Freaky Friday: Options Expiration

Watch list preview for the day. It's options expiration and the market is teetering at a level that could lead to a healthy pullback. In other words, any trader not exercising caution could get shredded.

If you like candlestick charts, here's the status of my watch list, courtesy of American Bulls.

AAPL — hold
AMZN — buy if
APC — buy if
ARMH — sell if
BIDU — hold
C — sell if
CLR — buy confirmed (Thursday)
CMG — hold
CSTR — wait
DIS — hold
EGPT — buy if
EXK — sell if
F — sell confirmed (Thursday)
FAS — hold
FCX — sell confirmed (Thursday)
GLD — hold
GMCR — wait
GNK — sell if
GOOG — hold
HAIN — sell if
IPI — buy confirmed (Thursday)
LULU — buy if
LVS — hold
MOS — hold
NFLX — hold
NGD — sell confirmed (Thursday)
OIH — hold
OPEN — buy if
PSUN — wait
QID — buy if
RLOC — hold
SBUX — buy if
SLV — buy if
TBT — buy if
TLT — sell if
TVIX — n/a
UCO — hold
VCLK — wait
VXX — wait
VZ — buy confirmed (Thursday)
X — wait
XVIX — n/a

Update, 5:44 am (Hawaii). So dependent on Red Bull. I kept an eye on the "buy if" watch list (six stocks only) and SLV really intrigued me. Always has for many reasons. But it was trading above its opening price of 31.08 on up to about 31.17, in that range, while the rest of the market was flat. Then I nodded off. It was a few minutes at most. Woke up and SLV was at 31.25 or so. Kept right on going, big run and settled into the 31.30s. I opened a position, with the stochastics swinging low, saving a lot of powder for other opportunities.

SLV has made a massive run from 26 in the past three weeks, and with equities peaking short term and so much uncertainty in the Middle East (oil), metals are so shiny and attractive. For now. I still don't trust the possibilities on options expiry. I think SLV holders are ready to cash in profits after holding from 26, 27, 28, 29. It's human nature to collect that beautiful bounty before the weekend begins. So I hope to be out of this trade before lunch hour hits the East Coast.

My position is small, so even another big run today won't make a huge profit for me, but I am aiming to get familiar with the price movement and rhythm of SLV. It could be a nice, steady trading vehicle for some time, especially with AAPL in the doldrums (355).

Update, 6:18 am (Hawaii). Added more SLV at 31.56. Hesitated on stochastics (low) and MACD at 31.51, but no regrets. Huge buys came in moments after my addition, now at 31.68. This is too hot and I don't assume anything about where SLV will close today, but the news surrounding the physical metal is bullish, bullish, bullish. For today.


Bob Kirtley: Silver prices just starting to warm up (see Chinese demand)

Update, 11:27 am (Hawaii). It's been so long since I actually stayed up through the night and morning to follow the market. Normally, I sleep in or get a decent nap. This time, Red Bull and a position in SLV had me buzzed and stoked. That's where I have to deal with this plain fact: once emotion enters the realm of any trade I'm in, good goes bad. 

It was roughly 7:30 am when SLV was hovering at 32 and I had a decent paper profit, far more than I expected that quickly. I'll take a 1.2% profit for just three hours of "work" any time. But I took a phone call that was lengthy and the topics were both sad and happy. Emotion. By the time I hung up, SLV was still slightly above 32. Knowing that I entered midway through today's momentum, exiting at lunchtime (Eastern time) was the game plan. 

But I realize now that emotion clouded my thinking. I was shaking off the effects of the conversation, but also feeling a bit high about the fun of a daytrade. I haven't bought and sold anything on the same day with a solid profit in a long time. Most trades cover a few days. So I sat there and watched. And watched. And eventually, right on cue, the selling began after lunch. I held and held all the way down to 31.55, a shade above my cost basis.

I knew it was too late to get out. The old adage, Get out fast or don't get out at all, so true, true, true. My mental stop was right above my cost basis. If SLV froze at 31.55, I wouldn't mind holding it over the weekend, either. But the game plan was in and out, and I failed. I couldn't stay locked in that failure, though.

The market remained somewhat robust, closing in the green. SLV picked up, dropped off, repeat ... eventually, buyers returned, i.e. traders going long rather than the shorts who got squeezed royally in the morning. SLV is at 31.85 afterhours. 

The retrace today from its high of 32.13 down to 31.55 is EXACTLY 61.8% (going back to yesterday's closing price of 31.03). For you Fibonacci devotees out there, this is proof that you are geniuses. 

Watching SLV trade for hours was quite an experience. The MACD is undeniably indicative of direction of price. That never failed. I didn't want to believe, but I don't matter to MACD. Also, by the final hour, I gave up watching the 1-minute chart. It was exhausting. The 5-minute did just fine for a position like mine, which is not huge, not tiny. 

Another observation: Once the lots on the Ask side become smaller than the Bid size, SLV goes poof! Early on, during the run to 32+, lot sizes of 20,000 and more poured through on the Ask side. After it hit is high of the day, the Asks shrank until the final 45 minutes. Numbers just don't lie. 

So, I screwed up. Maybe I should turn off the phone during market hours (3 am to 3 pm Hawaii time). Maybe I should tune out human existence in my life 12 hours a day. But if I'd sold at half of 1 percent or 1 percent flat off the top, I'd have my pocket-change profit. I'd have satisfaction. I would probably not have reestablished a position, though. 

I'm prepared, though, to roll with this trade and see it through to Tuesday. Unless SLV does something unexpected in AH. Note to self: write up every possible scenario and have a solution.


Update, 12:47 pm (Hawaii). A look at how today's "buy if" stocks turned out. The market opened flat, so the buy-if mandate is to see how each stock fared after the opening bell. If it stays above opening price, potential buy. If it opens lower, no deal. 

All "buys" listed here are in theory only.

SLV — previous close 31.03; open 31.08; 31.95 afterhours (+2.8% since opening bell)

SBUX — previous close 33.50; open 33.37; not a buy (but turned out +1.9% since opening bell)

TBT — previous close 39.97; open 40.28; 40.14 afterhours (-0.03% since opening bell)

LULU — previous close 82.44, open 83.24; 82.13 afterhours (-1.3% since opening bell)

APC — previous close 81.30; open 81.15; not a buy (dropped to 80.96 in afterhours)

AMZN — previous close 187.76; open 187.55; not a buy (dropped to 186.31 afterhours)

EGPT — previous close 18.99; open 19.00; not a buy (18.73 afterhours)

OPEN — previous close 92.89; open 92.52; not a buy (89.96 afterhours)

So, the only two buys based on the candlestick approach would've been SLV and TBT. The best performers were SLV and SBUX. Aside from theory, I actually did open a position in SLV, still holding here.


Update, 2:49 pm (Hawaii). Some charts of SLV. First, a one-year chart with comparison to GLD, AAPL and the S&P 500. Then a two-day chart. Note: there are some concerns that short attacks may arrive next week. I may still unload my position in the next 10 minutes before the AH session closes.