PowerShares QQQ Trade Update

I put out a trade yesterday morning that is off to a good start. The Dow is enjoying a triple-digit gain on the heels of a historic FOMC meeting. More importantly, the Nasdaq is outperforming the Dow as it is up over 2%, or 35 points, to 1,543. The PowerShares QQQ Trust (QQQQ, $29.85, up $0.69) look poised to break $30 if we can continue the rally and get an even stronger close.

We took a look at some December options that I said could easily experience 20%-25% swings during the trading day this week and here we are. I wanted to provide some insight to the trade and why I decided to go long. The December 29 calls (QAVLC, $1.15, up $0.22) were going for 80 cents and I was pretty bullish on the market’s direction this week. I had did my homework over the weekend and looked at the past trading patterns of “triple witching” week. I had also factored in the barrage of news that would be hitting the market and how sentiment could be turning. I normally play options on stocks but I figured there was a chance to make a quick return by playing the market straight-up.

Things got even better when as we got a break when the market opened lower on Monday morning and we were able to get into this position at 80-85 cents. My initial target was $1.20 as an exit. Well, we’re right there heading into the Fed meeting. If you close the trade right now you walk away with a 50% return in less than 24 hours. If you hold out and the market takes a dive on the Fed news, you will quickly see a loss. However, if the market continues its rally, you could make even bigger gains. You could also close half out and let the rest ride.

Welcome to the life of an option trader…

Rick Rouse
Rick@OptionsMentoring.com

]]>

Leave a reply Cancel reply

CFTC Disclosure:

GOVERNMENT REGULATIONS REQUIRE DISCLOSURE OF THE FACT THAT WHILE THESE METHODS MAY HAVE WORKED IN THE PAST, PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE PERFORMANCE. WHILE THERE IS A POTENTIAL FOR PROFITS THERE IS ALSO A RISK OF LOSS. A LOSS INCURRED IN CONNECTION WITH Momentum Options Trading, LLC CAN BE SIGNIFICANT. YOU SHOULD THEREFORE CAREFULLY CONSIDER WHETHER TRADING IS SUITABLE FOR YOU IN LIGHT OF YOUR FINANCIAL CIRCUMSTANCE. THERE IS SUBSTANTIAL RISK IN TRADING. A LOSS INCURRED IN CONNECTION WITH FUTURES TRADING CAN BE SIGNIFICANT. WE MAKE NO CLAIM REGARDING PAST OR FUTURE PERFORMANCE. WE MERELY TRACK EVERY TRADE AND SHOW THE PERFORMANCE OF ALL TRADES THE SYSTEM OR NEWSLETTER PRODUCES. SIMULATED TRADING IS DIFFERENT THAN TRADING REAL MONEY. HYPOTHETICAL RESULTS ARE NOT REAL RESULTS. PLEASE CONTACT YOUR BROKER ABOUT THE RISK OR TRADING STOCKS, OPTIONS OR FUTURES. ALL COMMUNICATIONS ARE OPINIONS NOT ADVICE.

CFTC RULE 4.41 – HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT BEEN EXECUTED, THE RESULTS MAY HAVE UNDER-OR-OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFIT OR LOSSES SIMILAR TO THOSE SHOWN.

Blog