|
PureBytes Links
Trading Reference Links
|
Okay...I've seen the posts about volume...if I may be so bold as to
discuss my own method. I've found that option volume and open interest
can help you find options that are possibly being accumulated by what I
call "smart money".
For example, on 5/14, the HOME DEPOT (HD) June 75 calls traded 5697
contracts with open interest of 1933. My system considered this to
be urgent buying by "smart money". I bought the calls on
5/15 at 1 5/8.
Sure enough, within days, HD announced a split and a dividend hike. We
sold the calls on 6/1 at 5 for a 231% profit.
(Now, I have to confess that there is more to this method than just
volume and open interest...I use some common sense rules and moving
averages)
The system trades infrequently. On 10/9, calls on SYNOVUS (SNV), a NYSE
listed financial company, flashed a signal. The volume of calls traded
swamped the open interest by over 10 to 1 (3,000 to 254). I considered
that to be URGENT buying on the part of "smart money". We took a 133%
profit after only 4 days in this trade!
I closed out another trade a week ago Friday. We had call options on
PROCTOR & GAMBLE (PG). On 10/7, the PG November 80 calls traded 2728
contracts with open interest of 472. Within days, PG announced better
than expected earnings. Did someone know about that in advance? We sold
the calls Friday morning for profits of 75-100% In fact, here is an
e-mail I received from another trading using this method, detailing the
results of his trade in PROCTOR & GAMBLE:
"Here's the story of my (PG) trade;
Nov 85's in @ 2 out @ 4 100% profit heh,heh,heh
Nov 80's in at around 3 5/8 - 3 7/8 out @ 7 1/2 = 100%
I can deal w/ that type of return WHOOPEEE !!!!!!!!!!!"-J.A.
I guess you can say that my theory is that the public stays away from
low open interest options (almost by definition) and that when volume
comes into such an option, investigation must be made to see if the
buying is retail or professional.
I will post my web address where you can see more examples. But I must
warn you that is an advertisment so if that offends you, don't go to the
site!
Regards,
Alan Friedman
http://www.netword2000.com/wolf/wolf.htm
|