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Archive for the ‘Money Management’ Category

Options Market Gets Facelift

Saturday, February 6th, 2010

11:00pm (EST) Special Update

We have been talking about the new option symbol changes that will take place starting next Friday, February 12th, and we wanted to get everyone prepared for the transition.  As you know, current option symbols range from 3-to-5 characters but all options will become 8 to 21 symbols long once the conversion takes place. 

The goal is to make options easier to decipher but all you really need to know to place a trade is the underlying stock, the expiration month you want, the strike price and whether it’s a call or a put.  They will look more complex but most brokerage accounts have already upgraded their trading platforms so that you really don’t even need to remember the option symbols anyway.

We have already started incorporating the new style of options symbols for our latest trades and ideas and we will continue displaying the old or current symbols up until the change.  Some financial sites have already made the switch but even if you see different symbols you can still place a trade as long as you know the option you want. 

The one problem with current option quotes is that some stocks use their stock symbols as the first part of the option while others don’t.  For instance, the option quotes for International Business Machines (IBM, $123.52, up $0.52) start with “IBM” while the options for Microsoft (MSFT, $28.02, up $0.18) start with “MSQ”.

We will look at these two stocks and their current options and show you the new change.

The IBM February 125 Calls (IBMBE, $1.16, up $0.04) currently look like this.  The new option symbol becomes (IBM100220C00125000).  NOTE:  The “option root symbol” can be up to 6 characters long. 

The Microsoft February 27 Puts (MSQNB, $0.24, down $0.10) will become (MSQ100220P00027000).  NOTE: Until February 12th the option root will be the same as the previous.  After the 12th, they should read (MSFT100220P00027000). 

The stock’s underlying ticker symbol will always be used in the new symbol.  MSQ will soon become MSFT.  The days of “decoding” option root symbols are coming to a close.  This wasn’t a big deal anyway but it does make things easier.

The second element, the expiration date, is always six numbers.  In this case, “100220″ for both IBM and Microsoft represents February 20, 2010, the expiration date for February 2010 options.  The first two numbers, “10″, represents 2010; the “02” for February; and “20” for the day.  A 2011 option reads “11”, a December option would be “12”

The expiration date is always on the Saturday that follows the third Friday of the month, unless that Friday is a market holiday, in which case the expiration is on the Friday. This is a little confusing though as the last day to trade options for February is Friday, the 19th.

The third part is if the option is a call or put which is represented with a ”C” or “P”.

The last set of numbers represents the strike price, which consists of eight numbers. The first 5 denote the strike dollar price, and the remaining 3 represent the decimal (if any).

Thus, “00027000″ represents the Microsoft February 27 put strike.  If it were a 27.50 strike, it would read “00027500.”

The new terminology will take some getting used to but again, as long as you know the stock, the month you are playing, the strike price and if it’s a call or put option you will be fine.  If you have any questions, email us.

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MomentumOptionsTrading.com Portfolio Update for 1/23/10

Saturday, January 23rd, 2010

5:00pm (EST)

Quick note for our current subscribers…

We have updated our 2010 portfolio in the Members Area today.

We have received lots of emails over the last few days as many of you are nervous of a pending market correction.  The Dow lost another 216 points on Friday to finish at 10,172 as the selling pressure continued into the closing bell.

The Dow reached a high 10,763 on Tuesday and the 600 point drop from the high has meant a 5% correction.  Are we nervous?  Not at all.

In fact a week ago we had this to say:

“We have mentioned our targets for the indexes and from our camp it looks like the market is nearing a top which makes it harder to trade.  It’s possible we rally for a few more weeks but once we get to February we think there’s a chance of a 5%-10% pullback.” (END)

Well, we got the 5% decline and next week we may get the other 5% decline.

As we enjoy the weekend, Dow futures are down 187; S&P 500 futures are lower by 20 while the Nasdaq futures are off by 43.  Folks, if these figures hold up then we could have a major sell-off on Monday.

We have protected our portfolio by going way out in our call options and we have a current put option open that could do very well if the market does continue lower.

A lot of investors get nervous when the markets tanks or starts to correct but we love it.  We’re like a chameleon, we change colors.  Folks, if the market is in correction mode then you can make just as much money on the downside as you can on the way up.  We still expect some kind of bounce but that may not come until the bears are done pushing.

For instance, we talked about the weakness in Goldman Sachs (GS, $154.12, down $6.75) on Thursday and Friday it dropped another $3 from our 1pm update.  Some options traders did well buying Goldman put options.  The February 150 puts (GPYNJ, $4.59, up $2.44) jumped over 110% on Friday.

