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Strategies & Market Trends : How To Write Covered Calls - An Ongoing Real Case Study! -- Ignore unavailable to you. Want to Upgrade?

To: tuck who wrote (10788)	5/14/1999 3:22:00 PM
From: Dan Duchardt	Respond to of 14162

I also have heard of a rule about not placing orders at open and close; Dan and Dave, who seem to be our daytrading experts currently in residence, might be able to expand on this. I do not know if that rule was meant to apply to options, which don't open until at least twenty minutes after the stock does. I can't speak to the question of what does or does not apply to trading options, having so far restricted my options trading to paper. As far as daytrading stocks, as in most things the practitioners of this craft come in different varieties. The most die hard daytraders I know have a simple rule they will never violate: go home in cash, ALWAYS!! It's considered too risky to take stocks home overnight, because you never know what world event, or analyst's opinion, or earnings warning will send the stock into a tail spin. Others take a more moderate view and will purchase stocks at the close that are on an uptrend if the overall market looks like it will support a gap open. Most of these traders expect to take their profits during premarket trading. They consider waiting for the open too risky. Swing traders (holding stocks anywhere from a few hours to a few days) usually call themselves daytraders too, but are of the opinion that the downside risk of a breakdown is offset by the upside potential of sequential gapping or running in a stock following a trend. I've seen both sides of this coin, as I am sure most of you have as well. I first bought ATIS, a promising biotech stock @ 10. After owning it for a few days, I woke up to the news of an FDA delay in approving a product for market, and a stock price of 4. I have since accumulated some in the 3-4 range, and patiently waited for the nice little breakout of the last week. I might break even soon. On the other hand I once sold shares of Neurex (NXCO, but the name and symbol no longer apply) after making 1/8 intraday because I didn't want to hold it overnight. The next morning the stock was up 8 from about 20. Isn't it amazing how we always seem to be on the wrong side of these things? Personally, I think I have lost more by arbitrarily selling everything at the close than I would have gained by holding, which is why CCing and swing trading looks attractive. You get some protection while you can still capture a lot of gain. However, as I wondered aloud when trying to execute my second roll up on Edify, it might be advisable to use market orders if the price is moving really fast. Pure daytraders have another simple rule: NEVER pay up for a stock; don't chase it. They will almost never use a market order to get into a position, but may use it to get out. It's far better to miss a trade than to get executed as the stock is turning against you. Market orders are sometimes used to get out of a position; if you have enough profit you can afford to give a little back, rather than missing your price and giving back more, and if something is really going against you, you might want to get out at all costs. I'm not sure any of this applies in the options market, where many times there are only a few trades each day. My gut feeling is limit orders are the only way to go here. I don't know how honorable the option specialists are WRT filling market orders at their published quotes. Seems like quotes suddenly change a lot around the time someone is getting filled. Is that because traders are reacting to sudden changes in the market, or is it the market that is reacting to the traders? Witness the 250 contracts of WorldCom June90 calls that traded today accompanied by a sudden drop in the ask from 3_3/8 to 3_1/8 that lasted all of 16 seconds. What was that all about? Dan