₦airaland Forum

LadunaI:
I only traded FX and Commodity for now, but my approach can be successfully applied to other Asset Classes albeit having enough data to cover the period of my analysis. Though I have over time gone through CFD, and recently, aggressively into Stocks but not yet going LIVE with it.

I think it will be NICE to collaborate on any issue or security of choice, and share our various approach of investing in them, that would be absolutely excellent.

Thanks

check this out your lovely Southwest Airline

Please explain this graph, what exactly is it showing?

@ Ladunal,

Yes I do plan to dump the stock at the end of January, I'm also hoping Trump will cut capital gain tax to 15% as he said, so it would make more sense waiting a little while. You are right, your chart above do show the stock might be in overbought territory right now. Do you currently trade stocks and other asset classes? Maybe you can also share some ideas here.

So back in September, I bought & sold Disney (DIS) options. I have been following the stock for sometime now but it had been lagging behind other DOW stocks and the broad market in the past 6 months or so. Once again, wall street analysts have written off the name because of recent decrease in ESPN subscribers. Again I just have to wonder how these so called experts come to conclusions about these stalwart companies without facing any negative repercussions. I mean this is a company that's been around for over 100yrs, I would at least give them the benefit of a doubt to figure out any current woes they might be having particularly when it comes to lower ESPN subscriptions and cord cutting fears. Even besides that, this is a company with a global presence, blockbuster theme parks both in the U.S and China, multiple record breaking movie releases and easily recognizable characters fetching them billions every year. Give me a break, Disney owns franchises like Starwars, Frozen, Toystory, Mickymouse, Minions ETC. Over the weekend, Starwars Rogue One smashed box office expectations bringing in over $290 million as more people watched the movie than anticipated, hence the reason the stock is higher today. I hate to be a contrarian, but I only invest in companies I know and understand.

So to the meat & potatoes, I initiated a bullish option trade in the name: sold an in-the-money put, then used the money from the sale to buy a far out-of-the money call and an at-the-money put (see screenshot). In other words, I didn't pay for this trade at all.

sold 5 contracts of the January 20th 2017 put
bought 5 contracts of the January 20th 2017 Call
bought 5 contracts of the January 20th 2017 put

See the screenshot below, the total gains for this trade is the sum of all 3 which is $2,660 + $1,365 - $735 = $3,290.

Now this is a profit basically out of nothing as I didn't pay for this trade, it paid for itself. There's still 1 month to expiration and I'm not about to close out right now as I strongly believe this name has more legs to run. I usually place some kind of hedge in my trade just in case anything happens, that's the reason for buying the DIS $85 put which will continue to lose money as the stock goes higher, had I just focused on just the profitably trades, I would be up over $4k. As I get better with options, I might take more riskier positions for a higher return margin, but i'm not there yet. Also, not all my trades are profitable, I have some bearish trades costing me money, its always about striking a balance.

LadunaI:
I really like most of your stock picks, by the way do you use purely fundamental or technical analysis? Or both?

Can this approach be replicated on any other asset class?

Thanks.

This is a really good question and my apologies for replying late. I'm guessing when you talk about other asset classes you are referring to bonds and fixed income classes, both of which I don't know much about unless you meant something else.

I do rely on both fundamentals and basic technical analysis if I can really call it that. I pick stocks based on the market trends and after familiarizing myself with the company and thankfully, I know most of the companies' stocks I own. When I see a name that I like, I first look at the chart to note any upward & downward resistance; then I set a small limit order close to the recent price "floor" while hoping for a pull back to buy more at an even lower price. Take for example this major airline stock I own LUV (Southwest Airlines), I bought in January of this year. This airline offers really cheap flights with basic to minimal frills while thriving on narrow profit margins. I nibbled on the name in the beginning of the year when the price of oil was trending lower which also means jet fuel will be considerably cheaper which should increase the airline's revenue. See the screenshots below, showing the January 27th 2016 purchase of 50 shares @ $37.37 a piece. Also see the attached 1yr graph for the stock, there seems to be some kind of floor/support around $36 as the price bounces higher while approaching $36. Being more of a long term investor, i'm not too fazed with the daily price swings as I would ultimately prefer to hold on to stocks for at least a year. So as you can see from the graph, the stock did shoot up to $48 in mid April before trending down to $36 between August to September, once again i took the opportunity to buy another 50 shares on October 26th at $37.28 (see screenshot) which is close to my initial purchase price in January. Today, I own 100.262 shares (the .262 is automatic dividend reinvestment) and the stock price is $50.11 or 34% above my cost average.

