EXITS! Thought I Forgot???

I never forget, I just procrastinate. None of my thoughts on this post can be conceived as factual, coherent, or relevant. They are just my thoughts. If you disagree, you are wrong.

Case Study#1 PLCE

I didn't catch the entry point, but here is my take on the exit.

My take: PLCE: As I look at this chart I didn't see any reason to exit this trade. Sure, the big rally up to $35 was uncomfortable, but if you look at a longer dated chart you'll notice the symmetrical triangle I tried to point out several weeks ago. Since your support line is ascending in this pattern, I teach that it is imperative to use the apex of the triangle as the breakpoint. If the stock remains below the apex, it is a good trade. $36 was my stop point based on this rule.

Since the rule was to wait for a break of $53, you were well within your rules, but this rule didn't give the stock much of a chance to move.

Case Study #2 BBY

Entered trade on the intra-day dip below support. Stopped out on 2% rule.

My take: This is why I use closing prices.

Case Study #3 BGC

4/26- Entered trade

Target- $67

Stop- $55.85

My take: See case study #2.

Case Study #4 ISIL

4/26- Traded a bull flag breakout

Target: $34.50

Stop: Close below flag break

My take: I am not sure how much this one can be argued. Use a weekly chart to see this breakout and you'll get a sense of where I want to go with it. Yes, a rule is a rule. However, I looked at this as $30 being the magic number, which held well. I thought the longer term break out had more merit than the little flag as of late, so make sure when you are planning your exits to see them from the long term perspective as well.

Case Study #5 BIDU

Rules: 4/13 enter on resistance bounce

Target: $92

Stop: Close above resistance

4/24 Exit at mechanical stop

My take: Follow your rules!

Case Study #6 BUCY

Here is what I clipped from the original e-mail...

Here is a great example of not sticking to the plan. I saw a move to around 62.50 for an exit and re-adjusted the stop loss way too tight at 57 to lock in profits. It was a winner but I cut it short. At 64 I could have sold half or more and let a couple, or even just one contract, continue to run. Stick to the plan and don't get tight on stops just when things are going your way for fear of losing what gain you have. Plan the trade, trade the plan, fear will destroy you just like in any other part of life. DUH!!!

My take: That particular day was a healthy re-test of a prior high. I hate to see one down day in the middle of ten up days to be a reason to exit a winning trade.

A recurring theme I want to keep discussing is patience. Whether it is riding though a day where price doesn't exactly move in your favor, waiting until the end of a day to exit a trade or confirm a new breakout, or just taking a breath and focusing on what the trade will look like weeks from today, you must develop a level of patience. Profits are not made in just a few days worth of work (unless you're into that whole brevity thing). I'll look under the mattress for a few good articles on the topic.

hi jeff
i was wondering if you could tell me the ticker symbols of case studies 2-6. i cant click on the picture for a bigger view and it is really blurry on my computer for some reason. sorry for the trouble.


#2 BBY
#3 BGC

Hi Guys

What do you all think about AVB thus far. It is only just around resistance, but it has had some big moves, with some substantial volume the last three days. Are you staying in?


Keep an eye on these guys they are moving counter trend that usually indicates weakness

also nice bounce on PBR,SBS

Loved your perspective on the big picture. After reading your thoughts....I micro manage my trades. I think that is what keeps me from staying unemotional at times. Managing a few more trades may not be a bad idea. Thanks, Tim. Your thoughts and via email are extremely helpful.

Not much time as I am at the airport between flights. Just wanted to add my perspective on patience.

Have a look at DRYS. I got in at the beginning of April on what I thought was a good bounce. At the beginning of May it dipped back a couple of dollars and I was tempted to get out and take my rather substantial profits. I did not. I exercised patience (which Catherine tells me is a virtue.) The stock has gone from $22 to $42 as of today and we are looking at incredible profits (up about 500%.) If I'd decided to take my profits I'd have been happy with 200%. There will be times that the little dip will become a big dip (much like my mother tells me I have become) and you might lose some of those gains, but by letting the winners run.... hooooeeeeyyyy!!! it feels so nice.

Wish I had more time today to chat and read all the posts. I'll have to catch up when I get to Edmonton at 3:00 tomorrow morning.

It's a good day. Even LCC is still going down.


