was in a downturn and as the market tested the SPY $110 mark on the Friday as it hit $109.68 and closed on $110.34.
It opened on Monday the 6th down at $107.15, a $3.19 gap or 2.89% and continued down more than $30 into March of 2009 to a low of $67.10... almost $40 on the money.
This gap is important as September past tested the bottom of the gap and pulled back. October tested the top of the gap and pulled back. November passed the top, basically closing the gap over one year later, and may see this $110 level as support for now.
If the pattern holds I see the $115 being tested by mid December, which puts my $115-$118 spread in serious jeopardy as it is a Dec 31st expiry. If it does not make it to $115 then I think that it may hit $113, pullback to the $110 support level again before taking off to the $116 level and may do so near the end of December...BAH! I may have to close the spread early in either case.
Of course we may see this level be a further test and a correction take place too.
Either way I will not likely set another spread trade right away in SPY as I wait for a bit while this shakes out. I could place a $1 or $2 higher spread, wait for the first trade to atrophy somewhat and close it to keep some credit and just step the spreads up to the EOM.
Hmmm... step spread trading in the same month to capture premiums in an uptrend situation...has some merit for future thought.
Here is the SPX chart for the S&P500 index. I noted that there is no gap on that Oct 6th morning BUT the level on the Friday closed at 1099.23...say 1100 for now and opened on Monday at 1097.56. The S&P dropped from there and returned the next day to test 1073 and dropped never to look back until testing 1073 in September...basically the exact same range as if it had gapped. Same pattern as the SPY, which it should be, just the lack of gap was noted.
The red lines are the Friday Oct 3rd 2008 close and the following Tuesday test of 1073 with the current correspondence
I like how the price is hovering about the 1100 mark after testing and crossing it, nice consolidation... begs the use of a directionless spread trade to capture the move which ever way it ends up going, as long as it goes quickly. The short Linear Regression channel is showing signs of a slowing down of the uptrend which is remaining within the longer term LR channel so far. Target moves, like in the SPY, are 1080 on the bottom and 1150 on the top.
Jeff.
Going back in time a bit, October 3rd 2008, the market was in a downturn and as the market tested the SPY $110 mark on the Friday as it hit $109.68 and closed on $110.34.
It opened on Monday the 6th down at $107.15, a $3.19 gap or 2.89% and continued down more than $30 into March of 2009 to a low of $67.10... almost $40 on the money.
This gap is important as September past tested the bottom of the gap and pulled back. October tested the top of the gap and pulled back. November passed the top, basically closing the gap over one year later, and may see this $110 level as support for now.
If the pattern holds I see the $115 being tested by mid December, which puts my $115-$118 spread in serious jeopardy as it is a Dec 31st expiry. If it does not make it to $115 then I think that it may hit $113, pullback to the $110 support level again before taking off to the $116 level and may do so near the end of December...BAH! I may have to close the spread early in either case.
Of course we may see this level be a further test and a correction take place too.
Either way I will not likely set another spread trade right away in SPY as I wait for a bit while this shakes out. I could place a $1 or $2 higher spread, wait for the first trade to atrophy somewhat and close it to keep some credit and just step the spreads up to the EOM.
Hmmm... step spread trading in the same month to capture premiums in an uptrend situation...has some merit for future thought.
Here is the SPX chart for the S&P500 index. I noted that there is no gap on that Oct 6th morning BUT the level on the Friday closed at 1099.23...say 1100 for now and opened on Monday at 1097.56. The S&P dropped from there and returned the next day to test 1073 and dropped never to look back until testing 1073 in September...basically the exact same range as if it had gapped. Same pattern as the SPY, which it should be, just the lack of gap was noted.
The red lines are the Friday Oct 3rd 2008 close and the following Tuesday test of 1073 with the current correspondence
I like how the price is hovering about the 1100 mark after testing and crossing it, nice consolidation... begs the use of a directionless spread trade to capture the move which ever way it ends up going, as long as it goes quickly. The short Linear Regression channel is showing signs of a slowing down of the uptrend which is remaining within the longer term LR channel so far. Target moves, like in the SPY, are 1080 on the bottom and 1150 on the top.Jeff.
Friday, November 27, 2009
Interesting gap play with a spread.
