Trading the Thanksgiving Market

Trading tomorrow and on Friday are historically generous days in market history. I am sure most know that the market is closed Thursday and half of Friday. Make sure that you volume traders take this into consideration on your breakouts and or trading signals. Light volume this week will be a given, so don't skip too many trades over it.

After we make it through the holiday week we will head into December where opportunities typically present themselves. Get it while it lasts since January will probably correct all the recent madness we have witnessed in this market for the last few months.

With this I would like to present a chart to discuss. I am not interested in whether you would trade it or not, since on this one you must make some type of trade. The stock is Google. Look at the chart below, and what is the best trade to make on this one. The stock is catching on fire and what trade could you place to take advantage of it? Yes, there are expensive options here...yes, it has moved a lot already, so what would you do if you had to trade it?



My disclaimer is that I'm in the trade with March $500's.

I would use a target of $550 (the huge symmetrical triangle and also the flag that broke out 11/13) and buy the March $520's.

No one should be scared of this one. Use $500 as your stop.

You could consider bull put spreads on expensive options with high volatility.

Got into this one two days ago with a bit of trepidation. I knew $500 would be a mental hurdle, and yesterday it pulled back and had me wondering if I'd made the right decision. But a bull flag like this one can't possibly lie (can it Jeff?) so I dove in head first. Now I'm up 60% in three days and I've got a $540 mental target, but I'm thinking it'll go higher. I bought the (very expensive) $490 Dec call because I'm thinking the flag pattern will be done by then. But I could be tricked into going into January on another call if it pulls back and uses $500 as a support bounce.

Chris and Catherine.

Hmmmm just noticed that GOOG started with an ascending Triangle back at $350 which had a $100 upside and then just handed off immediately to a bull flag which had a $70 pole... this is like watching WWF tag-team smack downs. What's next?
Chris and Catherine.

I am already in a bull put trade since 11/15th. current one is 480/470 which is actually doing very well.

Since it broke out of a bull flag today, I will do another one arround at probably 490/480.

Mahmood

I might consider a strangle.
dec 510/490 calls cost ~$20
With GOOG at $510 it would have to move more than about $25 either up or down to be profitable (5-6% of it's current price).
I would be a bit nervous about this though because there have been 4-week periods where GOOG does not move very much so it doesn't seem like a slam dunk. Time is expensive though. Adding another month adds another $15.
jan 510/490 calls cost ~$35
-Mike

Yes, I would trade this stock. Earnings are nice and momentum is on its side. Could be a momentum and I would play it as such while keeping my stops tighter than normal.

I have been in a Jan 520 call since 11/3 as it came above the top of the flag. I normally play near month on GOOG because the options are so expensive. But after seeing my time value swallowed whole in sideways moves not unlike what happened from the 3rd to the 10th, found it safer to be out a month. On the upside, the current implied volatility is about as low as you will ever see on GOOG (Check the vol chart at CBOE because the volatility chart on the prophet chart on the new site is not accurate). I have a conservative target of 530 on the wedge and 540 off the flagpole.

I would trade this stock. Past average moves have taken about 6 to 8 weeks... so I would buy the Jan 540 call. With option costs increasing quite dramatically with each month.... purchasing the Jan call would give enough time for the expected target of 550. Target based on recent flagpole, although this stock has the potential to go higher. Exit would be 495.
Although this is an expensive stock....the rules remain the same....at least that's what I have to remind myself when I look at a stock like this one....

Danuta

Since I am just starting to trade real money and watching a $500 stock with $10 options is new to me, I would opt to try a Bull Put spread using the Dec 510/490 combination for a $7.40 credit. I would put a BTC stop on the short Dec 510 Put at $18.00 to risk $500 in the trade.
Larry Meier

I would buy the January 500 call option and keep a tight mental stop on the stock. If the stock closes below 500 I would exit the trade.

Interesting, I'll post my thoughts before I read everyone elses.

Goog is indeed on fire, don't see any weakness. It appears to have made the full move from the big sym triangle but so what. IV is at an all time low for the past 12 months with earnings due in January. IV looks to be ticking up.

If I entered the trade today I would buy the 520 OTM call for January with a stop 1 penny below the close of Nov 21.


But those options are still cranking expensive.

MikeH

Sorry to buck the trend, but I decided to buy some GOOG stock to ride the move.

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  • I'm Option Addict
  • From Saratoga Springs, Utah, United States
  • I am a professional trader and an instructor for Investools. I've had relations with the markets for 9 years. Born in Concord, CA, but reside in Saratoga Springs, Utah. Father of THREE, Husband of one.
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