“Patience, Grasshopper” Posted at 8:18 AM EDT 4-5-17

April 5, 2017 by Doug Campbell

“Patience, Grasshopper” Sometimes Less is More For Traders.

When I was a kid one of my favorite shows was a TV series called “Kung Fu.” When the student played by actor, David Carradine wanted to rush his education; the Kung Fu master would say “patience, grasshopper.” The phrase is so popular it has become part of the US lexicon. However, I’m not sure many fully understand it’s context. What the master wished to confer was that the desire to accomplish was not enough. The real message was that with patient dedication, hard work, thoughtful study and repeated practice that success or mastery would be the result.

I think that kind of thinking applies well to trading and the current condition of the market. Sitting in front of our computers we often tend to rush in, but the desire to hurry the process most often produces an undesirable result. The trader with the patience to prepare, watch and wait for the best time to act will most likely succeed.

On the Calendar

Today on the Economic Calendar we have the ADP Employment Report, ISM Non-MFG, Petroleum Statis Report and the release of the FOMC minutes. A big day for news to be sure. Of those reports, it’s the report on the oil supply and the FOMC that have the most chance of moving the market. On the Earnings Calendar, there are 23 companies reporting today.

Action Plan

I have mentioned in my morning notes and several times during the Right Way Options sessions that we should expect choppy price action. Not that I want to be repetitive, but I believe we can expect more of the same the rest of this week. After the morning rush, you should not be surprised to see the volume to become very light as we wait for the FOMC minutes. After their release, there will be a flurry of activity that new or inexperienced traders would be wise to avoid. Keep in mind the big Employment Situation report will be out on Friday morning. The market will likely once again become choppy until it’s release.

Having said all of that my plan for the day is to be very patient watching, waiting and preparing for my next trade. I have only made two entries this week, and that number may not grow at all today. I don’t trade just to trade I will follow my rules and remain in control of my emotions.

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Trade wisely,

Doug

Stock Option Basics Posted 4-4-17

April 4, 2017 by Doug Campbell

Stock Options – Your Options Trading Success Starts Here!

Trading stock options may be a little scary at first due to their level of complexity. However, options trading provides many benefits well worth the additional learning curve they may require. Most people think the power of options comes from the “leverage” they provide. In truth, the real power of options is in their versatility. Depending on the strategy used the trader can construct positions that are conservative to those used for pure speculation. The birth of options came from the need to manage the risk of significant positions. Learning effective hedging strategies alone is well worth the effort required to educate yourself on these valuable tools.

What is a Stock Option?

So, What is a Stock Option? Simply stated options are contracts between one Buyer and one Seller. The Buyer of the contract is known as the Holder while the Seller is called the Writer. Option contracts are standardized into 100 share lots and based upon the underlying equity. The terms of the contract include the Strike Price, Expiration Date, and of course the Underlying Stock upon which it the contract is structured.

Strike Price

The price which the contract writer (seller) is obligated to accept as payment for the purchase of the underlying stock is called the strike price. The holder (buyer) has the right to buy the underlying stock at the strike price, however, is not obligated to do so.

Expiration Date

One indisputable fact about options contracts is that all of them will expire. It’s critical, for the options trader to know the expiration dates as they vary depending on the instrument used. For example, Monthly options are the most widely used contracts. The last trading day for a monthly option contract is the 3^rd Friday of the month, yet it technically does not expire until Saturday. A Weekly options contract will expire the Saturday just eight days after issue while a Quarterly option expires at the end of quarter no matter what day of the week.

If the price of the stock, is below the strike price at expiration the contract is (out-of-the-money), and the option contract is worthless. Therefore, if the stock is above the strike price at expiry, the option is (in-the-money). The Options Clearing House will transfer the stock of an In-The-Money Option, to the holder at the listed strike price.

Rights and Obligations

An option contract Buyer acquires the right but not the obligation to buy the underlying stock at the Strike Price before the expiration of the contract. Thus, the Buyer has the right to buy the underlying stock but may choose to sell the option contract collecting a profit or stopping a loss. It’s important to note that the buyer’s rights to exercise the contract are only valid if the value of the underlying stock is greater than the strike price before expiration. The seller of the contract has an obligation to fulfill the terms of the contract at expiration or upon the buyer’s order to exercise. However, the seller can buy back the contract to take a profit or stop a loss before expiration or exercise.

Option Types

There are call options and put options for each strike price. Call options are often thought of as a long instrument while Put options are considered short instruments, yet the opposite may be true. Holders of calls or puts are in long positions. Therefore, option writers are in short positions. The table below may be helpful in sorting out the details.

Premium

All stock options have a premium associated with them. Options writers collect a premium as compensation for the risk of carrying the obligation of the rights conferred to the buyer.

Moneyness

Moneyness is the term describing the relationship between the Strike Price of an option and the current Trading Price of the underlying equity. In options trading, you will commonly hear phrases such as In-The-Money, Out-Of-The-Money, and At-The-Money or see their respective abbreviations ITM, OTM, and ATM.