If I were to plan on placing a spread trade with SPY perhaps, only due to looking at those options of late, this morning's action got me to thinking. I checked the FTSE yesterday and this morning so I knew there was going to be a gap down in the S&P500 index and with the wallowing of late I would also expect at least a small move up into the gap.
Seeing as a spread (a Bear Call Spread as I find these are called) has two legs, the sold call and the higher bought call there should be no reason why I cannot "leg into" the spread. Actually, I might not be able to tie the sold call tot he long call after the fact with Questrade, I need to either try it or ask.
This morning the expected gap occurs, I already have a plan to enter a spread trade anyway so I look at the numbers.
The SPYLM 117 call traded as low as 13 cents. Perhaps I would have placed a limit order for this option through my trading platform at 15 cents...so I'll use that number.
Now I am long SPY at 117 strike. Time to wait to see what the morning brings.
Seeing as SPY has returned to $110 from $108.30ish the entire option chain has appreciated. My call would be up to 16 and 17 cents. A single contract would cost me $2 or $3 more now. No big deal.
Looking at my call to sell, 114 strike, it has gone from 36/37 cents to 57/58. Selling now, or even later if I chose) would put about $20 more in my pocket. That covers the commissions at least.
Obviously the protection is not going to move as much with the underlying prices due to the distance OTM so this may not be worth the effort but waiting for the direction following the gap certainly is. This serves to drive the short call price higher faster and make the trade more profitable.
Looking at the gap mechanics for a moment I would expect that the closing price last trading day would provide resistance...how much is unclear, except that there is a corresponding gap in October of last year that is just now looking at being filled. This makes this a great area of resistance and a great place to set a spread. The expiry is 21 days for December options so the trade is also very short duration, ideal.
So why I am sitting here writing about it and not doing it is unclear to me. The market is only open until 1300h so I will take a moment and run the numbers through my spreadsheets and see what I will trade today.
Jeff.
Seeing as a spread (a Bear Call Spread as I find these are called) has two legs, the sold call and the higher bought call there should be no reason why I cannot "leg into" the spread. Actually, I might not be able to tie the sold call tot he long call after the fact with Questrade, I need to either try it or ask.
This morning the expected gap occurs, I already have a plan to enter a spread trade anyway so I look at the numbers.
The SPYLM 117 call traded as low as 13 cents. Perhaps I would have placed a limit order for this option through my trading platform at 15 cents...so I'll use that number.
Now I am long SPY at 117 strike. Time to wait to see what the morning brings.
Seeing as SPY has returned to $110 from $108.30ish the entire option chain has appreciated. My call would be up to 16 and 17 cents. A single contract would cost me $2 or $3 more now. No big deal.
Looking at my call to sell, 114 strike, it has gone from 36/37 cents to 57/58. Selling now, or even later if I chose) would put about $20 more in my pocket. That covers the commissions at least.
Obviously the protection is not going to move as much with the underlying prices due to the distance OTM so this may not be worth the effort but waiting for the direction following the gap certainly is. This serves to drive the short call price higher faster and make the trade more profitable.
Looking at the gap mechanics for a moment I would expect that the closing price last trading day would provide resistance...how much is unclear, except that there is a corresponding gap in October of last year that is just now looking at being filled. This makes this a great area of resistance and a great place to set a spread. The expiry is 21 days for December options so the trade is also very short duration, ideal.
So why I am sitting here writing about it and not doing it is unclear to me. The market is only open until 1300h so I will take a moment and run the numbers through my spreadsheets and see what I will trade today.
Jeff.
Thursday, July 30, 2009
Gap trading
I stumbled upon a gap trading blog today and it has caught my attention. They are promoting a service to provide historical odds on gaps on certain stocks/funds/indices but they have a fair amount of free information on the "how to" of gap trading. The service is really a number crunching system.
I may give it a try to see how it works, they have a trial membership for a low fee and I get the feeling that they are a reputable bunch (one guy really). I doubt that I could setup a study to get the same information myself...like fancy charting services, there will always be some things that will have to be paid for that cannot be done or is too time consuming to do myself. I don't fix my own cars but I do most renovation projects. I pick and choose where to save money based on my expertise.
The monthly is cheap enough if it pays for itself. I figure that with the 14 day trial (I will see if it is 14 trading days) if it pays for the first month then I will continue with it for a bit.
