Squid Options » Index Trading

QQQQ vs NXT

Squid — Mon, 09 Apr 2007 08:28:27 +0000

I was reading over on IndexUniverse that “NYSE Arca Tech 100 ETF Offers Challenge To QQQQ”.

I really don’t know what the author was thinking. The NYSE Arca Tech 100 (NXT) is the old Pacific Exchange 100 Index. That is not the only thing old about the NYSE Arca Tech 100.

The index is price weighted, NOT by capitalization. That means smaller stocks make up a larger percentage of the index. This may not seem like a problem, until you try some sort of hedge where you need to buy all the stocks in the index. Buying a price weighted index , well acts more like a benchmark than a trading vehicle. This is something that I think I could write condors on a day.

Now the NXT is tax efficient, but carries a higher expense ration than others. Now it is a “Lower Expense ratio compared to the average actively managed mutual fund” as claimed on the http://www.nxt100.com/ website. Isn’t one of the reasons we buy ETF’s instead of mutual funds is the supposed lower expense ratio.

The only reason I can see this thing is as a benchmark. Maybe something you want to buy as a proxy for a diversified tech portfolio. But diversification alone does not make up for the fact that this ETF is just like all the others with a higher expense ratio. If you want the diversification, get spiders. If you want tech exposure, buy the QQQQ. I haven’t run the numbers, but I suspect the NXT is “a horse of an average color”.

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Don’t bet against the house.

Squid — Sat, 31 Mar 2007 06:47:26 +0000

Friday was a difficult day for me. The market seemed to irrationational in a logical way.

Last week when Cramer came and talked on video about how hedge funds manipulate the market, people seemed shocked. im Cramer described in a Wall Street Confidential segment on The Street.com, how hedge fund managers basically juice the market to close out their quarters in good positions. Well, IMHO, that is what happed on Friday.

You can read more a the WSJ, Painting the Tape, My Money Blog, and Trader Mike.

In the morning when good news hit the street, the market did not go up. We had some bad news and the market fell. Funny thing, in the afternoon the market started to rise on light volume. Just like Thursday. Hmmm. Could it be that the funds were trying to “window dress” before the end of the quarter. I suspect so.

In the after noon on Thursday and Friday, the market went steadily up. Strangley so considering the news that was on the street.

Of course we do not have any evidence of market manipulation, since that would be illegal. Cramer’s words do ring a lot truer these days.

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Long day of nothing

Squid — Thu, 29 Mar 2007 02:38:00 +0000

Well, I put on a long Long strangle QQQQ @ 43.82 @ 10:00 A.M. right at my support level. They both had narrow spreads. The IV was not too expensive. I wanted some downside protection so that if things did not go the way I wanted, IV would not plummet. I also went for APR as the MAR options expire this week.

bought APR 45 calls – 15.68% IV – narrow spread
bought APR 43 puts – 18.37% IV – narrow spread

The 10:30 AM Crude Inventories report came out and the market did move. I was hoping that Bernake would come out with bad news and we would have a good day. However he didn’t, the news was middle of the road. I was looking at 43.55 as an exit point on the downside.

After his testimony started the market seemed to take a breather to decide on what to do, and the answer was to rally. SO I was back up a little, on the other side of the strangle. I was looking to see if I could bail around 44.35, but the market did not continue the rally and failed and fell back.

I wasn’t happy about this trade, so I bailed around 2pm. I broke even on this trade.

What I did see was that a bracket order would be better when the market starts to make a triangle pattern before news. Also, when the market is nervous, I think these can work out better.

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Monday was a good example

Squid — Tue, 27 Mar 2007 01:13:53 +0000

Monday was a great example of how support / resistance levels are set and used. Yesterday, I set support @ 44.0. This level is where there is ‘congestion’ in the market. This is both on the down and upside. So when the market goes thru a support level , that level then becomes a resistance level.

So Monday, after the housing market report, the market blew thru support. Once it blew thru the support, the 44.0 level then became resistance on the upside. From the chart below, you can see the market did hesitate at the 44.0 level until the afternoon.

From 12:30 to 2 p.m. , the market re-tested the 44.0 level. Finally at 2 p.m. the market pushed thru closing higher.

Tuesday QQQQ : Support 43.85 | Resistance 44.45 / 44.7

~squid

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Expiration Week

Squid — Mon, 26 Mar 2007 13:28:58 +0000

Another day, another week. Options are expiring this week. I am going to hold off on my analysis until later in the week, when I get a better idea of the levels I plan to trade.

The QQQQ’s ended up with a narrow range on Friday. A failed move on Friday, puts resistance at around the 44.25 level. It is going to be really tight, and unless we have a bear day, the QQQQ’s will break thru that level. The next resistance level will be around 44.5.

The first time thru a level, the QQQQ’s will fade, so I am going to make sure it is a good move before going long.

Monday QQQQ : Support 44.0 | Resistance 44.5 to 44.3

UPDATE : 9:55 AM NYC Time [ We have the new home sales report due at 10:AM that could move the market]

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Normal trading time

Squid — Fri, 23 Mar 2007 10:11:49 +0000

Ah… I am back. I haven’t even looked at the markets in the last few days. So back to trading today.

I usually trade from 10:15 until early afternoon. If I am trading options for position, I will trade from the afternoon to close. I have gotten away from that, and usually it did not come out in my favor.

So I think I am going back to my normal trading time, and I think that will work out.

~squid

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Closed my positions

wenzi — Sun, 18 Mar 2007 18:49:56 +0000

The MAR 42 Puts I sold at the open. The QQQQ’s gapped up. I held off closing my positions until it looked like it was going to refill the gap. , then I closed the MAR 43 calls. They were leftover from a multi leg trade. I really screwed the pooch on that trade, but it still came out profitable.

Funny thing is, the spreads were less than sucky for the 43 calls. They were still sucky, but better than normal. On an open like this, the spreads tend to be pretty wide.

Right now, I am flat in my account. I have some things coming up , and I won’t be back trading until next week.

UPDATE : I did scale out gettign out of the trade. I sold some of the position first, then held on to the other part for a little bit to see if it was going to mive back up.

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wenzi — Mon, 19 Mar 2007 02:11:40 +0000

Starting off my first week writing Squid options, I am going to post what I normally do on a weekly basis. I trade QQQQ’s and the first of the week, the first thing I check is how the cubes did the previous week, and the trading range for the next week. I see short term resistance around 43.30 & and support at 42.25. When I say short term, I mean for the next week or so. I do see buying if a breakout above 43.50 in the QQQQ.

On the longer side, we won’t see anything until we pass 44.0, where it would be a good time to take a look at our position.

For Monday, i am looking for a tighter range between 43.0 and 42.55

~squid

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