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Strategies & Market Trends : Options
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To: jjetstream who wrote (7405)5/5/2000 9:10:00 AM
From: Poet  Read Replies (1) of 8096
 
Hi jjetstream,

Last night I said I'd post more of my options trades, including the reasoning behind them. Here goes:

I'm trading RMBS June 220 calls. RMBS is due to split 4:1 on June 14th, has traded as high as 471 in 2000 and is highly volatile. Here's the chart:

siliconinvestor.com

It bounced at the 130 level during the April crash and now has support in the mid 190's. Yesterday's activity in the stock is signified by a doji (candlestick pattern) which means RMBS could break out in either direction.

I've been buying slightly OTM calls (which since they are not the front month, give me a little time) which are highly sensitive to movements in the underlying. I buy them when RMBS approaches support, then immediately set a limit sell aproximately five points higher. Sometimes I'm filled a hour later, sometimes I may wait a day, but trading RMBS' volatility by the using the chart, in the face of an impending 4:1 split and general bullishness on the chipmakers has made this a lucrative play for me.
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