As i was waiting in line at CMG, i was overcome with the strong desire to post something. As luck would have it, Jeff opened the exit thread and this is the perfect opportunity to make this point:

Some of you are not equipped to trade price patterns.

That may sound harsh, but it's true. That doesn't mean you won't ever be able to become equipped to trade them, but right now, a lot of you are bailing on great trades, missing out on big moves, or taking losses you shouldn't be taknig.

The bottom line is this: If you're going to trade a pattern, you need to know the pattern and know what can happen as the pattern unfolds.

How many of you bailed on AVB today? I know at least one of you did because I got an email. ARE YOU GUYS NUTS? Not only did the upgrade fail to keep the stock over $125, but as I type this, the stock is about to go RED on the day. Pattern intact.

I know someone (I won't single her out again) bailed on AKAM because she didn't like the dojis. Look at the price action now. Pattern intact.

These are just 2 examples. Do yourselves a favor please. If you're not ready to trade patterns, don't trade them. Trade bounces instead. Otherwise, KNOW the patterns. Take Jeff's classes. Fight with your own emotions to sit out these daily blips.

Oh look, AVB down already.

Patiently waiting for a good entry into CE......and waiting for AVB to follow the "RULES" and turn down from its neckline ;)

OK Brett, the truth is I AM nuts. I got into AVB at the exact wrong time and have ridden it up to the exact right time to get in. I was hoping to keep that a secret (especially after my posting on patience) but now you've RATTED ME OUT!!! Oh the pain, the embaressment... the agony. I did AVB on my own and asked for input after the fact. Both entry and exit. I will learn. Please, please, PLEASE don't tell Catherine. Beware the bag of hammers!!!

Brett, good post and I think I fit so have been trading break outs and bounces lately. My patience is growing but my use of stops is killing me, do you have a little person for that? With a bit more guidance I want to try Tim's approach as I was doing that before and was coached out of it...
Oh and Tonya I would love to know how your index trading is going but if you do not want that to be a blog topic please email me at bob@noburnca.com - THX.

Bob, here's what I have done. For these emergency stops, I will take the greater of 3% below my identified support level OR 2x the ATR, whichever gives it MORE room to move. The idea again is that I don't ever want this stop to be triggered unless the sky is literally falling.

But when calculating R/R, I don't use that emergency stop because, again, I don't expect to ever use it. I know that this leaves me exposed to a little additional risk in the event of a catastrophic emergency, but I think that's just the risk of trading options in the first place, and I hope to combat that risk with other things like being diversified with bearish trades which will do GREAT if the sky actually does fall.

So, to calculate a R/R, I've done two things and I'm trying to determine which I like better. 1) I just use a range for my risk instead of a hard number. So, I might say I'm willing to lose anywhere between $100-150 on a trade. 2) I split the difference between my mental stop and my emergency stop. So, I may take where my mental stop is and multiply by .985 or 1.015 and use that to calculate the risk. I like this method pretty well.

Again, I think the bottom line is that everything is a range. I used to try and nail everything to the dollar and it just doesn't work that way, I don't think.

Another thing I've discovered I like doing is using OTM options on earnings plays and such because with those, I just risk it all and don't ever think about stops. That's a nice feeling, but of course, I don't think you should use all of your capital that way as it would then be possible to lose 100% of everything. But it's nice in a limited portion of the account.

Hope this helps. I'm just learning with all of you guys but this stuff has helped me a lot so I thought I would share.

And, by the way, it is absolutely true that doing this will keep you out of a lot of trades that you wish you could take because the risk is too high. So, I just don't take those trades, and it's hard.

Sorry, Chris. I didn't actually rat you out. Your trading is a cry for help, and I was just giving you the opportunity to get it.

Now repeat after me: My name is Chris, and I'm a bailaholic.

"We love you, Chris."

Oh, and by the way, I have never set an automatic stop on the option price itself. I always use the contingent order by stock price. That's just how I've done it.

Learned my lesson on AKAM, thank you. The good news, at least I bailed for a profit, albeit too small. I'm still in AVB but this morning was soooo hard to watch as it went way beyond what I was comfortable with. I think part of my problem with AVB is I was a little late on my entry so naturally it's tougher to wait it out.

