tag:blogger.com,1999:blog-90678716776453132062024-03-05T08:15:08.226-08:00optionsANIMALOptionsANIMAL is the leading provider of options and stock trading education. Discover strategies to help you stay profitable in any market condition.optionsANIMALhttp://www.blogger.com/profile/17843639413203271237noreply@blogger.comBlogger39125tag:blogger.com,1999:blog-9067871677645313206.post-68829817406262829792011-01-13T08:57:00.001-08:002011-01-13T08:57:05.786-08:00Verizon (VZ) gets the iPhone and the stock drops? What is that about? <a href="http://ping.fm/b1eK6">http://ping.fm/b1eK6</a>optionsANIMALhttp://www.blogger.com/profile/17843639413203271237noreply@blogger.comtag:blogger.com,1999:blog-9067871677645313206.post-32081043462427920612011-01-12T10:30:00.001-08:002011-01-12T10:30:10.671-08:00“If I had just held my Coca Cola stock, we’d be very wealthy now!” <a href="http://ping.fm/EqUbR">http://ping.fm/EqUbR</a>optionsANIMALhttp://www.blogger.com/profile/17843639413203271237noreply@blogger.comtag:blogger.com,1999:blog-9067871677645313206.post-2581600271497701832011-01-11T11:27:00.001-08:002011-01-11T11:27:49.348-08:00Apple iPhone on Verizon network coming this February but what does the market think today? <a href="http://ping.fm/vDwIK">http://ping.fm/vDwIK</a>optionsANIMALhttp://www.blogger.com/profile/17843639413203271237noreply@blogger.comtag:blogger.com,1999:blog-9067871677645313206.post-6454462605465413962011-01-10T14:06:00.001-08:002011-01-10T14:06:36.442-08:00Best Buy (BBY) nice ride to kick off 2011...will it continue? <a href="http://ping.fm/w3uzJ">http://ping.fm/w3uzJ</a>optionsANIMALhttp://www.blogger.com/profile/17843639413203271237noreply@blogger.comtag:blogger.com,1999:blog-9067871677645313206.post-35738337326343902572011-01-08T10:01:00.001-08:002011-01-08T10:01:54.997-08:00OptionsAnimal Weekly 1/8/2011 <a href="http://ping.fm/IW5zj">http://ping.fm/IW5zj</a>optionsANIMALhttp://www.blogger.com/profile/17843639413203271237noreply@blogger.comtag:blogger.com,1999:blog-9067871677645313206.post-80858459011336496562011-01-04T04:38:00.001-08:002011-01-04T04:38:05.282-08:00CSCO Is Ready To Roll <a href="http://ping.fm/QHdnH">http://ping.fm/QHdnH</a>optionsANIMALhttp://www.blogger.com/profile/17843639413203271237noreply@blogger.comtag:blogger.com,1999:blog-9067871677645313206.post-37430316175614326722010-12-31T10:36:00.001-08:002010-12-31T10:36:57.242-08:00A New Year Allows You to Invest S.M.A.R.T., Set Your Trading Goals for 2011 <a href="http://ping.fm/2HNRu">http://ping.fm/2HNRu</a>optionsANIMALhttp://www.blogger.com/profile/17843639413203271237noreply@blogger.comtag:blogger.com,1999:blog-9067871677645313206.post-24036175675338815872010-12-31T10:19:00.001-08:002010-12-31T10:19:41.702-08:00A New Year Allows You to Invest S.M.A.R.T, Set Your Trading Goals for 2011We are disciplined traders at OptionsAnimal. We educate students on how to apply leverage through the use of Options while managing portfolio RISK. The curriculum not only provides an in depth education about options behavior, but also a blueprint from which to build trading activities into a strong business.<br /><br />Its’ traditional to consider RESOLUTIONS for the New Year, those activities that will make us healthier, wealthier, and happier. This is the perfect time to begin to apply something that is taught in OptionsAnimal’s class on Portfolio Management – Goal Setting. Where do you start?<br /><br />There is an acronym that serves as a guide to setting SMART goals. <br /><br />S = Specific<br />M = Measurable<br />A = Attainable<br />R = Realistic<br />T = Timely<br /><br />Anyone without experience in applying the process may not know where to start. I offer the following example as one application of the SMART goal setting method. This method can be applied to guide you in getting anything you want out of life, whether for personal fulfillment or career advancement.<br /><br />Example:<br />S= Specific (Make this as a definite statement, not a “wish.”) I will graduate from Options Animal by December 31, 2011.<br />M = The statement above is measurable. You will either have the certificate by that date or not.<br />A = This is attainable, as many others have proven.<br />R = This is realistic, as enough time has been built into the goal to make it realistic.<br />T = It has been given a deadline, and not been left open ended.<br /><br />Now the goal has been set. But, there is still much more to do.