Tuesday's Agenda

I woke up this morning with anticipation. After a long drought of potential trades, I found myself with seven genuine prospects on my desk.

My hopes, as I had feared the night before, were dashed. All seven have preternaturally low implied volatility that, relative to recent trends, lies below my minimum standard.

A book from my library →

The standard is based on where volatility stands within its most recent range. Implied volatility, unlike stock prices, are always in a long-term sideways trade. It eternally fluctuates within its current range and rare rushes off in a significant directional movement.

I calculate the position of volatility within the most recent significant swing within its current range -- think of it as the most recent leg of its journey -- expressing it as  a percentile, where the 100th percentile is at the top of the range and the 50th percentile is at its middle. For a trade, I require that implied volatility be in the 60th percentile or higher.

Here is where my seven prospects stand this morning by that measure:

sym	imp vol %ile
PACW	43
NKE	37
WFC	31
DAL	30
PGR	27
PNC	23
JPM	22

So all fail final screening, and I shall do no full analyses today and anticipate entering no new positions.

The day hasn't hasn't been a complete waste. My position in FAST, which I entered on Monday, fell sharply after earnings were announced, and I've exited claiming 54% of potential profit. Expect full results, with an awesome annual rate for the yield, to be noted in the the Outcomes post near the market close.

-- Tim Bovee, Portland, Oregon, April 12, 2016

References

Tradecraft: Playing the odds to build winning stock market trades from options, a description of how I trade, can be read here.

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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.

License



All content on Tim Bovee, Private Trader by Timothy K. Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Based on a work at www.timbovee.com.