Day Trading NFLX

Session 1 - This months No Risk stock: CME The Chicago Mercantile Exchange is a very volatile stock with large price swings every day. They just had the 2011 4th quarter earnings and the stock jumped over 6% but not on "good news" per say, they jumped on Tax-Related adjustments which means they will save money in the future even though they are losing revenue from slowed trading volumes. They also announced a new structuring deal for farmers to the tune of $100M to offset losses created by the MF Global disaster. Let's see, the company is losing revenue, they are getting rebates from restructuring owed taxes and they are spending money to prop up failed ventures. Hmm, companies in my experience, who operate like this are headed DOWN but with the FED actively involved in propping up the money, this horse could have a lot of run left in it. Looking over a long term chart, we see they have been in a steady down trend for some time now; with a solid bottom in place around the $220 price area. What concerns me is the rapid rise (in 3 trading days) of more than a 50% retracement of a downtrend that took over a year to make. I am as optimistic as the next person (NOT), but I know one thing, you can't fight the FED, so I will keep this one on the top of my list and only trade a small load long until I build up some insurance puts under me. For this example, I am going to trade a position of 100 shares long during the trading day. I will add shares up to my full margin if I see opportunities to exploit for more profits.
Session 2 – Options Here are the options prices for the month of March. I would sell 1 contract of Naked Puts of the $260 Strike then buy 2 contracts of the Mar 250 Puts. Next we look at the ATR of CME for the past 10 trading days to get a baseline of expected movement each day: As you can see, the stock has a daily average of $6.00 which is a very good amount of volatility for us to capture profits. Next we look at our cost of insurance and our total risk to determine our daily profit needs to assure we are covered. As you can see, we only need to make .43 cents per day to cover our maximum risk. Our stop will be placed at $250-$260 because we will need the capital in our accounts to meet any broker requirement to take delivery of the stock should CME fall below $260 by expiration. Finally we will monitor the trade and take some of the daily profits to add more put and call options. ======================================================================================================= 2/10/11 - CME keeps moving on up! I am starting to buy more insurance puts in the March expiration. This particular stock has very expensive options, so it would be better to trade 300-500 shares so you make enough daily profit to buy insurance options and not eat up your profits. ====================================================================================================== 2/14/12 - CME is still attempting to climb higher and should reach the whole number of $300 per share. Most likely it will be an intraday high and selling will kick in, so I will be looking for shorts if the stock fails to hold above $300; which is not likely since there is a lot of open interest on the Mar and June options. Ok, have enough puts to cover my day trades so now I am looking to bank some more profits. ======================================================================================================= 2/26/11 - CME failed to make a higher close for this last week of trading which indicates it tired. The overhead resistance is at $300 so we need to watch the price action as we head into the beginning of March trading. I anticipate some selling pressure this week and will look for opportunities to short if $297 is not taken out.
More No Risk Day Trading Plays: Profits Up! The donFranko

Session 1 - This months No Risk stock: CME

The Chicago Mercantile Exchange is a very volatile stock with large price swings every day. They just had the 2011 4th quarter earnings and the stock jumped over 6% but not on "good news" per say, they jumped on Tax-Related adjustments which means they will save money in the future even though they are losing revenue from slowed trading volumes. They also announced a new structuring deal for farmers to the tune of $100M to offset losses created by the MF Global disaster.

Let's see, the company is losing revenue, they are getting rebates from restructuring owed taxes and they are spending money to prop up failed ventures.

Hmm, companies in my experience, who operate like this are headed DOWN but with the FED actively involved in propping up the money, this horse could have a lot of run left in it.

Looking over a long term chart, we see they have been in a steady down trend for some time now; with a solid bottom in place around the $220 price area. What concerns me is the rapid rise (in 3 trading days) of more than a 50% retracement of a downtrend that took over a year to make.

I am as optimistic as the next person (NOT), but I know one thing, you can't fight the FED, so I will keep this one on the top of my list and only trade a small load long until I build up some insurance puts under me.

For this example, I am going to trade a position of 100 shares long during the trading day.

I will add shares up to my full margin if I see opportunities to exploit for more profits.

Session 2 – Options

Here are the options prices for the month of March.

I would sell 1 contract of Naked Puts of the $260 Strike then buy 2 contracts of the Mar 250 Puts.

Next we look at the ATR of CME for the past 10 trading days to get a baseline of expected movement each day:

As you can see, the stock has a daily average of $6.00 which is a very good amount of volatility for us to capture profits.

Next we look at our cost of insurance and our total risk to determine our daily profit needs to assure we are covered.

As you can see, we only need to make .43 cents per day to cover our maximum risk.

Our stop will be placed at $250-$260 because we will need the capital in our accounts to meet any broker requirement to take delivery of the stock should CME fall below $260 by expiration.

Finally we will monitor the trade and take some of the daily profits to add more put and call options.

=======================================================================================================

2/10/11 - CME keeps moving on up! I am starting to buy more insurance puts in the March expiration. This particular stock has very expensive options, so it would be better to trade 300-500 shares so you make enough daily profit to buy insurance options and not eat up your profits.

======================================================================================================

2/14/12 - CME is still attempting to climb higher and should reach the whole number of $300 per share. Most likely it will be an intraday high and selling will kick in, so I will be looking for shorts if the stock fails to hold above $300; which is not likely since there is a lot of open interest on the Mar and June options.

Ok, have enough puts to cover my day trades so now I am looking to bank some more profits.

=======================================================================================================

2/26/11 - CME failed to make a higher close for this last week of trading which indicates it tired. The overhead resistance is at $300 so we need to watch the price action as we head into the beginning of March trading. I anticipate some selling pressure this week and will look for opportunities to short if $297 is not taken out.

More No Risk Day Trading Plays:

Profits Up!

The donFranko