Gap trading is aimed at playing the gap between the closing price one day and the opening price the next day so the trade is in right off the bell and could be finished in minutes, typically less than an hour anyway. This is one trade per day that a gap fade is highly probable, it doesn't setup every day unless I want to play it both ways, fade or run. I tinkered with this early on but found the initial trades were executed poorly and the volatility was rather large...so my limit order choices and stop setting sucked.
The upside of day trading, which gap trading is, is that the trades are complete and nothing rides overnight, the downside is that a huge loss can be accrued over the day due to a number of trading problems as overtrading is possible. Gap trading eliminates the chance of overtrading as there is only one...maybe two trades likely due to the extreme time sensitivity of the trade style. It is a complimentary trading style to my current setup for the same reasons.
With my final P&F trading strategy, so far, I have not realized a loss. I will, but I have more trades in the green than in the red as I speak. I am hoping that I can close some decent winning trades early to overcome the losers, head games really.
Jeff.
I may give it a try to see how it works, they have a trial membership for a low fee and I get the feeling that they are a reputable bunch (one guy really). I doubt that I could setup a study to get the same information myself...like fancy charting services, there will always be some things that will have to be paid for that cannot be done or is too time consuming to do myself. I don't fix my own cars but I do most renovation projects. I pick and choose where to save money based on my expertise.
The monthly is cheap enough if it pays for itself. I figure that with the 14 day trial (I will see if it is 14 trading days) if it pays for the first month then I will continue with it for a bit.
Gap trading is aimed at playing the gap between the closing price one day and the opening price the next day so the trade is in right off the bell and could be finished in minutes, typically less than an hour anyway. This is one trade per day that a gap fade is highly probable, it doesn't setup every day unless I want to play it both ways, fade or run. I tinkered with this early on but found the initial trades were executed poorly and the volatility was rather large...so my limit order choices and stop setting sucked.
The upside of day trading, which gap trading is, is that the trades are complete and nothing rides overnight, the downside is that a huge loss can be accrued over the day due to a number of trading problems as overtrading is possible. Gap trading eliminates the chance of overtrading as there is only one...maybe two trades likely due to the extreme time sensitivity of the trade style. It is a complimentary trading style to my current setup for the same reasons.
With my final P&F trading strategy, so far, I have not realized a loss. I will, but I have more trades in the green than in the red as I speak. I am hoping that I can close some decent winning trades early to overcome the losers, head games really.
Jeff.
Tuesday, December 23, 2008
Picture perfect gap trading
On Friday I decided to start practising with Suncor as my day trading subject.
Today I was thinking about trading it for real but I had a glitch or two with my platform as I was considering entering a trade, lost connection and upon startup the charts would not update. I restarted the platform and the charts were back but the bids were wonky. I have had this happen before and I usually just shut down but I thought it might be a good exercise in trading with a handicap. It means that I have to track the bids closer as they are not up to date were they should be. A real PITA. The charts are correct and SU, being a slower mover may give me time to make decisions... Here is how that went.
This was such a nice example of how to play targets that I had to capture it and post it here.
Green line I placed as yesterday's close $22.30 (from my broker account chart)
Red line was the primary pivot point for the day $23.04
Dark green is the 200SMA
S and L are short and long positions taken
The overnight gap up was interesting in that it spanned the 200SMA line so I would have expected the gap to close and therefore I considered shorting very early. I usually like to wait and see what starts to form first, just to make sure.
My trades are pretty obvious as were the targets. The shorts were closed as the 200SMA was hit, I did not wait for bounces or hoping for it to cross the 200 for a big hit, just taking my targets. Even the third short I closed early. The one long was rather speculative but worked well, I didn't hold for the red line as I just bailed as soon as the price hesitated then went short almost right away.
At the end of the above chart the price started a nice consolidation then promptly offered a very nice 200 sma bounce and cross. Seeing as today is a short day I would have been playing for more shorts. The price did not even hesitate at the green support so I expect that I would have let it go...as I type this the price is still heading down and considering the next support level is $21.11 I would have liked to have been trading yet. This last bit is hindsight but I know my plan and I know I would have been on this ride for at least a few cents had this been my fourth trade...although I have been adding the fifth lately. I see that at $22.oo the price turned a hair more than I like....So out I would have been as there was lots of trading at the $22.00 mark.
Stats for Friday and Monday were 6% net return combined. Today bumped that up to 9.12% net. The last move that I did not actually track would have dropped 55 cents more had I got in at the resistance area...for another 2% for the one trade. I don't like banking on those sized single trades, though they are nice.