<br />First consider what steps must be taken to reach the overall goal.<br /><br />Perhaps you are currently at Level 5 in the curriculum. You have 12 months to complete levels 5, 6, 7, and 8. Then you must meet the requirements for graduation. The graduate candidate seminar is offered once a month. Perhaps target November for participation in that to ensure that your deadline is met. If 2 months are needed to assemble the completed documents for graduation, the levels should be completed by September. That really gives eight to nine months to learn and digest the lessons in levels 5, 6, 7 and 8. Given the time frame you established, you can comfortably spend two months on each level.<br /><br />Now you have a vision of how you’ll reach your goal. You’re still not finished!<br />What intermediate steps are required to measure your progress? The level examinations are a good measuring stick for your intermediate progress.<br /><br />Intermediate Goal: I will graduate from level 5 on, or before February 15, 2011.<br /><br />a.) I’ll attend each level 5 class once by January 20, 2011.<br />b.) I’ll take the level 5 exam during the fourth weekend of January to determine weakness that requires more study.<br />c.) I’l l spend the next three weeks studying that material.<br />d.) I’ll re-take the exam by February 15th and pass with a 90% or better score.<br /><br />Now that you see how to break every step down into smaller, measurable, attainable, reasonable and timely goals, you’ll be able to create your PLAN. (I’ve provided a starting point. It needs to be completed through each level and graduate requirement.) You know that if you had stopped after identifying the GOAL, you may not have looked at it again until next fall, then you’d wonder why you didn’t achieve it.<br /><br />This is really no different than the trading plan that is constructed before each trade, identifying primary and secondary exits. The key is the discipline to flesh it out and put it on paper. Yes….<br /><br />WRITE IT DOWN AND KEEP IT CLOSE! This is a blueprint for your daily, weekly, and monthly activities. It is your working document that should be handy, not filed away to review later. Make 2011 your BEST year yet! Achieve your goals!<br /><br /><br />By Emilu Bailes<br /><br />Source: <a href="http://www.optionsanimal.com/new-year-allows-you-invest-smart-set-your-trading-goals-2011">http://www.optionsanimal.com/new-year-allows-you-invest-smart-set-your-trading-goals-2011</a>optionsANIMALhttp://www.blogger.com/profile/17843639413203271237noreply@blogger.comtag:blogger.com,1999:blog-9067871677645313206.post-14297512855329243962010-12-31T10:18:00.001-08:002010-12-31T10:18:44.851-08:00<a href="http://ping.fm/0uIgx">http://ping.fm/0uIgx</a>optionsANIMALhttp://www.blogger.com/profile/17843639413203271237noreply@blogger.comtag:blogger.com,1999:blog-9067871677645313206.post-81686122162705340922010-12-30T11:00:00.001-08:002010-12-30T11:00:59.617-08:00Options Animal 2010 Review - 2011 Forecast <a href="http://ping.fm/lRq75">http://ping.fm/lRq75</a>optionsANIMALhttp://www.blogger.com/profile/17843639413203271237noreply@blogger.comtag:blogger.com,1999:blog-9067871677645313206.post-2398853533706328452010-12-30T10:20:00.003-08:002010-12-30T10:20:13.918-08:00<a href="http://ping.fm/ujK8Q">http://ping.fm/ujK8Q</a>optionsANIMALhttp://www.blogger.com/profile/17843639413203271237noreply@blogger.comtag:blogger.com,1999:blog-9067871677645313206.post-17449623631791448552010-12-30T10:20:00.001-08:002010-12-30T10:20:09.973-08:00<a href="http://ping.fm/0kVEQ">http://ping.fm/0kVEQ</a>optionsANIMALhttp://www.blogger.com/profile/17843639413203271237noreply@blogger.comtag:blogger.com,1999:blog-9067871677645313206.post-29182359290143771532010-12-30T10:19:00.001-08:002010-12-30T10:19:53.117-08:00Using Implied Volatility to Determine the Expected Range of a StockWhen there is an event that is likely to impact the price of an equity (e.g., earnings; FDA ruling; new product release; etc.,) you will see an increase in the option pricing. This rise pricing is attributed to an increase in the option's implied volatility. When the implied volatility is high, that means that the market anticipates a greater movement in the stock price.<br /><br />I am often asked "How can I determine how far a stock is likely to move?" I will give you two methods to estimate the expected movement: one that requires a calculator and a quick and dirty way that you can do in your head.