HI Scott: Answers to your questions on buy/sell targets follows:
A primary factor on what initiates my buy and sell points is based on my watching the position closely for a long period of time. Recall in my previous post I explained the degree to which I typically follow a position. Consequently, I have a good indication as to what the option price will do versus the underlying, especially on intraday moves.
With that in mind, I can generally tell where to place trialing stops to play the weekly swings like you asked about. I do not set automatic targets, such as 15%, 20%, etc. for the moves as that will vary, sometimes greatly, with each position. On that portion of options that I do churn, I would say a general sell target is around 20% profit.
You asked if I used momentum and pattern changes. I'd say both. Again, on the assumption that I have watched that position for sometime and know how it will react, then I can establish when to execute on momentum, if that is the case, or by pattern, such as a channel indication on the stock. For example, if a stock is high in its channel, I'm more inclined to sell, wait a few days, let it pull back, then re-enter when it is lower in its channel. On momentum, if it is true momentum driven, I'll be more cautious to profit taking along the way and may exit quicker. Again, I don't have a set % target. Maybe after a 3-4 day run, I'd take profits and wait for a pullback, even if I have to wait another 3-4 days to get back in. Very hard to time it perfect as you know.
Sometimes a stock will simply oscilate up/down in a rather narrow range. Those are great because the options easily can move up/down 20-25%. If a clear pattern of this is established, then playing those swings is certainly more predictable.
Also, some simple little rules work wonders. Recall I really do try to keep it simple. Up 3 days, down 2.... ever heard that before? If a position has run a bit, I'm not going to get greedy, I'll take some off the table, wait several days, and re-enter, only to do it all over again.
The bottom line for me is to watch the position daily so I can anticipate the movement. I could not do the churning that you asked about if I didn't watch it every day where I could learn it like the back of my hand.
Hope you are having a great weekend.
RR |
