Bought 1 MER Jul08 55 put for $9.80

This stock has been in a downtrend since last May, and I traded an earlier bounce off a resistance level earlier this year.  Since then, it has broken the trendline it was using as support, and is now using that line as a resistance level.

The stock has come up to this line again and bounced down, with confirmation from the MACD and stochastics.  The stock actually closed the day up $0.09, but it was down by about $0.10 when I entered the position.

The stock is currently at $46.50.  Support is around $38.15 and resistance is around $47.25.

My exit orders are:

• Market order to exit if the stock trades above $48.70
• $0.10 trailing stop loss if the stock trades below $39.30
• Stop loss on the option at $4.50

 

Bought 1 ADI Jun08 35 put for $5.40

This stock has been in a downtrend since May 2007.  It was using a trendline as support until November when it broke below it and it now appears to be a resistance level.  The stock has come back up to the line and bounced down.  The MACD and stochastics also give a confirmation because they are both high and starting to head down.

The stock is currently at $29.90, and it was at $29.95 when I entered the trade.  Support is currently around $26.60 and resistance is around $31.25.  Coincidentally, the 200-day moving average is also almost exactly at the same resistance level, so this is also a bounce down off the 200 DMA.

My exit orders are:

• Market order to exit if the stock trades above $32.15
• $0.10 trailing stop loss on the option if the stock trades below $27.25
• Stop loss on the option at $2.00

Bought 1 WSM Aug08 35 put for $9.50

This stock has been in a downtrend since mid 2006, with a more tightly contained downtrend that started in March 2007.  It has been mostly bouncing between a pair of trendlines, with one break out to the downside in January.  It has now come up to the resistance level and bounced down.  The MACD and stochastics both provide confirmation because they are both at a high point and turning back down.

The stock is currently at $25.79, though it was at $26.07 when I got in.  Support is currently around $21.10 and resistance is around $26.20.  The 200-day moving average is also very close overhead at $27.69, so I’m actually using that as my exit point.

My exit orders are:

• Market order to exit if the stock trades above $27.75
• $0.10 trailing stop loss if the stock trades below $22.00
• Stop loss on the option at $4.20

Bought 1 BCSI Jul08 30 put for $8.20

This stock has been in a downtrend since August 2007, and has been bouncing between a pair of trendlines since then.  It has now come up and bounced down off the resistance level, with confirmation from the MACD and stochastics.

The stock is currently at $22.84, though it was actually around $23.25 when I got in.  Support is around $18.15 and resistance is around $24.50.

My exit orders are:

• Market order to exit if the stock trades above $25.40
• Trailing stop loss if the stock trades below $18.75
• Stop loss on the option at $4.00

Bought 1 XLF Jun08 33 put for $7.40

This is an interesting trade because the underlying is an ETF.  This is the first time I’ve traded options on an ETF, but my understanding is that the mechanics of it are the same as any other stock.  So far, I see no disadvantages to trading on an ETF, and three major advantages.

• There are no earnings releases for an ETF, so I won’t have the usual problem of not being able to trade a good entry signal because of upcoming earnings.  I had three buy signals today that I couldn’t take for that very reason.
• There is high liquidity on both the ETF and the majority of its options.  I missed another trade today on a stock with a good signal but low liquidity on its options.
• The options have strike prices that are $1 apart rather than $5.  This makes it easier to find the option that gives the right risk/reward balance based on the current price of the underlying.  I missed yet another trade today because the $50 put wasn’t far enough in the money and the $55 put cost too much.

We’ll see how this trade goes, but I’m going to keep my eye out for ETFs in the future.

Now about this particular trade.  This stock has been in a downtrend since June 2007.  It has been trading in almost a perfect channel between two trendlines, and has just come up and bounced down off the resistance line, with confirmation from the MACD and stochastics.

The stock is currently at $25.62.  Support is around $21.60 and resistance is around $27.00.

My exit orders are:

• Market order to exit if the stock trades above $27.80
• Trailing stop loss if the stock trades below $22.25
• Stop loss on the option at $3.80

Bought 1 AMLN Jul08 35 put for $8.10

This stock has been in a downtrend since mid 2006, with an accelerated slope since October 2007.  It was using two trendlines as support and resistance before breaking down below that support in February, and has now come up and bounced off basically both of those lines since they are very close to each other right now.  This appears to be a very strong area of resistance, and there is also a confirmation from the MACD and stochastics.

The stock is currently at $28.55.  Support is around $23.25 and resistance is around $29.40.  I actually bought the option when the stock was down around $28.25, so I’m a little bit in the red, but I like the pattern and this looks like a good trade.

My exit orders are:

• Market order to exit if the stock trades above $30.40
• Trailing stop loss if the stock trades below $24.00
• Stop loss on the option at $4.00

Bought 1 EYE Apr08 30 put for $7.20

The stock has been in a downtrend since July 2006, and it has been on an even steeper descent since June 2007.  It broke down below its old support level in November, and it has now come up and bounced down off both the steeper resistance trendline, and the old support trendline.  There is also confirmation from the MACD and stochastics.

The stock is currently at $22.85, though I got in when it was at $23.00.  Support is currently around $17.65, and resistance is around $23.90.

My exit orders are:

• Market order to exit if the stock trades above $24.60
• Trailing stop loss if the stock trades below $19.00
• Stop loss on the option at $3.50

Bought 1 AKAM May08 40 put for $8.20

The stock has been in a downtrend since last February, with a slightly steeper descent since August.  It has come up to its resistance trendline and bounced down, and also has confirmation from the MACD and stochastics.

I really should have entered this position on 2/14, which is the first time it bounced down off the trendline.  However, at the time the trendline was drawn slightly higher and I decided to not get in.  Today the stock moved down $1.14, so I’m getting in at a higher price on the put than I would have otherwise, but it looks to still be a good trade.

The stock is currently at $32.63.  Resistance is around $34.25, and support is around $25.60.

My exit orders are:

• Market order to exit if the stock trades above $35.25.
• Trailing stop loss if the stock trades below $26.50.
• Stop loss on the option at $4.00.

Bought 1 TDW Apr08 60 put for $8.80

This stock has been in a downtrend since last July.  It has come up and bounced down off of its resisting trendline, and has confirmation from the MACD and stochastics. 

The stock is currently at $52.02, and resistance is around $53.40.  There is a major supporting trendline that currently puts support around $40.00.  However, there could be a double bottom around $46.75, so I will use that level instead.

My exit orders are:

• Market order to exit if the stock trades above $55.00
• Trailing stop loss if the stock trades below $47.25
• Stop loss on the option at $4.50

Bought 1 HOT May08 55 put for $10.10

The stock has been in a downtrend since last July.  It has been bouncing between a downtrending support line and resistance line, and is currently in the process of bouncing down off the resistance line.  MACD and stochastics are also high and starting to head down.

The stock is currently at $45.85.  Resistance is around $46.25 and support is around $35.20.  However, the previous low is at $36.88, so I’m setting my stop above that in order to be a little more conservative.

I was forced to pay just a tad over my limit of $10.00 on this trade.  I would have bought the Mar08 55 put instead, but it has an open interest of 1, which is a deal breaker.  I could also bought the May08 50 put around $6.40, but with the stops defined below, that would require me to take a loss of greater than 50% on the position before the stop is taken out.  In the end, I decided that going $0.10 over my limit was the better choice.

My exit orders are:

• Marker order to exit if the stock trades above $47.70
• Trailing stop loss if the stock trades below $37.00
• Stop loss on the option at $6.00