Most option traders have a watch list which is simply a list of stocks they track for daily stock movement or alerts. Watch lists will help you keep track of stocks that may be undervalued or overvalued or show extreme volatility. They can even help you generate charts to show a general trend so that you can predict when may be the best time to purchase or sell an option.
If you are just starting a watch list it is usually pretty tough to keep track of too many stocks so keep it simple at first. Maybe start with five companies and gradually work your way up to 10 and 20 once you get better at digesting the information faster and thoroughly. If you have active positions and and are watching a few others it becomes pretty easy with the help of a few simple software tools and utilities.
It’s also best to track sectors that you are familiar with and ones that you understand. For instance, you could create a “Chip Sector List” or an “Restaurant Sector List”. After you have added five stocks to each sector you’ll eventually know 10 stocks that trade within that sector. When you work your way up to five or six sectors, next thing you know you’ve got 50 or 60 stocks under your belt.
It takes time to get acclimated with so many stocks but after time you will know the ticker symbol, where the stock is currently trading and what upcoming events will move the stock. Having this arsenal will increase your odds of success and make you more aware of what sectors or stocks to avoid.
Having said all that, I created a “Mining Sector List” for myself today. I’ve added four so far:
BHP Billiton (BHP, $91.91, up $3.03). The stock set a 52-week high earlier in the week ($95.61) and is in a strong uptrend. The 400-point drop in the Dow over the last few days knocked BHP from $95 to $88. Bullish options traders are active in the June 95 calls (BHPFS, $3.80, up $1.20 or 45%) and the June 100 calls (BHPFD, $2.45, up $0.89 or 57%).
Rio Tinto PLC (RTP, $521.57, up $12.29). Also set a new high this week of $558.65.
Alcoa (AA, $41.08, down $0.62). This stock set a 52-week LOW of $27 in late January and has had a solid month of May rising from $35 to $44.77 on Monday. Tons of action in the June 40 calls (AAFH, $2.72, down $0.43) and the June 42.50 calls (AAFV, $1.62, down $0.20) is taking place today.
Freeport-McMoRan (FCX, $117.35, down $3.23). Strong suits are copper and gold. Set a 52-week high of $127.24 YESTERDAY and is down $10 since the Fed Minutes came out less than 24 hours ago. The June 125 calls (FCXFV, $3.50, down $1.58) have fallen from $6.45 in the same time frame.
I see some good opportunities from this group…
Rick Rouse
Rick@OptionsMentoring.com
