Wednesday's Agenda update

In "Wednesday's Agenda", I discussed the need to cull potential trades beyond the limits provided by my usual means.

In the end, I traded four symbols out of the nine preliminary survivors from among 13 potential trades. That's about where I wanted to be going into the process.

I used only two methods to cut down on potential trades.

Implied volatility is fundamental to my strategy for playing earnings announcements, and the higher the volatility relative to its history, the better it is for the trade.

My normal screening process cuts trades with implied volatility below the 50th percentile of the distance between the volatility high point and low point over the past 12 months.

I raised the cutoff point to the 60th percentile, eliminating KMI, MCD and UA.

My preference at this point is to trade the DEC series of options, which trade for the last time on Dec. 18. My ideal trade expires in six weeks -- 42 calendar days.

The DEC options are 16 days away from meeting that idea, while the NOV options are 12 days away, close to being a wash.

I now have 17 positions expiring in November, a heavy load for the future. Given the closeness of both expirations to the ideal, I chose to give preference to December. That eliminated EBAY and SNDK, both of which have insufficient open interest on their December options to support a trade.

That left four, which I have analyzed: LVS, LLY, CAT and LRCX.

-- Tim Bovee, Portland, Oregon, Oct. 21, 2015

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 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.