In-The-Money

A call option would be ITM when the strike price is below the current trading price of the underlying equity. For Example; a 30 strike, call option contract would be ITM if the current stock price is $30.01 or higher.

A put option would be ITM when the strike price is above the current trading price of the underplaying equity. For Example; a 40 strike, put option contract would be ITM if the current stock price is $39.99 or lower.

Out-Of-The-Money

A call option would be OTM when the strike price is above the current trading price of the underlying equity. For Example; a 25 strike, call option contract would be OTM if the current stock price is $24.99 or lower.

A put option would be OTM when the strike price is below the current trading price of the underplaying equity. For Example; a 50 strike, put option contract would be OTM if the current stock price is $50.01 or higher.

At-The-Money

As an equity price moves up and down at some point in time, it will be equal to the strike price. Thus, and ATM call or put would be equal to the current price of the underlying equity.

When an underlying equity is close but not exactly equal to the strike price of an option you will often hear, they referred to as near-the-money or close-to-the-money.

Intrinsic Value

The Intrinsic Value of a call option is the underlying stock’s current price minus the strike price. If the resulting difference is a negative number, then the intrinsic value is given as zero.

The Intrinsic Value of a put option is the strike price minus the underlying stock’s current price. If the resulting difference is a negative number, then the intrinsic value is given as a zero.

Extrinsic Value

Extrinsic value is the cost of time. The expression, “time is money,” is very true when it comes to option prices. As time passes extrinsic value diminishes until it reaches zero at the expiration of the contract. One of the challenges of options trading is this effect of time decay. Not only do you need to be right on direction but it’s also necessary to be correct on the trade timing.

Successful Options Trading

Learning option terminology and the mechanics of their construction is the first to becoming a successful options trader. At Right Way Options we believe a good education Key to trading success. We back up that belief with 10 hours of live options and stock training every week. If you would like to learn more, please visit our website and come back regularly for more valuable trading information.

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FREE Swing Trade Ideas

April 4, 2017 by Rick Saddler

Will the Children Ever Stop Fighting?

From a bull’s eye SPY:

Will the children ever stop fighting? Well, the answer is yes, the real question is when. This morning I was looking at the Volatility Stops (Indicator) on the 4-hour chart and the daily chart, it looks like between $233.40 and $236.10 is the battle-ground.

Looking over our watch list and scans we have no loss of bullish or bearish charts to trade, takes just a few min a day to do a little work produces great results.

FREE Trade Idea – CERN

CERN – Has broken out of our Rounded Bottom Breakout Pattern and the 200 period moving average. CERN is now a PBO flag at the T-Line.

Today we have 11 more members trade ideas located on the members trade ideas page.

Spotlight Trade – GKOS

GKOS was an HRC members swing idea on February 1; it’s currently up 26.71% at yesterday’s close.

Why GKOS? Because of the bullish J-Hook continuation pattern, and the bullish cup and handle that challenged the September 2016 highs with success. The February 1 trade alert to our members was because of the J-Hook continuation pattern coming from a little double bottom and support.

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Bullish Piercing Pattern

Trying to identify the Bullish Piercing pattern? Look for this essential criteria:

The Rising Three Methods signal includes more candles than your typical candlestick pattern: five in total. However, this signal is easy to spot due to the three minuscule candles in the center. If you’re trying to pinpoint the presence of a Rising Three Methods pattern, look for the following criteria:

First, there must be one long green (or white) candle. Second, that first candle will be followed by three or more short red (or black) candles. Third, those three short candles must be contained within the first candle’s body, meaning their real bodies cannot reach above or below the first candle’s real body. Fourth, the short candles should be followed by another long green candle. Fifth and finally, the last candle must close above the first candle.

Also, the Rising Three Methods pattern typically follows an uptrend. Read More.

Investing and Trading involve significant financial risk and is not suitable for everyone. No communication from Hit and Run Candlesticks or it’s associates should be considered as financial or trading advice. All information is intended for Educational Purposes Only. Terms of Service

Members Trade Ideas Below

Morning Market Prep Posted at 8:05 AM EDT 4-4-17

April 4, 2017 by Doug Campbell

Focus on the bigger picture and don’t get distracted by the hard right edge.

With the afternoon rally yesterday it’s very easy to become overly focused on the hammer candlestick and ignore the downtrend staring us right in the face. Most people are naturally positive. When money is on the line the desire to be right will influence how we visualize a chart. We may latch on the bullish hammer pattern and be blinded to the fact that it has occurred at resistance in the middle of a downtrend. Not the most helpful place for a hammer to form. Failing to see the overall chart pattern is a bad habit that can be tough to break.

We may latch on the bullish hammer pattern putting on blinders to the fact that it has occurred at resistance in the middle of a downtrend. Not the most suitable placement for a hammer pattern to form. Failing to see the overall chart pattern is a bad habit that can be tough to break. I call it hard right edge trading. It’s times like this when the trader tends to focus only on the candle and become blinded to the bigger picture. I can tell you from experience this habit can cost you a lot of money if not dealt with by taking just a few more seconds to focus on the bigger picture objectively.