Bottom line, I don't know if I can call this very basic graphical analysis a technical analysis as I don't place much emphasis on the moving averages and other indicators, but thus far, this layman interpretation of charts and fundamentals have been good enough. I will learn more about technical analysis and plan to apply it even more as I delve deeper into options, but for right now i'm content with this bare bone analysis.

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Jideams let us know the outcome of your weeklys option, I guess it expires this Friday.

On other news, TXMD, one of the pharmaceutical stocks I own is popping a whooping 23% overnight and I'm up 24% overall. I own 900 shares only because the stock kept tanking and I kept buying the dip to reduce my cost average. Results came out last night showing a successful 3rd phase trial of their menopause drug. I'm pretty sure it will shoot up even more once the market opens today. These small cap stocks have been powering my portfolio thus far and I'm happy about it.

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Jideams:
Yeryer,


what is your average hold time for these stocks. Days, weeks or Months. I have decided to go long on my position till the market hits my stop loss unless the stock is moving sideways for too long in heaving swings.

Believe it or not, I hold on for the long haul unless there's a sudden pop in the name or if I feel like the underlying appeal is deteriorating. On average, I guess I hold on for about 6months but my target is really 1yr to prevent that high capital gains tax. Even when the market was selling off before the election, I held on because if I had sold, my profits will register as short term gains and the IRS will want a premium tax from it. Look at this oil pipeline stock MDR for example, I'm currently up 84%, although it was selling off before the election but I wouldn't sell a month before the year ends for tax purposes... maybe early next year. Also a Trump presidency is supposedly good for the oil sector, coupled with the expectation that OPEC & Russia will cut their oil supply this week (fingers crossed), makes sense to hold a Lil longer.

Jideams:
Yes, they will be installing a fiber optic at home this weekend, that should give 2 24/7 connection as 4mbps. From what I could see, its seem you had a call and put position in GME ( called a strangle) what is the plan here, sell one and hold one ?

Yeah, sold the put to fund the purchase of the call option. Will hold and hope it expires worthless.

Fiber optic in naija?? Which company and what's the cost?

Jideams:
YerYer,

Travelling to Nigeria this weekend and will be in lagos till 10 January 2017. I will be working from home for the whole month so let me know when we can test the video session or the webex. so you let me know a good time and we can have one next week. Please download webex and install on your labtop, it is free.

Alright, will download it today. You are always traveling na wa o. I will also be traveling in January. Hope your network will be good back home.

[quote author=Jideams post=51447630][/quote]Nothing sweeter than double digit returns, I like how you set trailing stops to cap your profit and limit your loss, again your understanding of charts does help you decide your exit point and that's good.

So few days ago I said I took a big risk trading options on a stock i've known for some time now. That stock is Gamestop (GME); it is a brick and mortar & online retailer of video game consoles and games. It reported lukewarm 3rd quarter earnings last thursday. Wallstreet analysts have written off this company as the next Blockbuster; if you can recall, Blockbuster used to sell & rent dvds until it was forced into bankrupcy by the disruptive nature of netflix and other online streaming platforms. The belief is, Gamestop wouldn't last very long as more and more gamers buy or stream their games online while avoiding the stores. This is a flawed reasoning if you ask me; some people still enjoy stopping by the stores to test out new games before buying it. Moreover, Gamestop also buys & sells used video games which requires customers to visit their physical stores.

Notwithstanding, I used this opportunity to sell 20 April 2017 put contracts of which i used the proceed to buy 20 April 2017 call contracts. My initial price target was far lower than what i ended up paying and its just unbelievable! The moment the market opened at 9:30am, the asking price shot up a whooping 20%! I was going to set a limit order but i realized that order will never fill because the price kept shooting up rapidly. As you can see from the screenshot below, I bought in around 9:33am, that's just 3 minutes after the market opened and I still paid over 20%. So that tells me other traders have the same thesis like me and they are pilling in, trying not to miss out on this opportunity.
This trade structure theoretically has "unlimited" profit potential if the underlying stock price shoots above $27.4 on expiration date. Unlimited profit potential stems from the fact that the stock could end up costing $1000 per share but of course that's unrealistic. Now to the risk profile, should the underlying stock price crash below $23 i will be losing money; the most I can lose is about $44000 or $2200 per contract. Again this is the maximum amount I can lose if and only if the stock price crashes to zero; as you can see that's also unrealistic. Currenlty up 23.74% on the call option and 6.95% the put option. I'm definitely hoping I don't lose my shirt on this trade, lets see how it goes