Michael Clark's  Instablog

OPTIONS CORNER
Short-Term Trading in Options.
Monday 27 December 2010

Merry Christmas and Happy Holidays to all.

Options Trading Scorecard:

	DAILY PORTFOLIO			Active
% Gain	since 12/17/2010		Profit	Trades
2.79%	Options	ST Test	$2,515	9

Today's First Trade: IAU, IShares Gold Trust.  Buy Jan 12.5 calls @ 1

Trading System: M4 Accumulation 00.

Two attractive charts from a group of possible purchase for Monday.  IAU looks good for a short term move up.

Other M4 Accumulation 00 trading signals for Monday: long GLD; long INTC; long RIMM; long VCI; long HUI; long ABX; long HK; short CSCO; short DGZ.



Today's Second Trade: NILE, Blue Nile -- buy NILE Jan 55 calls @ 3.2 (Bid/Ask).

Trading System: M4 Blank.

Other M4 Blank signals for Monday: long, BAL; long, C (Citicorp).



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A Disclaimer of sorts:

I will update these positions regularly, so we can all see how we are doing with our short-term speculating.

I am bullish on gold long-term (until Bernanke is fired, and more generally until about 2019, the end of the deflation cycle) -- and I'm relatively bullish on stocks until QE is abandoned.  QE does many things, one of which is to try to make sure that stocks and bonds don't decline.  The Fed, quite likely, has guaranteed to bankers the advance of stock prices.  As long as the Fed is willing and is allowed to backstop stock prices, short positions are very dangerous, except in isolated cases.  Bond vigilantes are showing Mr. Benanke that his designs may not be able to proceed without resistance however.  Rising rates are a slap in the face of American power; the slap is welcomed by those of us who think debt is the problem that needs to be addressed, destroyed, rather than expanded and extended.

Trading options is highly speculative and can be dangerous.  Pricing of options is never very clear; buying options is almost always less prefereable than selling options, in terms of likely profits.  But buying options gives an investor a HUGE BANG FOR THE BUCK.  Getting accurate price data on options (especially those thinly-traded) is also often a problem, with which we'll have to work.

If one knows what direction a stock is moving, short-term options can be profitable.  The problem with options, of course, is that they, like ourselves, decay with time.

The cheaper options expire more quickly (one can always buy long-term options is one wishes to speculate on long-term stock or market moves).  I like short-term expirations, cheap options, and getting in and out (with profits).

I have many short-term trading systems.  I will use several in this Options Corner.  The first I start with I call "M5 3 Chart Trade" which really relies on the M5 3 Momentum Indicator to trigger the trade, always in the same direction of the major trends.

Successful trading!  We know the game is fixed; but let's ride on the back of the dragon for as long as we can.

More information on the CGTS systems can be found at:
home.mindspring.com/~mclark7/CGTS09.htm

MICHAEL J CLARK
Clark's Gate Timing System
Hanoi, Vietnam
84 4 221 92210