<br />First a little theory:<br /><br />When we talk about historical volatility, we are measuring the zigzaggedness of a stock. How much did it zig and how much did it zag? If it zigged and zagged a lot, the historic volatility is high. In mathematical terms we determine the zigzaggedness by measuring the "standard deviation." <br /><br />Remember the bell curve or the normal distribution? <br /><br /><br /><a href="http://upload.wikimedia.org/wikipedia/commons/8/8c/Standard_deviation_diagram.svg">http://upload.wikimedia.org/wikipedia/commons/8/8c/Standard_deviation_diagram.svg</a><br /><br />If a distribution is considered "normal," 68% of the time, you will be within 1 standard deviation of the peak of that curve. For the most part, stock exhibit a normal distribution. (Actually, it's a lognormal distribution, but let's keep this simple.)<br /><br />The historic volatility is the movement that did occur. The implied volatility is the movement that is expected to occur in the future. When we are estimating future prices, we use the implied volatility. <br />Using the calculator:<br /><br />The following calculation can be done to estimate a stocks potential movement: <br />(Stock price) x (Annualized Implied Volatility) x (Square Root of [days to expiration / 365]) = 1 standard deviation. <br /><br />Take for example AAPL that is trading at $323.62 this morning. It has earnings next month. The current Implied Volatility is 31.6%. JAN options expire in 22 days, that would indicate that standard deviation is:<br /><br />$323.62 x 31.6% x SQRT (2/365) = $25.11<br />That means that there is a 68% chance that RIMM will be between $298.51 and $348.73 in January expiration. <br /><br />Quick and Dirty:<br /><br />Now, for those of you that have not touched the square-root key since you took algebra back in high school, you can just use an options chain to get an estimate of where the stock could move. Find the price of the at-the-money straddle and the out-of-the-money strangle and add them together and divide by two. That is about equal to the 50% probability movement. <br /><br />For AAPL this is the 320 straddle (320 call and put) and the 310/330 strangle (330 call and 310 put.) Add those together and you will get $30.58. If you divide that by two ($30.58 / 2 = $15.29) and add and subtract that from the current stock price, you get very close to 50% probability range. That means that AAPL has about a 50% chance of being at $308.33 and $338.91 by January expiration.<br /><br />This method is a enough to make a mathematician cringe. However, it works out to be a pretty good "SWAG," as they say.<br />Thoughts on what these numbers mean:<br /><br />I don't use these calculations as a price target to build a strategy. I use them more as a warning sign. Considering the potential movement, you may want to reconsider your delta neutral strategy (e.g., call calendar, put calendar, iron condor, etc.) which profits from a stagnant trend. While the premiums look good now, you might want to wait until after the event for that stagnant strategy. Or, you may be looking at a straddle or strangle knowing that there is going to be a big movement. If you look at those estimated moves, you'll see that a straddle or strangle is probably not that attractive - especially when you consider the volatility crush that is likely to occur after the event. <br /><br />For example the current JAN 320 straddle on AAPL. It's pricing at $19.40. That means that you need the stock to move to at least $304.22 or $343.02 just to break even by expiration. Now, consider the estimates made above. Does this look like a trade that you'd want to be in? Unless you know something that the market doesn't know - like the iPhone cures the common cold - you probably are best advised to avoid this sort of trade. (Another factor that must be considered is the dramatic changes in implied volatility. But, I will leave that for another post.) <br /><br />Unless you have a strong sentiment, I believe the most prudent approach is to consider a protective strategy. For stock ownership, I believe that a collar trade is typically best strategy around earnings. It protects you from downward movement in the stock. Also, because there is a long and a short option, the impacts of volatility crush is mitigated. The art is picking the right options and that is what we teach you at OptionsAnimal.