Tuesday, May 25, 2010

Now long APKT

I bought 1 (APKT) AUG 10 $22.50 Call @ $4.70. This option has a delta of roughly 70. So if APKT trades at my stop point $24.00, I stand to lose about $85.00 including commissions. If the markets should turn around and I get stopped out of APKT, I lose $85.00 that I can certainly live with.

If on the other hand, the markets reverse and APKT breaks out of this flat base pattern then I can make upwards of $200.00. However, this is not my goal. If APKT breaks out I will add to my position using the profits from this initial position to offset risk on my second purchase. I plan to build a huge leveraged position in this stock mean while minimising risk all the way by using profits on previous purchases to offset risk on new ones.

Although I want to make big profits, I am fully aware that we are still very much in a correction that can in deed go on for months and destroy even APKT in the process so I do want to risk too much of my account each time I initiate a new position. Since in trading you are at greatest risk when the position is just open. However, as you have a profit cushion you can be more at ease and even use this cushion to add further to your position and to offset risk to your overall account aka pyramiding. This is how huge profits are made in stocks by leveraging and concentrating your account in a monster stocks as it moves higher and continues to show you that you are on the right side. This is how the past great traders like Darvas, Livermore and O'neil made giant profits and this is how I plan to the same.

Good luck and good trading!

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