Nasdaq Forecast + QQQ Options Strategy

[EMphase]

I been working on this tonight. Anyone think this might be a decent strategy? I want to do this but I hope I'm not going to screw myself by trading those straps on the derivative market .

Basically each (modified) strap are made of 3 calls and 1 put and you can see the payoff on the picture below. I think 48$ is a reasonable target for december 2006. I added the put in case things might go sour but I see much more a bullish bias than a bear bias.

I want to trade the bullish triangle that is pointing to a 48$ medium term target. Simple traditionnal technical measurement as displayed with the little red vertical line can show the potential of that triangle. Break out of triangle was confirmed at the end of last year, price did a pullback and it seems now that price is going to catch up again the up-trend.

Oh yeah I forgot to mention. Expiration/Maturity of the options is December 2006 for all of them.

[New-born baby]

EMphase

Nice work, EMphase. Now, if I read your chartwork correctly, you stand to lose if the QQQ is between 30 and 45. In other words, you are really forecasting a nice move upwards. For my style of investing, you are leaving a lot of open space (15 pts) in which you can lose money. Too aggressive for my style. R/R is not favorable enough for me personally.

[Lyehopper]

Welcome EmPhase!!!!

Welcome to $$mm$$'s HUUUUGE forum EmPhase! You should be an asset to this place.

Is EW counting the only TA you like to use? Where in Canada do you reside?

Here's a true story I'll relate.... We had a "Cyborg Trader" here once who was all business and had very little sense of humor. It was speculated that he was created and programmed by Mr. Market to post ultra serious FA on various stocks. $$mm$$ denied it but Websman thinks he has proof.... ANYWAY.... I often read his thread but he seemed opposed to any discussion that veered outside his protocol.... You seem to be "all business" to me.... Are you an EW/TA posting Cyborg created by Mr. Market dude?

[EMphase]

If you bought just a call on the QQQ, you would lose 100% if the price felt under 41$. You are right that the gap is huge between 30$ and 45$. I'm not that satisfied with the strategy yet. I will try to check it out tonight again if something better can be made (most likely). The only to make it less dangerous would to involve using the QQQ itself along with the options but that would dilute the payoff or yield. But it's worth a try and check on paper.

I use almost everything that makes sense not just EW. EW might be the core of my technical analysis but everything else is use to support it. Oscillators, traditionnal pattern in conjunction with Elliott, candlestick patterns, moving averages, etc.

I use fundamental analysis ratios and EVA model to value the stocks. I won't do a detailed analysis such as that one unless I'm staying long for a while inside a stock.

0% emotion 100% rational investing style. Somewhere in Quebec. A place the USA would not want to invade because we speak french here.

[New-born baby]

Short

If you bought just a call on the QQQ, you would lose 100% if the price felt under 41$. You are right that the gap is huge between 30$ and 45$. I'm not that satisfied with the strategy yet. I will try to check it out tonight again if something better can be made (most likely). The only to make it less dangerous would to involve using the QQQ itself along with the options but that would dilute the payoff or yield. But it's worth a try and check on paper.

I use almost everything that makes sense not just EW. EW might be the core of my technical analysis but everything else is use to support it. Oscillators, traditionnal pattern in conjunction with Elliott, candlestick patterns, moving averages, etc.

I use fundamental analysis ratios and EVA model to value the stocks. I won't do a detailed analysis such as that one unless I'm staying long for a while inside a stock.

0% emotion 100% rational investing style. Somewhere in Quebec. A place the USA would not want to invade because we speak french here.

While you are looking long the QQQ, I am shorting the QQQQ.

[scifos]

Have you considered using a call ratio backspread?

http://www.investopedia.com/articles/optioninvestor/05/backspreads.asp

I'm short on the QQQQ as well.

[New-born baby]

Scifos

Have you considered using a call ratio backspread?

http://www.investopedia.com/articles/optioninvestor/05/backspreads.asp

I'm short on the QQQQ as well.

What target do you have?

[scifos]

What target do you have?

Where'd my USB drive go?
<grumble grumble> <finds it> Ah, here we are. Went short on Friday @ 42.25 with a stop at 42.56. No downside target, I just let my stop catch the price. If its a gain then I go long (In the system I'm using, the stop is also the trigger to trade the other direction).

[billyjoe]

Lye,
The "Cyborg" trader you refer to made me money and I miss his automatonic posts. At first he seemed to be a pump and dumper, but
was hard to read. Any more "Data" types out there ? You're more than
welcome to post here.

billyjoe

[scifos]

Lye,
The "Cyborg" trader you refer to made me money (...)
billyjoe

Is that supposed to be a pun on the guy's (or robot's) name?

[EMphase]

The backspread looks like this, it's better than the previous strategy on the main post. Thanks for the suggestion.

Wrong tickers for the options. Too lazy to edit this picture again. The rest is fine.

[billyjoe]

Scifos,
Lye referred to the unnamed poster as a "Cyborg" and it fits him well.
He reminded me somewhat of the character "Data" on the second generation Star Trek series.

billyjoe

[scifos]

Scifos,
Lye referred to the unnamed poster as a "Cyborg" and it fits him well.
He reminded me somewhat of the character "Data" on the second generation Star Trek series.

billyjoe

Man I'm getting nostalgic today. First someone comments on Ender's Game, one of my all-time favorite sci-fi books, and now Star-Trek TNG: my favorite sci-fi series.

[TFred]

greetings,

Scifi,I like your idea with the stop,Im working on something similar for trading YM's for daily scalps.ANy reason you folks don't trade the e-minis for getting more leverage out of your short?

cordially Tom

[scifos]

Actually, I haven't invested in my QQQQ timing strategy. But backtested to May 1999 its up about 500%, or CAGR=25%. Trades last about a week, and has beaten the Naz badly, 'cept for late 1999 when the Naz was rallying hard right before it crashed.