<br /><br />By Eric Hale<br />OptionsAnimal Instructor<br /><br />Source: <a href="http://www.optionsanimal.com/using-implied-volatility-determine-expected-range-stock">http://www.optionsanimal.com/using-implied-volatility-determine-expected-range-stock</a>optionsANIMALhttp://www.blogger.com/profile/17843639413203271237noreply@blogger.comtag:blogger.com,1999:blog-9067871677645313206.post-52006388263986396362010-12-29T08:53:00.001-08:002010-12-29T08:53:21.392-08:00Apple (AAPL) Throws Us A Curve Ball! <a href="http://ping.fm/RBafC">http://ping.fm/RBafC</a>optionsANIMALhttp://www.blogger.com/profile/17843639413203271237noreply@blogger.comtag:blogger.com,1999:blog-9067871677645313206.post-33309499504385448502010-12-28T15:17:00.001-08:002010-12-28T15:17:00.586-08:00I bought some Best Buy (BBY) stock...am I too early? <a href="http://ping.fm/8uTWd">http://ping.fm/8uTWd</a>optionsANIMALhttp://www.blogger.com/profile/17843639413203271237noreply@blogger.comtag:blogger.com,1999:blog-9067871677645313206.post-24164532430941077482010-12-22T12:47:00.001-08:002010-12-22T12:47:14.872-08:00Changes to banking executives’ compensation could dramatically affect their focus and decisions. <a href="http://ping.fm/tHkaE">http://ping.fm/tHkaE</a>optionsANIMALhttp://www.blogger.com/profile/17843639413203271237noreply@blogger.comtag:blogger.com,1999:blog-9067871677645313206.post-26783666467891326712010-12-18T10:00:00.001-08:002010-12-18T10:00:45.063-08:00OptionsAnimal Weekly 12/18/2010 <a href="http://ping.fm/ZS0in">http://ping.fm/ZS0in</a>optionsANIMALhttp://www.blogger.com/profile/17843639413203271237noreply@blogger.comtag:blogger.com,1999:blog-9067871677645313206.post-5894809992451774172010-12-16T11:08:00.001-08:002010-12-16T11:08:29.038-08:00Market Leader, Baidu, Inc. (BIDU), Falls Fast after growth forecast <a href="http://ping.fm/HnFWb">http://ping.fm/HnFWb</a>optionsANIMALhttp://www.blogger.com/profile/17843639413203271237noreply@blogger.comtag:blogger.com,1999:blog-9067871677645313206.post-8438084754977970612010-12-16T09:55:00.001-08:002010-12-16T09:55:56.573-08:00Market Leader, Baidu, Inc. (BIDU), Falls Fast after growth forecastWhen market leaders such as BIDU make a significant price reversal it’s a clear market signal. Wednesday’s loss was Baidu’s biggest percentage drop and price drop since June 29, when the stock fell $6.87, or 9%, in big volume.<br /><br />That move established a short-term low, but circumstances were different. The Nasdaq was then near a low, not a high.<br /><br />BIDU isn’t the only leader experiencing a loss of upward momentum. Several market leaders have seen price pull-backs in recent weeks. NFLX is 14% off its high, VIT is down 16%, CTRP is down 22%, and EBIX is down 21%.<br /><br />When the market rolls over, it’s never clear whether it’s a “healthy pullback” that will set up for another price advance, or the beginning of a new Bear Market (a drop of 20% or more.) Astute traders, such as those at Options Animal, who have learned how to protect themselves with options, will be able to trade whatever the market gives them. <br /><br />Not all leaders have been wounded this week. Apple, Lululemon Athletica and Priceline.com are holding up fairly well. But, leaders lead the market, in whichever direction the market is moving. When a number of leaders stumble, pay attention!<br /><br />Emilu Bailes<br /><br />Source - <a href="http://www.optionsanimal.com/market-leader-baidu-inc-bidu-falls-fast-after-growth-forecast">http://www.optionsanimal.com/market-leader-baidu-inc-bidu-falls-fast-after-growth-forecast</a>optionsANIMALhttp://www.blogger.com/profile/17843639413203271237noreply@blogger.comtag:blogger.com,1999:blog-9067871677645313206.post-63910306448364051342010-12-15T08:23:00.001-08:002010-12-15T08:23:05.609-08:00RIMM Implied Volatility - Taking an uncharacteristic pre-earnings plungeBefore an earnings event, RIMM typically sees a ramp up in the implied volatility and then a dramatic drop after the announcement. The ramp is the result of increased demand for protection (i.e., buying options) for the move that is anticipated due to the earnings event. <br /><br />The drop after the event is a result of people selling their puts and calls once they know they results of the report. This drop is commonly known as "volatility crush" and is the bane of anyone who buys a straddle or strangle before an event. While big moves often happen, they are not enough