A change in the chart: I’m finding a need to distinguish between a sideways trend (yellow) and a neutral trend, which is really the same as an ambiguous trend. See CVI and HAL in the discussion below for examples. From today, I’ll be coding neutral, or ambiguous, trends as grey.
This daily posting tracks my covered call plays for October and other base positions.
CVI, HAL turn to a neutral trend as they touch the area of the previous high. A rise above the highs would suggest an uptrend that would require confirmation by a higher low. A bounce down would indicate a sideways trend.
TKR moves to an uptrend with a decisive break above the previous high. The trend needs a higher low for confirmation.
I’m carrying out-of-the-money insurance puts on MCO and a bull put on BIDU.
The last trading day for October covered calls is Oct. 21. I have earnings risk on four stocks in my covered calls portfolio: BIDU, 10/20 after the close; HAL, 10/17 before the open; JNJ, 10/18 before; and TPX, 10/20 after.
Of those, I’m near-term bullish on BIDU, slightly bearish on JNJ and neutral the rest. BIDU, HAL and TPX have all broken above declining channels, and JNJ is in a near-sideways trend -- just a slight decline.
So, how to insure? These stocks would all be exercised at today’s prices. A bullish surprise and price move does me no good. These are deep in-the-money covered calls. A bearish surprise and a drop below the covered call strike price would increase my profits over time.
So, good news is meaningless and requires no insurance, and bad news is worth insuring in out-of-the-money puts, since non-exercise means I’m left holding a losing stock.
All in all, an interesting question.
Covered Calls| sym | phase | trend | adx | 200/50 | 40/10 | |
|---|---|---|---|---|---|---|
| BIDU | ||||||
| CAR | ||||||
| CNX | ||||||
| COG | ||||||
| CVI | ||||||
| GMCR | ||||||
| HAL | ||||||
| JNJ | ||||||
| KEG | ||||||
| MCO | ||||||
| NOV | ||||||
| SPRD | ||||||
| TKR | ||||||
| TPX |
Other Base Positions
- None.
Key
- phase: 20-day price channel phase, with green for bull trend, red for bear trend and yellow for neutral trend.
- trend: Price direction, green for higher highs and higher lows, red for lower highs and lower lows, yellow for sideways, and grey for neutral or ambiguous.
- adx: Average directional index location, indicating the strength, or the temperature, of the trend. Orange for 40 or greater, aqua (light blue) for 25 and up but below 40, magenta (light purple) for 20 and up but below 25, and brown for anything below 20. (Mnemonic: Orange for the overhead sun, blue for the surrounding sky, magenta for sunset on the horizon and brown for the earth.)
- 200/50: The moving average cross, green for the 50-day ma above the 200, red for below and yellow for closely aligned.
- 40/10: The moving average cross, green for the 10-day ma above the 40, red for below and yellow for closely aligned.
About my trading methods
Read a detailed explanation of my analysis method, including trading rules. These don't, at present, discuss my covered call strategy, which is under revision.
Disclaimer
Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.
No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.
The trader’s greatest sin is inaction. Sleeper, awake! Seize the Nietzchean moment. Roll out of bed and trade.
No comments:
Post a Comment