I can tell you from experience this habit can cost you a lot of money if not dealt with by taking just a few more seconds to focus on the bigger picture objectively.

On the Calendar

This data-laden week kicks off the morning with a potential market moving report on Internation Trade at 8:30 AM Eastern. It’s followed shortly after by Factory Orders at 10 AM Eastern which can affect the market particularly if the number is a surprise. Also noteworthy is the Fed speaker at the end of the day. On the Earnings Calendar, we only have 15 companies reporting today but, it’s wise to continue with the process of checking rather than being surprised.

Action Plan

With the futures continuing to push lower in the premarket I’m inclined to become very protective of the capital. First thing first is not to panic. Emotional decisions are rarely the correct business decision. Remember to follow your trade plans because they are there to protect you from that emotional beast which costs you so much money. As always manage the positions that you’re in first. Set your stop orders and allow them to work for you! If your new, inexperienced or struggling as a trader the best course of action may to simply set this one out!

Watch Morning Video | Right Way Options

Trade Wisely,

Doug

FREE swing Trade Ideas

April 3, 2017 by Rick Saddler

SPY- Will the Bulls attack $236.70

Today’s Swing Trade Ideas – Double click trade plan to enlarge

In today’s trade ideas we have 11 swing trade ideas for the members, and we are featuring one free trade idea –

From a bull’s eye SPY:

Take a look at the weekly chart of the SPY, and you can see a Bullish Piercing Pattern formed last week. Looking back 5 to 6 candles you can clearly understand why $236.70 is acting as resistance.

Back to the daily chart – the last five bars have been bullish and has formed a bullish chart pattern; the Bulls simply need the energy for follow-through. Without it, the Bears can easily take over.

Spot Light Chart

JAZZ was an HRC members swing idea on January 3; it is currently up 33.11% at Friday’s close.

The trade idea started because of our signature Rounded Bottom Breakout chart pattern that led all the way to the 200-period moving average. Pulled back for another opportunity with a Doji Bullish Engulf and then followed through with a T-Line run. Consolidated for a couple of weeks and then back above the T-Line. It’s above support again with a little flag pullback.

Bullish Piercing Pattern

Trying to identify the Bullish Piercing pattern? Look for this essential criteria:

First, there must be a clear and definable downtrend in progress for the pattern to qualify as a Bullish Piercing pattern. Second, the first candlestick (which appears at the end of the downtrend) must be a black (or red), bearish candlestick. Third, the second candlestick must be white (or green) and bullish. Fourth and finally, the second candlestick (the white one) must open below the black candlestick and close above the black candlestick’s midpoint. So if you mark a dotted line through the vertical center of the black candlestick, does the white candle close above it? If so, it can qualify as a Bullish Piercing pattern. Read More.

Members Trade Ideas Below

Morning Market Prep Posted AM 8:05 EDT 4-3-17

April 3, 2017 by Doug Campbell

At resistance or not at resistance, that is the question?

The four top indexes closed right at resistance or just below. Now comes the decision point. Will it be the Bulls or the Bears answering in the majority? If you have been or watching or reading any of the market new headlines, the predictions have started the fly. There are the rose colored glasses crowd with the deep conviction that the changes made by the Trump administration will carry us much higher. Then we have the gloom and doomer’s, convinced we have been teetering on the edge of the world and our next stop is a bottomless pit. As I continue to say predicting is fools that will rob your hard earned money if you allow it to influence your decision making. Personally, I have always felt it is much easier to simply follow the market if or when it picks a direction. You and I are the CEO’s of our trading businesses. Therefore the ultimate decision always rests upon our shoulders. There will never be anyone that cares about our money more than us. So let’s make our own decisions! Let’s turn off all the outside noise and focus on price rather than waste our time being influenced by the predictors.

Items to watch

This is a big week on the Economic Calendar. We kick it off with PMI Manufacturing at 9:45 Eastern followed by the ISM and Construction Spending reports at 10. The ISM index number is the most likely to move the market. Other than that we have two Fed speakers out there stumping on interest rates today. It seems to me they have said plenty and have nothing noteworthy left to say. Some quiet would be nice! On the Earnings Calendar, there are 38 companies reporting today to be aware of. Keep in mind that the FOMC minutes will be out on Wednesday and the Big Employment Situation report happen Friday. Both of these important reports tend to give the market pause because of the uncertainty that comes with them.

Action Plan

As you know, I trimmed a lot of risk from my portfolio last week. If the Bears use resistance to begin moving the market lower, I should be affected very little as a result. On the other hand, if the Bulls step up to the plate I’m prepared with the cash in hand to start buying are low-risk entry points as they develop! First things first, I will manage existing open positions. After that, I will do the job of the trader and begin going through my watch list preparing for the next trade. I won’t predict, I will follow when direction as has been determined.

Watch Morning Video | Right Way Options

Trade Wisely,

Doug