Tuesday, December 29, 2009

Jan 2010 Trade Update - Watching JOYG

JOYG is finally heading back down towards support and our three qualifying indicators are all moving towards flashing the green light to pull the trigger. Just a little more patience is needed.

The beauty of the three qualifying indicators (Williams %R, Probability and Percent Profit) is that they act as a set of checks and balances to help determine the proper strike price. For example, let's take a look at the current status of JOYG which is currently our top trade candidate. Notice that the probability for the $50 Put is only 67.9% (we need 70% or higher to qualify), so we need to drop down to the next lower strike price $49. With 17 days left to the Jan expiration date we simply cannot achieve all three qualifiers if JOYG drops more in price the success probability for the $49 Put we drop even lower. We now have to look at the $49 strike price which qualifies with a 75.2% probability of success rate, and has a %5 buffer to give up if the price of JOYG drops further.

We still have to qualify for being oversold enough, and of course we want to meet our 2% monthly profit target. If one of the three indicators has to give a little I prefer to be conservative and take less profit by letting the profit percent slide a little.

If the price of JOYG drops a little more we should see its oversold rating drop below 80 and the price of the $49 Put option should go up to $1.00 to get our 2% profit. Our other four top trade candidates are not close to knocking JOYG out of the #1 position.

Monday, December 21, 2009

Jan 2010 Top 5 Trade Candidates

Here are the top 5 trade candidates for the January option expiration month.

Last months trade of the JOYG $49 Put was another 100% successful option income trade that produced a 3.6% return for the month of December (43% annualized) more on this in next post.