The first characteristic is where implied volatility stands in relation to its most recent move from the most recent significant low to high, expressed as a percentile of the range. I trade symbols whose volatility is in the 60th percentile or greater.
LULU in the 29th percentile and CCL in the 57th percentile fails to make the grade. I won't proceed with further analysis of either.
The second characteristic is open interest -- the number of contracts that are out there as potential trades -- at strike prices in the areas I would need for a trade. By tradable areas I mean roughly those strikes with a 65% to 85% chance of expiring out of the money for maximum profit. I require open interest of 100 or more at those strikes.
CCL, LULU and PAYX all have insufficient open interest to meet my requirement.
That leaves RH as the one symbol that meets both requirements. I shall post a full analysis of RH this morning.
-- Tim Bovee, Portland, Oregon, March 29, 2016
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.
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