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                                                       Frame 1                                                                                                                                         Frame 2

           

 

                                                   Frame 3                                                                                                                                            Frame 4

           

 

 

                                                                                                                                        Frame 5 

 

11/14/11 - My OI/Max Pain works to the T during a non-volatile market. When you have events or something that causes abnormalities, it loses its way. That's why AAPL will go on 3 month flatlines (max-pain) or drop off a cliff like now (headline driven). Above is a quick visual: “something” will break AAPL on the put side (a rumor this time) So let it go. The options market will help you find that $50 run on the upside.

 

This is how the story goes:

 

There are so many calls on AAPL it will keep going down. You need to see the call OI walk down until the put OI stops, this will cause a point where a break must be made.

This article still applies http://seekingalpha.com/article/275730-apple-options-it-doesn-t-have-to-hurt

 

Enter “Frame 2” Same ol’ thing. People love their calls on AAPL and are shooting for the fences. There is nowhere near enough puts to stop 99% sell volume in AAPL.

 

Enter “Frame 3” The calls will keep walking down but one major change will occur. The puts will finally find a backstop. Fundamentals, positive rumor, news may cause this. People will still love their calls during this week. All of a sudden we have a stall.

 

Enter “Frame 4” Call buyers finally gave all their money to call writers (Wall St). They are tired of the stock moving down. Yet; put buyer are ecstatic. The bid on puts is quoted in “how many you got?” This all of a sudden flips the script. Who do you think is writing “high risk” puts in this environment? All of a sudden Wall St thinks AAPL should be higher, right at the moment more puts are bot than calls.

 

Enter “New High 5’s ” This is where the $50 run comes from. Weekly options just ruined the monthlies plans. The options market isn’t set-up to control AAPL -- and off it goes. This is made possible as there were no calls or for some reason the stock made it over the calls and nothing can stop it now.

 

Overview -- I used “Frames” as examples to make it easy. This may happen on a fast track or not. Overall this is what it will look like visually. (Note 11/15/11 pm I changed the titles from weeks to frames as weeks is inappropriate.

 

"Purple Bubble" = Stock Price

 

Jason Schwarz has his “slingshot” theory. (Guess not a theory when it’s factual)

http://seekingalpha.com/article/307305-jim-cramer-has-reversed-on-apple-because-he-doesn-t-understand-it

  • Vitalogy80

    Starting to look into Pain Range and trying to see if I can figure out where Apple won’t end the week…what day do you usually have a pretty good idea where it’s not going to end up? Wednesday or Thursday? Also, I see the Theta Portfolio isn’t going so well, is that portfolio only returns on Pain Range? Or is the Theta Portfolio something else?

    • On a weekly, you have to thread a needle. You want to start early as possible due to time decay but also wait until the OI builds up. I usually will do it on Mondays and just give a buffer of few strikes if I need to. Depends if doing covered call or spread etc. Monthly is best to do 3-5 weeks before expiry.

      Theta+ had a credit put spread and debit call spread that took about $9K loss thru the downturn. I had a $485 Cr put spread months out, never saw AAPL getting this low. I also bot AAPL up @ $570 when Theta+ started. I needed to take a position. No, not pain related. It has SPY and MSFT in it too and cash.

      • Vitalogy80

        Thanks Travis…so using today as an example, with Apple sitting around $425/430 you look for either a bull put spread like $410-$415 or a Bear Call Spread like $445 – $450. Is there a good price you try and get without taking too much risk? ie…take $1.00 credit on the spread? Or how do you find that it works best for you? Going to try a few paper trades the next few weeks, see how I do.

        • I wouldn’t start out using this week just cause it’s a monthly and all over the place. Mainly I would just pick 1 side instead of an iron condor. Either way you want to do a credit spread, not debit. You know what would be a good start. March 18th. Mini options are coming out. So you could buy AAPL in 10 share increments and sell covered call against. Buy 10 shares then sell a CC on it.

  • Trader21

    Never noticed this page. Really puts it into perspective. Thanks man

  • dt8

    hey travis. if you get a chance, could you post the dates of the Opex that match the frames? thanks.

    • They are examples, they are not based on actual OI.

  • Bryce Condon

    Not sure if anyone noticed but these frames were just completed to a T in reverse. pps finally fell back in between call and put oi, and is now falling quickly to new recent lows