So, my target would be nicely beat as I saw 9 days worth of trading in three days.
While I don't expect DTing Suncor to be this easy all the time, it does look promising.
Jeff.
Today I was thinking about trading it for real but I had a glitch or two with my platform as I was considering entering a trade, lost connection and upon startup the charts would not update. I restarted the platform and the charts were back but the bids were wonky. I have had this happen before and I usually just shut down but I thought it might be a good exercise in trading with a handicap. It means that I have to track the bids closer as they are not up to date were they should be. A real PITA. The charts are correct and SU, being a slower mover may give me time to make decisions... Here is how that went.
This was such a nice example of how to play targets that I had to capture it and post it here.
Green line I placed as yesterday's close $22.30 (from my broker account chart)
Red line was the primary pivot point for the day $23.04
Dark green is the 200SMA
S and L are short and long positions taken
The overnight gap up was interesting in that it spanned the 200SMA line so I would have expected the gap to close and therefore I considered shorting very early. I usually like to wait and see what starts to form first, just to make sure.
My trades are pretty obvious as were the targets. The shorts were closed as the 200SMA was hit, I did not wait for bounces or hoping for it to cross the 200 for a big hit, just taking my targets. Even the third short I closed early. The one long was rather speculative but worked well, I didn't hold for the red line as I just bailed as soon as the price hesitated then went short almost right away.
At the end of the above chart the price started a nice consolidation then promptly offered a very nice 200 sma bounce and cross. Seeing as today is a short day I would have been playing for more shorts. The price did not even hesitate at the green support so I expect that I would have let it go...as I type this the price is still heading down and considering the next support level is $21.11 I would have liked to have been trading yet. This last bit is hindsight but I know my plan and I know I would have been on this ride for at least a few cents had this been my fourth trade...although I have been adding the fifth lately. I see that at $22.oo the price turned a hair more than I like....So out I would have been as there was lots of trading at the $22.00 mark.
Stats for Friday and Monday were 6% net return combined. Today bumped that up to 9.12% net. The last move that I did not actually track would have dropped 55 cents more had I got in at the resistance area...for another 2% for the one trade. I don't like banking on those sized single trades, though they are nice.
So, my target would be nicely beat as I saw 9 days worth of trading in three days.
While I don't expect DTing Suncor to be this easy all the time, it does look promising.
Jeff.
Monday, December 8, 2008
The gap fade
Today was a great day to play the longer term day trade, in fact I thought it might be best to just place a short at the earliest peak and let it run... but I don't have the patience for that right now. It certainly would have been a good application for some sort of moving stop but probably not a VTSO as that would have gotten hit pretty early in the day.
The setup was classic. I entered my pivot points, 15 minutes, checked the trading price of gold in other markets, 45 seconds and decided that the day was going to be a huge gap up and run or a fade...given the size of the gap and the trading of late I was putting my money on the fade.
This is an example of why I like the day trading arena. Time spent researching...45 seconds... as the pivot point setup is a technical tool. I know of traders who get up early, 4AM, to research the markets, check out scans to determine what stocks they are going to trade, set those stocks up in their platforms, then wait anxiously until the market opens and hope that all that time spent is worth it.
Most, in fact the vast majority of those traders are not trading right now either because the market is not reacting as they think it normally should (whatever normal is) or they have lost a lot of money and cannot stomach it anymore. A percentage I keep stumbling across is 3% of all traders ever make it consistently. With the influx of online traders right now that makes a lot of easy money available for those 3% that know how to pull it out of the market.
I feel that the research adds a bias to the idea where the price is going to go.
Consider that it can only really do one of two things, in the big picture. It can go up, it can go down, it can wallow around and churn while not really going anywhere. So all the research and watching for a slightly better then one in three guess is not my idea of a good time.
If I am wrong off the start, I lose a few bucks then change my plan. I have not invested a lot of time in deciding which way it is going to go so I won't get caught in the trap of wishing and wanting it to go my way, I have no way, I just follow the price action.
For the record, the gap up was a guaranteed move, there was next to a zero percent chance of it not jumping at least $2 off the start given the price of gold, and it went over $3. The aftermath was just a hunch and best guess. I would put a 70% or better chance of an overall fade in the current market for such a jump. Had it gapped down I would have put a similar chance of the gap NOT fading and the price continuing down, under similar market circumstances.