We show you this stuff because you can make just as much with put options as you can call options.  So, if the market is going to tank, don’t be nervous.  The opportunity the volatility is providing right now is incredible.

There will be a ton of action next week and we will be back Sunday night with a full review of what to expect in the Weekly Wrap.  Also, don’t forget to check out our money management video if you haven’t seen it yet. 

If you want to see some of the returns you can make in a down market, check out our 2008 portfolio which can be downloaded as a PDF file.  For those of you who don’t follow the market, we had a major correction from the summer of 2008 through March 2009.  The bull market has been intact since then but the bears are waking up…


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Stock Options Trading: Money Management Video

Tuesday, January 19th, 2010

Hi folks! We put together a brief video that should really help your stock options trading. Included in the video are:

  • Money management principles
  • Common trading account killers
  • Trading psychology advice

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Intel Crushes Earnings Estimates

Friday, January 15th, 2010

9:00am (EST)

Intel (INTC, $21.48, up $0.52) blew past Wall Street’s forecast after the bell yesterday and reported some impressive numbers.

The company said it earned a profit of $2.3 billion, or $0.40/ share versus $234 million, or $0.04, in the year earlier period.  Revenue climbed nearly 30% to $10.6 billion as Intel posted its highest gross profit margins ever, at 65%.  Amazing.

The market finished higher on Thursday as the Dow closed with a 30 point gain at 10,710.  The S&P 500 added 3 points and settled at 1,148 while the Nasdaq edged up 9 to 2,310.

For those of you who have been following us since the summer, we set targets for the market back in August that are about to be hit.  Last Sunday we had this to say:

“The Dow added 11 points on Friday and 190 for the week to close at 10,618.  Our near-term target remains 10,800 and this could be the week we take it down.

The S&P 500 gained 3 points to close at 1,145 and for the week the index added 30.  In August, we set our target at 1,175 so we are within spitting distance…

As far as the Nasdaq, we clearly saw the strength in Tech back in the summer and set a year-end 2009 target of 2,275 for the index.  That level was taken out before Christmas.  On Friday, the Nasdaq displayed its muscle once again and had the biggest percentage gain as it added 17 points to close at 2,317.

We remain bullish and our portfolio has consisted of mainly call options since March 2009.  We have added put options as “insurance” along the way but we still feel like the market moves higher from here.  Of course, once our targets are hit that could all change but the beauty of getting a pulse on the market is that it allows you to change accordingly.

If and when we reach those aforementioned targets, we either, continue higher, stay flat, or retreat to lower levels.  The cards to figuring out the next six months on where the market could be headed are being dealt right now.  A lot of investors and traders will be ready to pay the ”big blind” this week as 4Q corporate earnings start to come in.  We will go over this more on Monday morning.” (END)

Folks, it is important to know where the market is headed because once it gets in a groove, trading becomes easier. If and when we reach Dow 10,800 and 1,175 for the S&P we honestly don’t know what happens next.  However, our gut is telling us the market continues higher but we have to wait for the clues to confirm our thesis.

Nobody knows what the market will do from day-to-day but overall the information is out there.  There are times when trading options can get choppy but they key is not to “over trade” your accounts. 

We talk about this in our Welcome Guide which is at the top of the Members Area page.  Obviously, everyone wants to score the big trade but this gig is like all others…you have to grind it out.  And you can’t blow up a $2,000 account by buying 10 or 20 contracts with your first trade.  Try limiting your portfolio to 3%-5% per trade.  In other words, if you buy 10 contracts for each of our trades then you should have a $20,000 account.  If you have $10,000 then trade 5 contracts.

Our trades target $500-$2,000 if you are doing 10 contracts as we profile options anywhere from 50 cents to $2.00.  Obviously, if you are new to trading or you are starting small then go slow and paper trade with us for a while.  And remember, any money you trade options with should be considered “aggressive” and this type of trading is not for everyone.

Options are the most lucrative way to grow a trading account and remember everyone’s results will be different based on your own expectations and risk levels.  Also, you will have winning and losing streaks but the goal is to make a 100% return on each trade.  This allows you the luxury of having 2 losing trades at 50% if all things are equal.  They key is to hit the 400%, 800% and 2,000% trades which we have. 

Our documented track records show we have over a 70% winning percentage for the past couple of years so keep this in mind if you join us for a month and start off with a negative trade.  For 2010 our track record shows we have closed trades for gains of 13%, 90%, 119%, and 150%.  We still have open trades and once we get a few more closed we will start posting the 2010 track record at the end of the month. 

