Michael Clark's  Instablog

OPTIONS CORNER
Short-Term Trading in Options.
Tuesday Jan 4 2011

We're up 25% since 20 December 2010, with a heavy weighting in precious metals and biotech options.  14 new trades below.

Options Trading Scorecard (since 12/20/10):

CGTS OPTIONS  PORTFOLIO (Since 12/20/10)				Active
% Gain	1/3/11		Profit	Trades
16.22%	Options		$98,959	61

SALES TODAY: None

PURCHASES TODAY:

MONDAY	CGTS NEW TRADES
3-Jan
ISSUE	TRADING	CLOSE	SIGNAL
	SYSTEM
UNH	M5 3 ASP LT 2a	37.13	ENTER LONG
UNH MAR 38 calls		1.45	ENTER LONG
AHGP	M5 3 ASP LT 2a	49.45	ENTER LONG
AHGP FEB 50 calls		0.7	ENTER LONG
UBS	M2F 14% Trade	16.71	ENTER LONG
UBS FEB 15 calls		1.41	ENTER LONG
MRK	M2F 14% Trade	36.04	ENTER LONG
MRK FEB 35 calls		1.79	ENTER LONG
CAB	M4 Accum 00	22.38	ENTER LONG
CAB MAR 20 calls		3.6	ENTER LONG
POL	M5 3 Chart Trade	13.89	ENTER LONG
POL FEB 12.5 calls		1.6	ENTER LONG
BEAV	M5 3 Chart Trade	37.95	ENTER LONG
BEAV FEB 35 calls		3.8	ENTER LONG
SBUX	M5 3 Chart Trade	33.25	ENTER LONG
SBUX FEB 33 calls		1.48	ENTER LONG
ICON	M5 3 Chart Trade	20.02	ENTER LONG
ICON FEB 20 calls		1	ENTER LONG
VTAL	M5 3 Chart Trade	14.35	ENTER LONG
VTAL Feb 12.5 calls		1.9	ENTER LONG
ALGT	M5 3 Avg ASP Diff Sum	50.84	ENTER LONG
ALGT JAN 50 calls		1.5	ENTER LONG
PPD	M5 3 Avg ASP Diff Sum	62.45	ENTER LONG
PPD FEB 60 calls		5.8	ENTER LONG
AXP	M5 3 Avg ASP Diff Sum	43.4	ENTER LONG
AXP FEB 40 calls		4	ENTER LONG
SAH	M5 3 Test Combo	13.68	ENTER LONG
SAH FEB 12.5 calls		1.35	ENTER LONG
AIG	M5 3 Test Combo	58.05	ENTER LONG
AIG FEB 57.5 calls		4.15	ENTER LONG
TBT	M5 3 Test Combo	37.51	ENTER LONG
TBT Feb 35 calls		3	ENTER LONG
STJ	M4 Rev 3 Trade	42.28	ENTER LONG
STJ FEB 40 calls		2.94	ENTER LONG
FNMA.OB	M4 Rev 3 Trade	0.33	ENTER LONG
FNMA JAN 1 puts		0.78	ENTER LONG
FISV	T5 Turn (M4 Accum)	59.5	ENTER LONG
FISV MAR 55 CALLS		5.4	ENTER LONG

SELECTED CHARTS OF TODAY'S TRADES:



We love this chart; and think UNH has a chance to go to 45.



Everything looks positive for ALGT to make a run at 55.



Another nice-looking chart pattern.  AXP is going to try to make a new high.  This trading system (M5 3 AVG ASP Diff Sum) is up 24% in two weeks.



SBUX should go higher in the short-term.  It balked at a down-turn yesterday and made a new short-term high.  Jan calls would be good here also.

___________________________________________________

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.  Typically we work with the last close, if it falls between bid and offer.  If it does not, then we average the bid/offer.

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







Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.