Futures were up but the market only opened 30 points up, allowing easy entry to the call, which moved to profitability by 10.30. a.m. with a 119 point run up.
Traders watching the market were able to trade fast and easily to good profits, from lows of 6.80 to 9.00 in a short hour and a half.
Then, as the market rose, traders were able to enter on the put as low as 2.25 to as high as 4.25 by 2.30 p.m.
Both signals were profitable!
*Much of learning to trade is learning who you are trading against. When you are buying, their are sellers and they are your adversary. If you were selling an OEX Option, for example, that you owned, under various conditions you could be anxious to sell, or waiting to sell at a top price. Its' the same when you are a buyer, wanting the best price, and your goal as a fruit trader is to buy right, and at the right time. That's the trick.
I make my most money trading by simply getting to know something well. Our trusty November 490 Put comes to mind that could have been traded 11 or more times profitably in a 6 day period, and was massively profitable on the big run down last week.
When I find an option that seems to "swing in a range" I begin watching it, if the Dow or the OEX is also holding to a range. I become familiar with what prices the option seems to have the most volume and sell the most at, and that do my watching on that option.
When I provoke you, it is to find things that simple, and work from this perspective.
And as an example of provoking, trader MP wrote me this past weekend. You will note MP shares his thoughts with another person also, who explains it is all "liberals" faults :)
My comments are noted, as his questions and thinking are much like many:
"Hey Floyd..
I've got several questions:
1. Seriously, how can the market drop 140pts. on Wednesday..then rise over 200pt.s on Thursday and then drop 250 pt.s Friday...What the hell is that all about? One day there is good news and the market bounces 200pts. and the next day - fear kicks into the market? What could have possible changed that dramatically? The VIX went up 6 pts. on Friday and I'm just curious as to why ALL OF A SUDDNEN there is fear in the market? Did people really believe that things were fine two days ago?
Floyd: This is simply the law of supply and demand, and cause and effect. The market had moved up dramatically, and a fall was due. The move up on Thursday was nothing more than false euphoria and an exhaustive gap up.
U.S. Stocks Drop as S&P 500 Ends Streak of Seven Monthly Gains-- Floyd: This is a silly, dramatic headline that makes one feel " the end of the world_
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By Rita Nazareth
Oct. 30 (Bloomberg) -- U.S. stocks tumbled, ending a seven- month streak of gains for the Standard & Poor’s 500 Index, as declines in consumer confidence and spending and the threat of a CIT Group Inc.bankruptcy raised concern over the durability of the economic recovery. (IS THAT REALLY THE REASON WHY WE SAW A DROP?)
Floyd: This was the "reason,", but the real reason is that the market was OVERSOLD.
“I’m well-spooked for the Halloween weekend,” said James Paulsen, who helps oversee $375 billion as chief investment strategist at Wells Capital Management in Minneapolis. “We can talk about disappointing consumer confidence data. Bank charge- offs are still happening. There’s a growing sense on the Street that there’s got to be a pullback.” SO ARE WE GETTING A PULLBACK BECAUSE THE MARKET "NEEDS" A PULLBACK OR ARE WE GETTING A PULLBACK BECAUSE THINGS REALLY AREN'T THAT GOOD...AND HAVEN''T BEEN THAT GOOD? AND WE DIDN'T THINK THIS A WEEK AGO? AT LEAST NOT GOOD ENOUGH TO WARRANT THE RUN WE HAD TO 10,000 ANYWAY CORRECT?
Floyd: This is the normal law of supply and demand and cause and effect. Nothing more
What cracks me up is how come last week...before we hit 10,000...everything was all positive - hearing about how the S&P is looking for 1200 and that the recession is over and that our economy is moving in the right direction....now Citigroup is going under...what the frig is going on and who can you trust for the proper information? Does anyone really know WHAT IS GOING ON? WHAT IS THE TRUTH?
Floyd: But if you read our alerts, not was all positive. You are fed newsbites. Citigroup is not going under. Everything was not GREAT a week ago, but things are better than a year ago.
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I noticed that oil took a hit and your DUG calls are gaining some ground....I almost bought your .dzgkn signal for the first time the other day for 25 cents...they hit 75 cents on Friday...that would have been a nice 200% gain - instead I sat out and now I'm kicking myself...
Anyway...I'm beginning to hear more and more about the real estate plunge that we have yet to experience..what do you think about another one of those plays?
Floyd: We're doing fine on our DUG calls and will soon recommend a new position to SRS. We were too early in our inverse call on this last month.
And lastly..I often forward your political rants to my buddy Steve who is a retired marine fighter pilot, Christian, Neo-con and big time black and white guy. He is a currency trader and has yet to trade successfully over an extended period of time.He also just got out of alcohol rehab.
I was defending some of your arguments in a conversation with Steve and he had this to say about you:
Floyd may be a good trader but his underlying analysis of things is not accurate. He still refuses to acknowledge the fact that it was government meddling by the left that created the current disaster, not Bush lying. He is a statist and as such must be fought on every level. He is either a willing or innocent participant in the left's march to tyranny but it does not matter. The fact is he is an enemy of liberty.
Floyd: People like this struggle so much to believe it is "someone else's'" fault. This is a name caller, that does not know the words he uses. Statist and liberal...Limbaugh and Beck name calling, without logic. These are the people I see living in "black and white", not knowing it is grey.
My question to you is the following: How come when I read stuff like this from Steve, I see and hear how ridiculous it is...but at the same time, I'm unable to see or hear how absurd my own remarks have become. And why is it so obvious to me that a man who speaks and thinks like this will never succeed as a trader but think I can succeed when I've said and thought other things just as ridiculous?
In other words, how come it is so easy for me to see Steve's weaknesses but not mine...let alone change mine? Why so difficult?
Michael
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