To: R. M. JONES who wrote (3 ) 6/29/1998 11:51:00 PM From: John F. Summa Read Replies (3) | Respond to
I am not sure that my oscillator will help with getting out since it is used really for getting in, combined with a trigger price. When it gives a sell signal, I buy OEX puts even if I am long the calls. The calls are set to be stopped out at the previous day's low, usually. The oscillator is constructed using advancing and declining issues on the NYSE (10-day exponential moving average), and the high and low prices of the OEX the day that a signal is given. If the oscillator shows overbought or oversold, I wait for a significant move in the price to trigger an entry (below or above the high or low of the day the signal is generated-which is always the previous day because the indicator gets updated at the end of each day). As for getting out, I found that you should continue to do what you are doing, getting out each time with some profits. Forget about the home runs. I like to set a trailing stop at the low of the previous up/down day (depending if in puts or cals). But of course, I apply this only to the OEX, which is all that I trade. None of these rules are rigidly applied, however, as certain conditions may warrant suspension of them. But always know what you are going to do before entering any trade. Also, by dumping half your position after a quick move in your favor following the entry of a trade, you can establish a very low risk position to let run. For the OEX, this works very well. You can get in and let the position run for several days with virtually no risk if you sell half your position after a couple of points gained. You simply move the stop up to breakeven and keep moving it up/down in a trailing fashion as the position (either puts or calls) moves more in your favor.