Back to the day.
The gap started a quick momentum move in the direction of the gap which quickly peaked and fell, the first short entry ...which I hesitated on and missed...no big deal (which is one of the other reasons I like day trading, the next setup is only minutes away, not days).
Truth be told I fumbled the first couple of prime entries, the first short, the resulting long for the rally, then the very next short...I need to close my door so nobody can chatter at me while I watch these setups but mainly I need to tailor my limit order entries to not be quite sot tight as I try to squeeze every penny out of the starting price. I refuse to chase the price, I want it to come to me, so I miss a few and usually by pennies.
I ended up 1.07% net gain, still meeting my goal but missed at least that much off the start.
Shorting the top would have me closer to 2% after just riding it until sometime after lunch. The day is not done yet but I doubt that I will trade any more as the action is slow and unpredictable now...although it may still drop to fill the morning gap, just not for sure.
I won't speculate as to how much I really might have made had I hit the trades that I setup initially as I just didn't make them.
Just another fun day in the market.
BTW, I was done by about 1030h. Another reason I don't like the typical DTing "idea". I make my money or take my losses for the day early and get the heck out, I have other stuff to do for the day... although I would love to hit a really nice day for letting trades run and sit it out to make some serious cash...another time though.
Jeff.
The setup was classic. I entered my pivot points, 15 minutes, checked the trading price of gold in other markets, 45 seconds and decided that the day was going to be a huge gap up and run or a fade...given the size of the gap and the trading of late I was putting my money on the fade.
This is an example of why I like the day trading arena. Time spent researching...45 seconds... as the pivot point setup is a technical tool. I know of traders who get up early, 4AM, to research the markets, check out scans to determine what stocks they are going to trade, set those stocks up in their platforms, then wait anxiously until the market opens and hope that all that time spent is worth it.
Most, in fact the vast majority of those traders are not trading right now either because the market is not reacting as they think it normally should (whatever normal is) or they have lost a lot of money and cannot stomach it anymore. A percentage I keep stumbling across is 3% of all traders ever make it consistently. With the influx of online traders right now that makes a lot of easy money available for those 3% that know how to pull it out of the market.
I feel that the research adds a bias to the idea where the price is going to go.
Consider that it can only really do one of two things, in the big picture. It can go up, it can go down, it can wallow around and churn while not really going anywhere. So all the research and watching for a slightly better then one in three guess is not my idea of a good time.
If I am wrong off the start, I lose a few bucks then change my plan. I have not invested a lot of time in deciding which way it is going to go so I won't get caught in the trap of wishing and wanting it to go my way, I have no way, I just follow the price action.
For the record, the gap up was a guaranteed move, there was next to a zero percent chance of it not jumping at least $2 off the start given the price of gold, and it went over $3. The aftermath was just a hunch and best guess. I would put a 70% or better chance of an overall fade in the current market for such a jump. Had it gapped down I would have put a similar chance of the gap NOT fading and the price continuing down, under similar market circumstances.
Back to the day.
The gap started a quick momentum move in the direction of the gap which quickly peaked and fell, the first short entry ...which I hesitated on and missed...no big deal (which is one of the other reasons I like day trading, the next setup is only minutes away, not days).
Truth be told I fumbled the first couple of prime entries, the first short, the resulting long for the rally, then the very next short...I need to close my door so nobody can chatter at me while I watch these setups but mainly I need to tailor my limit order entries to not be quite sot tight as I try to squeeze every penny out of the starting price. I refuse to chase the price, I want it to come to me, so I miss a few and usually by pennies.
I ended up 1.07% net gain, still meeting my goal but missed at least that much off the start.
Shorting the top would have me closer to 2% after just riding it until sometime after lunch. The day is not done yet but I doubt that I will trade any more as the action is slow and unpredictable now...although it may still drop to fill the morning gap, just not for sure.
I won't speculate as to how much I really might have made had I hit the trades that I setup initially as I just didn't make them.
Just another fun day in the market.
BTW, I was done by about 1030h. Another reason I don't like the typical DTing "idea". I make my money or take my losses for the day early and get the heck out, I have other stuff to do for the day... although I would love to hit a really nice day for letting trades run and sit it out to make some serious cash...another time though.
Jeff.
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