Doji Grrrrl

Thinks Tim, I think I even understand that and thanks again for your help with my picture on the blog and all. We are actually are fairly similar just you set deeper stops. This may be too much for my feable mind to track the hard emergency stop and the mental line in the sand stop but I will give it a go. May have to use some of Chris' hammers to get it to stick though. Tim do you use TOS? I was not when I did contingent stops last so it may be much better with TOS now. I know just what you mean about the OTM earnings plays and have had mixed success with that as one would expect. MON was the first I tried and I found it really interesting that I though I was not emotional in my trades until I did this and felt the release of planning up front to risk it ALL. I suggest this as therapy as it really showed what emotion I still had. Hey, do I get any patience credit for staying in MON since 4/5? If so I need to cash those credits in on other trades. But that is a difference story...

Well AVB finally gave me my entry, but YUCK, whats with those bid/ask spreads.

I'm not buying at those prices.


I was pretty worried about BIDU today but then I cut the top off my crayon, drew a new line and I am ok now.

Mike H.,

I agree with you. The spreads on AVB are huge and even though the set-up is good, it is not worth it.

What?? I make a couple of posts and all traffic on the blog stops!! I am not feeling the love.


On MRO, the candle means that the bulls pushed it up, the bears pulled it down to 109, and the bulls are keeping it back up there?

Am I reading this right?

Randall and Michelle


You are so right on the patterns, I have watched many others, and experienced it personally with BUCY. Pathetic, I didnt see
the bounce off the old resistance becoming new support. Textbook investing 101.


Jeff K.
I have been active here for a couple of weeks, have been reading through many (not all yet) of the past links (archives). Just read "traders & drinkers" (very nice). Encourage all to read through these in their spare time that have not been doing so.
Please keep up the fine work.

Brett, that was a positive rant for the addicts. I know you helped me out with a couple of things that have made a huge difference in my trading.

I added to AVB on the failed move above the 30 day. I bought CME June 510 Puts when it was positive this A.M.
I think once Chris sees the power of the leverage you and Jeff are experiencing it will make it easier. I've had some loses in here but also have had some exponential winners.
Just be patient with the trade you'll see. It's kept me in short positions in :
WYNN,PSA,AVB,SPG,BBY (looking to add to), CAL, PLCE, DSW ( a new support break today...take a look).

DSW check it out

Anybody have any thoughts on ISIL? Do you think it's just testing old res/new sppt (again)? It's starting to look pretty iffy.

(Dallas) Texas


I'm sorry, I didn't mean to set you off on a rant -- and yet I kinda knew my comment would do that to you. I usually stick it out in a trade and don't panic.

However, I just got REALLY burnt doing that on RATE and a CME put a couple of months ago. I stuck it out with Jeff and as you can see, neither went that good and still aren't going that good. There was no point selling RATE at 100% loss, so I rode it out in hopes it would still drop. BTW, it's still at 100% loss!

I only asked about AVB this morning, because I just didn't want to miss the exit. I'm still in it don't worry. Thanks for the kick in the ass! Just let me know when to get out and I promise not to ask again....


Jodi (and everyone else),

there are a couple of very important points from your last post.

1) You got REALLY burnt. You should never get REALLY burnt ever. Even if your option(s) go to ZERO. That's position sizing and discipline. If your position is sized properly, a retest that goes a bit above resistance shouldn't even make you nervous. i learned that lesson by taking positions that were too big for me to handle.

Here's a rule of thumb: If you turn on your computer and the first stock you check is the same every day, it's probably too big a position (or just a big winner which is ok).

Also, the fact that you let RATE get to be a 100% loss means to entered at the wrong time or waited too long to exit. I was in that trade and when it failed, i got out with a rather small loss.

Lastly, and Jeff will readily admit this, even Jeff has strings of winners and losers. If you're going to jump on a trade just because Jeff took it, you better have a good idea when Jeff would get out too. Just ask yourself, "WWJD?"

Great insight all day today, Brett. Thanks for all of your help.

Also, wanted to add one more advantage to viewing each trade as just one of the next 100 trades I will make. That is, I can be a lot easier on myself when I make a mistake. I know that every time I exit a trade I second guess my exit. But what if I made a mistake? What if I cut a profit short? It's just one of the next 100 trades I'll make. Certainly I want to learn from it and adjust my rules as necessary, but there's no need to beat myself up over it.

