a trade on Options.

I am interested in trading US options due to its sophistication and low cost of online-trading in US market. Options allow us to profit no matter the market is uptrend, downtrend or moving sideway. But in my humble opinion, we need to learn higher skills compared to investing in stock market, if we really want to be successful in options trading.


On 5/1/2009, i paper traded Callaway Golf Cp (ELY). I bought a contract of FEB 10 PUT and a contract of FEB 12.5 PUT.

From the chart, we can see that Callaway Golf Cp is moving sideway. I bought the 2 put options when Callaway Golf Cp was near its resistance. There was DOJI appeared on its candlestick chart. Appearance of DOJI signaled uncertainty and it normally appears at resistance and support.





Stochastic is a powerful indicator when we expect a stock to move within a range. Stochastic indicator signaled a overbought situation.





RSI was slowing. +DI is neutral and ADX is slowing.





Although MACD gave a buy signal, i did not put much weight on it. I expected the current down trend of the whole economy was going to persist and I did not think Callaway Golf Cp would have enough catalysts to push the price above its resistance level.





I still have not closed the position as the whole market is still in downtrend. I plan to close the position of both contracts on 26/1/2009 (a day before Callaway Golf Cp earning announcement). Callaway Golf Cp is expected to release its earning announcement on 27/1/09 (before market opens).





Normally options will have higher implied volatility (IV) on days before earning announcement, thus, options will have higher value.





I would not speculate on its earning, but I really would love to close my position for a higher options value.






Currently, FEB 10 PUT value has increased a whopping 27% and FEB 12.5 PUT value has increased 23%. All these happened within half a month!


As 26/1/2009 is Chinese New Year, I don't think I would be facing my PC and updating my blog. So I would tell you guys the result of my position after that.





Enjoy Your Trading.