to offset crush that occurs in the implied volatility. This is why straddles and strangle purchased immediately before an event are not often big winners. <br /><br />What is curious about RIMM, is that it is making an uncharacteristic dive in implied volatility before earnings (which are December 16 after the market close.) A month ago, RIMM's implied volatility was 54%, today it's 43%. Typically, RIMM's implied volatility is flat or rises before earnings. <br /><br />What can you take from this behavior? It means that some traders must be confident that they know what RIMM plans to announce and they do not expect a surprise. <br /><br />Looking at the put/call ratio, it would appear that the bias is upward. This will definitely be an interesting earnings event to watch. For me, I am going to keep the stock in a collar trade, which limits my upside, but also offers protection to the downside. I also have "pre earnings" double diagonal. But, according to my trading plan, I will close that before earnings.<br /><br />Eric Hale<br /><br />Source - <a href="http://www.optionsanimal.com/rimm-implied-volatility-taking-uncharacteristic-pre-earnings-plunge">http://www.optionsanimal.com/rimm-implied-volatility-taking-uncharacteristic-pre-earnings-plunge</a>optionsANIMALhttp://www.blogger.com/profile/17843639413203271237noreply@blogger.comtag:blogger.com,1999:blog-9067871677645313206.post-18430407075568166422010-12-14T10:22:00.001-08:002010-12-14T10:22:13.744-08:00RIMM Implied Volatility - Taking an uncharacteristic pre-earnings plunge <a href="http://ping.fm/uzo5t">http://ping.fm/uzo5t</a>optionsANIMALhttp://www.blogger.com/profile/17843639413203271237noreply@blogger.comtag:blogger.com,1999:blog-9067871677645313206.post-82968026270524895542010-12-13T14:41:00.001-08:002010-12-13T14:41:23.049-08:00What Does Netflix (NFLX) and a County Fair Have in Common? <a href="http://ping.fm/7J1DV">http://ping.fm/7J1DV</a>optionsANIMALhttp://www.blogger.com/profile/17843639413203271237noreply@blogger.comtag:blogger.com,1999:blog-9067871677645313206.post-51713310909410385092010-12-13T14:37:00.001-08:002010-12-13T14:37:46.530-08:00What Does Netflix (NFLX) and a County Fair Have in Common?If you like volatility, if you like high risk, if you like to stay awake at night, have I got a stock for you! Netflix (symbol NFLX) is being day traded and driven radically both up and down in price. Seems like you can't go more than a day before NFLX changes direction and moves 5 - 10%! Now THAT'S some volatility!<br /><br />Here's the thing about NFLX - they have a great idea, a great product and some really great management. But what they also have is a very high profile and an investment community with very little understanding as to just WHAT NFLX metrics are and should be. Do you fully understand their revenue model? I think that I do, sort of, but do I REALLY know it like I do the airlines? Nope. Not a chance. Way too many opinions out there and it's all speculation.<br /><br />Here's the thing that concerns me about TRADING NFLX... it doesn't seem to really want to trend. Oh it did for quite a while and that was a great ride, but now it is being day and swing traded. Most likely will continue to do so for quite some time. NFLX's price action reminds me of the "scrambler" ride at those wonderful county fairs... Question is, can you ride it without getting slightly ill? No? me either. So for me, for now, NFLX is strictly a WAY out of the money type trade (like a bull put that is structured about $50.00 out of the money!)<br /><br />Jeff McAllister<br /><br />Source: <a href="http://www.optionsanimal.com/what-does-netflix-nflx-and-county-fair-have-common">http://www.optionsanimal.com/what-does-netflix-nflx-and-county-fair-have-common</a>optionsANIMALhttp://www.blogger.com/profile/17843639413203271237noreply@blogger.comtag:blogger.com,1999:blog-9067871677645313206.post-72149249607739948492010-12-11T11:44:00.001-08:002010-12-11T11:44:01.381-08:00OptionsAnimal Weekly 12/11/2010 <a href="http://ping.fm/nwlQv">http://ping.fm/nwlQv</a>optionsANIMALhttp://www.blogger.com/profile/17843639413203271237noreply@blogger.comtag:blogger.com,1999:blog-9067871677645313206.post-6480865650985121932010-12-04T10:43:00.001-08:002010-12-04T10:43:52.994-08:00OptionsAnimal Weekly 12/4/2010 <a href="http://ping.fm/GPzPy">http://ping.fm/GPzPy</a>optionsANIMALhttp://www.blogger.com/profile/17843639413203271237noreply@blogger.com