Friday, November 20, 2015

Friday's Agenda

I have two prospects on my desk this morning -- PFE and UNH -- and both, as it turns out, have been tripped up by news reports.

I rarely trade into news. By the time the news is published, after all, the market has already responded and it is too late for me to profit.

Also, I am not a narrative trader. I trade odds -- the math of probability -- and a change in narrative inevitably causes the odds to lose their effectiveness as a trading tool.

Therefore, I plan no further analysis of PFE and UNH and shall not be considering them further for trades today.

Here are details:

The pharmaceutical house Pfizer Inc. (PFE), headquartered in New York City, closed below its 20-day price channel on Thursday. With a tendency toward whipsaws after bear signals over the past year, and with high implied volatility in relation to its 12-month range, PFE is a candidate for an iron condor position. [PFE in Wikipedia]

However, Pfizer has been in talks to buy Allergan, Reuters reported that the companies reached a stage in their negotiations that shows confidence that the deal will receive regulatory approval. Rumor and counter-rumor could cause PFE to fluctuate wildly in ways entirely unrelated to the current probabilities, making it a bad play for my strategies.

The managed health care company UnitedHealth Group Inc. (UNH), headquartered in Minnetonka, Minnesota, closed below its 20-day price channel on Thursday. A tendency over the last year to whipsaw after bear signals and high implied volatility in relation to its 12-month range, UNH is a candidate for a direction-neutral position. [UNH in Wikipedia]

USA Today reports today that UnitedHealth's CEO suspended marketing of its 2016 Affordable Care Act exchanges ("Obamacare" to its critics) because of monetary losses, and said it is considering dropping out entirely.

That statement puts UNH squarely in the middle of the partisan battleground that encompasses health-care policy, beyond the reach of probabilities and making it a bad candidate for my strategies.

-- Tim Bovee, Portland, Oregon, Nov. 20, 2015


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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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.

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