This week has been pretty volatile due to options expiration and today is not historically a good one for the Dow.  The index has traded lower on 9 of the last 11 January option cycles with some major hits of 1%-2% lower.

As we head to press, Dow futures are down 25; S&P 500 futures are lower by 4; Nasdaq futures down 4.5.

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Home Sales Give Market A Lift

Tuesday, December 22nd, 2009

12:50pm (EST)

The Dow is trying to put together a three day winning streak (including last Friday) as we start the second half of trading.  The index currently is trading at 10,456, up 42, and has hit a high of 10,470 today. 

We got some good news from the housing sector as November’s sales rose 7.4%.  Sales had been expected to rise to 6.25 million and we got 6.54 million.

In other economic news, the Commerce Department said the economy grew at a 2.2% pace in the third quarter, as the recovery got off to a weaker start than previously thought.  The figures were released before the market opened and were a drag on the futures as Wall Street was expecting a 2.8% growth rate. 

As far as specific stocks, Amazon.com (AMZN, $134.15, up $1.36) made a run to $136 which may not seem like much but it was enough it get our subscribers a 50% return.  We have another trade in which we feel we have a Tiger-by-the-tail in our General Mills (GIS, $70.60, up $1.00) trade.  The stock is at a new 52-week high and we feel a run to $73 is possible.  Current subscribers, check the Members Area for the updates.

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Try our directional option picks.
    No fancy spreads. No iron condors. No need to watch the markets all day long.

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Results are NOT compounded.

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Trader Comments:

    LAWRENCE O.
    Hey Rick! Here is an update on what your picks have done in my accounts.

    1) Great call on the JoyG March 55. I bought when you said, then bought again on one of the dips. Booked 80+% profit. Made enough to pay for your service for years to come.

    2) Also booked profits on your Berk Feb 74 (80%) and threw a major chunk of change at the March 75’s (190+%). I would have never known that Buffet's stock had split if it weren’t for your service. Bought the shares also for the long haul. Won’t look at them for another 20 years. Great job on getting us in before the indexes did.

    3) Took profit on your Imax March 12.5. 20 cent trailing stop at 1.90 yesterday. Not sure what the profit on that was, but profit is profit.

    I see that you took a loss on some of these. It’s all good. I look to trade your “ideas” not your exact calls. I THANK YOU! For your ideas and commentary. Keep up the good work. And keep those ideas coming.

    C.J.
    Loving this subscription so far! I got into the BRK feb 76 calls the day you talked about right before the split...now up over 300% (0.70 to 2.475)! Keep the good picks coming and let's see some OSIS and EMC upside soon! Just wanted to share my positive enthusiasm on your newsletter...it gives us individual investors great ideas on not only the options market, but also the broader equity market! Case in point is BRK...I can't always read the breaking business news but its easy to read your twice daily updates on my smartphone...helped me get some BRK shares immediately after the split which I will hold for the long haul! Thanks again!

    SHAUN
    Aloha Rick - Thank you so much for the great CL pick. I am not sure if there was buy-out/merger news or what but at 3PM today Colgate-Palmolive absolutely EXPLODED to the upside, and my calls turned into green candy when they went from 1.40 to 3.8 in a matter of seconds! I even sold a few for over 4.0! Much thanks and keep the solid picks up my friend, honestly. Only a fool would scoff at 267% gains... Peace!

    MICHAEL K.
    I like the fact that you ask for comments from subscribers. Good customer service. By the way, am enjoying the service so far. Some good
    profitable calls. Keep up the good work.

    PARAG P.
    Woo hoo! Out for 50% on WMT this am. Making up for my depression for getting out of pcln for a 30% gain monday :( you the man! any word on the manual? My friend Mike ( who I sent to your service) told me he emailed you about your integrity in reporting fills. I echo that sentiment big time.. keep it up! Cheers!

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    MIKE
    Rick, I am a new subscriber to your service, and I want to say I am impressed. I am impressed by your results, but more than that I am impressed by your reporting of your fills. You could have easily said you got that Wal-Mart call today for 80 cents, instead you reported 98 cents! Good job and keep it up, I watched the reporting of the fills first, and then I subscribed. Thank You.

    TRISH D.
    Hi, good morning. I jumped the gun a little on this one (PCLN). But still made $1,675.00 profit!! Very happy!! Keep up the good work!! Thanks.

