Last Update: 4/25/2017
2/23/2017
Earlier today I’ve bought Call options on Russell 2000 ETF (IWM) at 138.46. I’ve been watching IWM since it broke out of that almost-2-months-and-half consolidations since the early-December. On 2/15/17, we saw confirmation of the breakout (from the consolidations) as the price pushed further away from 138ish resistance (red box). As the Russell (IWM) continued to move higher since the breakout, I was very tempted to go long on that gap-up on this Tuesday (2/21/17) morning. But I have decided to wait as I thought we may see a pullback for the retest of that pivot at 138 (red box)—if it didn’t pullback, I would’ve just let it go. Today, we did retest the pivot (red box), and as it started to find support in that vicinity during the mid-day, I pulled the trigger and bought calls there. I think there is a chance that we may see bit more selling, possibly filling the gap at 136.72ish-“Gap Open”-area, if so, I will buy more calls at that level. More updates later.
Tweet
3/1/2017
Earlier today, little after open, I’ve added more calls @ 140.18. IWM did close higher at 140.36 with +1.83% gain for the day. Pretty impressive move considering the fact that IWM recovered all of the loss incurred yesterday, and then some. Current support I am watching is the 139.68 which is the gap-up level this morning, I think as long as we stay above that level we may continue to grind higher. Let’s see how it plays out remainder of this week.
Tweet
3/8/2017
Earlier today, I’ve decided to add more calls into my existing positions on IWM @ 136.53. We are oversold in the minor-term, so I think, at least, we will see oversold bounce in the next few days. The question is, will that oversold bounce become something more or just get sold after few days of pop. In the intermediate-term (looking at things since late-2016) we are still in an uptrend, while the minor-term sentiment is still bearish as of today. If IWM drips lower tomorrow, I think we will see dip buyers really coming in at 135.00; if we start to bounce in this vicinity, I think 137.80 – 138.70 (gap fill 3/3/17) could be where it’s headed for the next week.
Tweet
3/16/2017
Yesterday, we finally saw that strong move to the upside with the “Breakaway Gap” to jump start, as, prior to the move, it has been retesting that rising-support line (see blue rectangles) all last week and earlier this week. Today, buyers were able to keep the price above 137.50ish pivot (red box) digesting the gain from yesterday (IWM actually closed the day with +0.13% while SPY -0.20%, showing relative strength). If we can able to hold above 137.00ish in the next few days, I do think we may see another all-time high price and beyond. I am still calmly holding my full call-positions since 138.46, 140.18 & 136.53 on IWM.
3/28/2017
IWM has been a tough trade since my entries in early March. As per my last SPY article, I was looking at few key levels for a strong bounce in the overall market which seems to be happening last few days here. For IWM, I wanted to see if we can stay above the 133-134 vicinity where “100SMA” is residing and the horizontal support (red). We did see a pretty strong gap down yesterday morning, but it recovered (this is why I use mental stop) and we did see a pretty strong follow-through today. Good news is we have cleared 135ish resistance, so it looks good in the minor-term; but bad news is, we still have intermediate-term downtrend resistance to deal with (blue dotted) at 137ish. We may see a pullback in the next few days to retest the 134.90ish level, but ultimately I think we are going to retest that downtrend resistance. Let’s see what happens remainder of this week. I am still holding my full call-positions since 138.46, 140.18, & 136.53.
4/11/2017
I have been very patient with my IWM trade since the first engagement back in late February, as I still believe that it could breakout of this consolidation pattern we’ve been in since early December of 2016. Last few months though, we really haven’t been trending as we saw volatility with many up-and-down sideways moves. It was not until this week I start to see some kind of pattern here as I have annotated with purple; it seems as though we are forming Inverted H&S formation. It has not been confirmed as it needs to break well above the “138 Breakout Zone” before the bullish reversal pattern can be confirmed. “100SMA” is where we’ve been seeing buyers show up last month and heavily today (we did see relative strength on IWM with +0.80% while SPY -0.12% at the close today). Let’s see how it plays out here in the next several days. I am still holding my full call-positions since 138.46, 140.18, & 136.53.
4/24/2017
Finally! IWM has broken above the “Breakout Zone” which I’ve been talking about since the last update–this is a very good sign in the development of an uptrend here. I am open to a possibility of a pullback to 137.00-137.80 level, and as long as we stay above the level I think bulls can successfully execute this breakout. At this point, Inverted H&S has been initially confirmed which it may want to retest the neckline area (137-137.80ish) before the full confirmation. I have been holding my long-term calls for about 2-months (since the first engagement) now, and the positions are starting to dimish loss at a rapid level with today’s move. For short-term support and sentiment, if we can hold 138.50 I think there is a chance it could continue move higher. Let’s see if we see a follow through before the week ends. I am still holding my full call-positions since 138.46, 140.18, & 136.53.
4/25/2017
We had another gap up this morning closing the day with +0.97%. I was looking for the follow through, and this morning’s gap up will do. Now, when the inverted H&S initially gets confirmed (by breaking above the “Neckline”) as it did last few days, many times it likes to retest the “Neckline” (138ish) as a new support. So I am open to a possibility of pullback to about 138.50-139.00 level before bouncing back up for another leg higher; of course there is a chance we could continue to grind higher at this level, and for that to happen we would want to see 140.00-level hold tomorrow. Either way, I am very pleased with what I see in the price-action just last few days as my calls are, finally, starting to turn green. I am still holding my full call-positions since 138.46, 140.18, & 136.53.
PART 2
What is the strategy to buy calls instead of the actual etf? As calls can lose their value through time.
Yes, but calls will give you much higher profit. ETF moves 8% you make 8%, but with calls, I can probably make 80-100% on the LEAPS I bought
Kay you are a god in my book!
Thats too flattering, thanks
Kay are you in Jan 18 expiry?
yup
Hey kay question…I’m interested in adding position trading via options however I’m curious how much theta affects those far out options when price shifts or consolidates? Do u ignore time decay and pullbacks bec of stops or is being in the money protecting huge losses and u heloping u hold with minimal pain?
So with todays move, my IWM long-term calls are finally turning green. Yes, with the consolidation and pullback, time decay will take effect but you can’t always expect for your trades to go perfectly every time. Instead of getting chopped to death with monthlies or even weeklies, now I can salvage this position into a winning position by getting into a long-term calls.
Hi kay couple of questions. One. Are you always using at the money calls? Second what levels are you looking for exit?
No, not always, My next target is $150 on IWM
Any rationale for the target price?. P.s. How do you control the weight /volume for each stock?
Target price is based on my targeting strategy. You would want to see volume coming in upon breakout or at a pivot level of a bounce—but for a index, I tend to not put too much weight on it as it can move higher and higher without volme
Thanks Kay. I mean how much % of your total portfolio you would allocate to each stock? Any difference between using stocks and options for the same stock in yr allocation? Lets say if you decide to allocate 10000 to one stock. If you later decide to buy option instead of stock, would you buy the same amount long option or?
It really depends on your portfolio size and depends on how many stocks you hold… I tend to do more % for stocks vs options its because options I would hold 3-9 months but stocks 1-3 years.