This page last update: February 6, 1997 @ 9:00PM
Is trading options just another trip to the track?
Good evening traders and welcome back for another chat. Before I give tonights analysis I want to explain how I intend to run Deaner's Prudent Trader Avisory. As you should be aware by now, the Prudent Trader intends to give you the very best service at the very best price (free until further notice). This means that I have begun providing intraday updates to my page ON CERTAIN DAYS. Currently I am unable to post updates during trading hours when I am knee deep in slavery, however, on those days when I am free from slavery, I shall provide updates once during the morning and once during the afternoon. The times will be around 10:15AM eastern and 3:15PM eastern. At those times if it is deemed important, I will post an update as it pertains to the price points that I have outlined in my pervious days nightly commentary. When you see RED ALERT on my evenning commentary, you should know that intraday updates will not be provided during the next trading day. This is only a temporary situation and soon I will be providing updates each and every trading day. Fair enough?
Tonights title makes reference to the race track. Why? Because too many traders treat trading options as if were a night out at the track. First, they bet every race. This a mistake when trading options. It is prudent that most of the time option traders be on the sidelines and not in play. Today was a case in point. Did anyone make money being long or short? Did anyone have fun going nowhere fast? The Prudent Trader was comfortably sidelined waiting for 1 of 2 things to happen. Neither did so I was relaxed the entire day. Things did get close for about 20 minutes, but that was it for me. Did you have the same experience? Also, many who bet the ponies have been known to choose a horse based on the horses name. This is absurd but it's a system nonetheless. It's the Prudent Trader's opinion that buying a call because you just finished selling a put (and visa versa) is akin to betting on a horse because of its name. We all know that trading options is an investment alternative. Let's not treet it like a lottery ticket purchase. Ok? Let's talk about the OEX.
Going into today, the Trailing Indicator had signaled a FULL SELL condition. As of the close today, the Full Sell condition remains firmly in tact. The Deaner Indicator (and all that it entails) remains intact too. The OEX vasilated back and forth today and only once came close to a price point I mentioned in my previous commentary. And a good price point it was too. After the lunch hour, the market begin to test yesterday's intraday lows. The OEX dipped to 757.42 which was a tad lower than the 757.52 intraday low set yesterday at the peak of the panic sell off. The Prudent Trader was on record as stating the price point to go short again was 756.50. If you jumped the gun you get a D- for todays class en route to your GED for trading OEX options. The Prudent Trader is not a random number generator and that price point was carefully selected. Since it wasn't hit, the Prudent Trader held back from purchasing any puts. Likewise the purchase of calls based on a desired price points was never even remotely a possibility.
If we look at the OEX chart, you will see that the ascending triangle (marked between the yellow lines) remains in tact. This market can go either way but because tomorrow is another day, I have revised my price points for entering any new option trades ever so slightly. A drop below 757 will cause the Prudent Trader to purchase a set of puts or a rise to the 770 price point will do the same. Call purchases are not an option at this time because 770 is less that 10 OEX points away and that is unsuitable for trading using the Prudent Trader's discipline. Should I go short and things turn against me I will cover my short positions in the following manor. On a short move at the 757 price point, I will cover upon a retracement back above 762.50 . On a short position entered at the 770 price point, I will cover at the 774 price point.
Let's focus a bit on that plan to go short at 770 . Tomorrows fundamental data, the employment statistics has the potential to move the market to this price point within the first 30 minutes if it is fudged right by the government and massaged right by the spin doctors employed by the big brokerage firms. Once again, the Prudent Trader will have to assess the quality of the move. The plan to go short at 770 is NOT A DONE DEAL. I will definately provide an update on the alert button as soon as I make a decision. However, the break below 757 IS A DONE DEAL.
That's all for tonight. Browse around the rest of my page and in particular read my Trailing Indicator and Deaner Indicator buttons if you are new to Deaner's Prudent Trader Advisory. For you regualrs, check out the Alert Page to see how it reads. Have pleasant and safe trading day tomorrow. And remember, the market has a tendancy to move in extremes on Friday afternoons.