    MIN L.
    Hi there, I have joined recently, and I am very happy to tell you that I am up over $10,000 on your picks in a month. I started on 10/7 with the Intel pick. I'll be your member for life. Please don't quit on us. Also, I am learning a lot about options. I didn’t get in your recent APOL and that gold trade and only had one loss on CHK. I appreciate all the DD you do. I enjoy your market commentaries. Best advice site period, and I have tried a few here and there. Again, you guys rock!

    JOE G.
    Thanks be to Momentum Options Trading for providing me with some fantastic wins. I just started with this service and am up nearly 50% in less than a month. There have been losses, but if I manage them properly, I will continue the best efforts given on the blog (in which there are no complaints). What a great cause for humanity. I feel more confident about my trades and continue to play the wins. Best of all, I am now keeping my regular paychecks in the bank! Thank you!

    GREG F.
    Rick - I wanted to say thanks for getting me started on the right foot with your service. I have made six trades since starting on October 22, 2009. Five are winners and One loser netting me $6,245. Thanks again and keep the trade recommendations coming.

    NOEL
    I got into the Nike 60 Call at 1.85, sold at 5.00, also bought a 55 put at 1.05, but got stopped out at .35. What a ride! $2830.00 in the black even with the put. It's right at 100% return. I hope earnings season coming up is going to look like this trade.

    TODD F.
    Nice call on Nike. I think I'll go buy a pair with my profits! : ) I did the straddle for safety but still made 62% on the trade. Not bad for less than 24 hours. If Goldman is right, then the Nov 70s or 75's could be a steal today.

    PAUL H.
    What a sweet way to get introduced to Momentum. My first trade based on your picks and it a 2X. Thank you!

    NOEL
    “Limit order was set at 1.60 on RIMM so it sold. I may have left some money on the table but you can't go broke making a profit. That was a fun trade. Thank you. Good call. I’ve been watching and trading Rick's advice since March. It’s usually a fun ride, but I give him heck when it's wrong to. :) ”

    CHRISTIAN
    “Your service rocks! I made bank on Dendreon last week! The other thing I have to say is that it took me quite a while to find a REAL options trading service like yours. Most of what’s out there is 99% scam and very sketchy. Momentum Options Trading is the first service I found that I can trust and seriously make money with.”

    JOHN
    “I made $420.00 on ANF in 2 days. Thanks for the trade and updates on getting out of the trade.”

    CHARLES M.
    “I did follow a lot of your trades with 1-2 contracts per trade and YTD I’m up 108%. I try not to follow blindly by not entering all of your trades and sometimes entering the ones you don’t. I entered AIG a few weeks ago against recommendation – that one hurt.”

    BRYAN C.
    “I have been following you for several months and am interested in the new service. I hate to see the free service go away but as they say, “all good things must come to an end”. My ability to join will be greatly influenced by the monthly fee so I’m very curious to see the new prices. Thanks for making April a great month for me and my family.”

    JOHN H.
    “I have really enjoyed the past month since finding your blog. You have made some great calls. I would appreciate info. on the new options mentoring program. Thanks.”

    JEFFREY
    “Hi Rick, I have been following your blog for several months now and I would like to be including on the list for your new service and to receive more information about it. And yes I was a Dendreon winner with your tips. Turned $280 into $7700, and literally saved my butt.”

    ED
    “I made over 6k on your Dendreon trade, and I’m very interested in learning how you pick and trade options. Sign me up.”

    GREG
    “Rick – Wow what a day! I got in at the Dendreon calls at $2.25. Thanks to for your advice. I appreciate that. This company has a lock on this type of therapy and no one else in the world is close. Kind of reminds me of the type of companies that Peter Lynch and Warren Buffet suggest that investments be made in. Companies that can build a moat around their business model, that allows them to charge a premium for their product or service. In other words - a monopoly.”

    KEN
    “Hi Rick, Thank you so much for the Dendreon trade, I made almost $10,000 with that trade with a little over $2,000 investment. You have shown me the power of options trading. Again, thank you so much for all your inputs.”

    GARETT
    “Hi Rick, thanks for the encouragement to play the dendreon calls! did freaking great! Got in the first lot at $1.44 on 3-24-09, sold at $2.45, 70% not bad. Bought it back at $2.30 on 4-7-09 closed out on 4-14-09 for 454% gain! Wow! I love it when that happens. So, thanks the encouragement to get back in when others were saying sell, sell, sell. Keep up the good work.”

    TERENCE
    “Rick – Thanks for Dendreon – it has made all the headlines today! I missed on RIMM earlier, but I’ve been holding onto DNDN calls since 3rd week March. Of course today it all paid off today, as DNDN rocketed up.”