On the upside I have come to realize that the stocks I track an usually like to trade (small cap momentum stocks and hot IPO's) have been making big moves from set ups that I notice the night before and watch explode with out me intra day (like SOL and JASO which I highlighted last week and CPWM today).
I also realise that with my account the level its at now it will take me an eternity to grow it if I trade stocks only. Essentially I need the leverage of options to supercharge the growth of my account. Although its really nice to trade weeklies, I can trade the front month options in their place just as easily as long as the liquidity is there.
So I have decided to merge both. That is, I will stick with trading what I know. However, instead of trading the underlying I will trade the front month options in their place when available. I will trade the options the same way as if I were trading the underlying. I will swing trade them as opposed to day trade. This will ease alot of pressure and instead of only being able to trade three times every five days; I will now be able to trade as often as I want. The day trades will only be used up when I initiate a position that stops me out the same day. Although it can happen, it is unlikely that I will get stopped out three days in a row. Even if it does, so what? Take a few days off then back to trading!
So here is my plan for tomorrow. With the markets having a huge breadth thrust today after 4 week decline I am leaning on the bullish side. So I have thr long ideas on my radar.
FTNT: this hot IPO is currently forming a beautiful ascending triangle after gapping up on massive volume in late October on better than expected earnings. If it breaks the upper trend line I will get long the Dec 18 $35.00 Call Options. My stop on this trade will be below the $31.00 price level. These options have a delta of about 0.26. So I will be risking about $52.00 per option since the entry price is about $33.00. However, I will hope to be out this trade long before that price level is hit if the break out fails.
RVBD: ordinarily I would not look to trade this stock but since I'm targeting the options instead of the stock this set now looks a lot more attractive. RVBD is flagging out beautifully beneath all time highs so break out here could see a nice pop. Although I prefer the set up in FTNT, should RVBD break out first I will go with it ahead of FTNT. For this set up I will be targeting the Dec 18 $36.00 Call Options on a break out from the bull flag. Since this option has a delta of about 0.36 and I will be risking about $1.30 on the trade then my risk will be roughly $46.80 per contract if stopped out. Again I will hope to be out long before the stop is hit.
The third idea is HDY. I will be looking at the Dec 18 $2.50 Calls on a break above $3.36.
I believe that this is a vast improvement to my previous gambling with weekly options and gives me a much better chance for success. My only problem now is that I have no day trades left. So if I get into a position and it does not work as I would have liked then I will be forced to hold the options till next Monday. So in light of this I will wait for extra confirmation before entering a trade or simply not trade at all.
Here's to the future!
Good luck and good trading!