Seeing the big picture can free you up from having to be perfect on every trade.

I didn't get REALLY burnt. That was maybe a bit of an exaggeration. However, I don't know how to take less than one contract (to be properly position sized) and that's all I ever take.

Like Tim from last week or the week before, I haven't ever hit a big winner. My already small account has almost become extinct, and I'm becoming very protective over it.

I definitely waited too long to exit on RATE, which was exactly why I wanted to be sure to get out of AVB this morning if it was actually time to get out.

Hi, my name is Jodi and I have a problem with exits....

BTW, interestingly enough, I bought a 125 ITM put on AVB and paper traded a 120 OTM Put on AVB the same time.

My OTM was up by $90 and my ITM was down $230. I don't think I get it....


This comment has been removed by the author.


This is Jeff's specialty and there are several prior posts on the difference between OTM and ITM. If you take the time to learn how to use the black scholes calculator, you can actually figure this result out beforehand.

I don't know when you bought the ITM put, but obviously it was after the stock had moved lower. Let's say $122 or so. There, you have a $125 put with $3 of intrinsic value and also some time value in it. The $120 only has time value. If the stock goes to $125, you've just erased $3 on that option's intrinsic value (which is likely a large part of it). The OTM $120 option only has time value, so you don't lose any expensive instrinsic value, and if the volatility ramps up, that option can actually go UP in value despite the stock moving against it.

Does that make any sense?

Hey Jodi,

I also am trading really small right now and, honestly, there are some trades I won't take just because the risk is too high, even with one contract. Stocks over $100 like AVB often present too much risk for what I'm doing right now.

So, I either don't take the trade, or trade the stock instead (less than 100 shares). With bearish trades, I'm not up for shorting stock yet so if the PUTS give too much risk, I just have to pass. It stinks sometimes but keeping risk within my comfort zone is more important right now for me.


I really appreciate the time you are putting in to answering this for me - thanks.

I have read and read about the difference between ITM and OTM. I learn best by doing, so I thought I would trade a couple of different ones, to try to understand the result. What I didn't get was that you actually lose intrinsic value when the stock moves to the ATM price. That makes sense now that you say it that way.

Call me dense but I don't really understand why you would buy ITM then???

Do you use the Black Scholes calculator before every trade you take?

It really pisses me off when my paper trade account does better than my money account - especially when I'm trading the same stock. Here I thought I was playing it more safe buying the ITM option.

Yes, the stock was at $122.28 when I bought. (Good guess!)

Thanks again Brett



Don't forget the option fundamentals. You buy an ITM option to get a closer relationship to the underlying stock, without having to pay the sticker price. The ITM option is a safer play because it is more sensitive to price movement, less sensitive to time decay, and less sensitive to changes in volatility.

The ATM option is moderately sensitive to price movement, very sensitive to time decay, and very sensitive to changes in volatility. At the same time, it is inherently worthless.

The OTM option is not sensitive to price changes, not as sensitve to time decay, yet not as sensitive to changes in volatility.

Remember with options, you get what you pay for.

I'd spend some time checking my library of posts on options. Afterall, this is one of the major reasons I started this site.

Keep asking questions until you feel more comfortable though...


Where it starts to really confuse blonde little me, is this. They are sensitive to time decay, but what does that mean exactly. If it is a July, or September OTM option. When does it need to make it's move by? How sensitive is it? When does it become too late for it to make it's move? Does there ever become a time, when time decay is eating you too badly that if the stock moves to your target, you won't make any money?

OTM options need to make their move quickly, but what is quick?

I got out of HWCC when it broke the diagonal trend line especially because it was still OTM and in the last month of expiration. I thought time decay was too much by then and it hadn't made it's move "quick enough". It finally made it's move and I was already out.

I know you get what you pay for, that is why I paper traded AVB OTM, thinking it was safer to be ITM - then my ATM loses money and the OTM makes money, and it closed almost exactly where I bought in (july option BTW) 2 weeks later and I've lost money. Shouldn't it be worth close to what I paid for it?

Do I just have a mental block here? Could you bring Catherine's hammers to smash through it for me please Chris? Are you near Calgary?


I can see a ton of questions here, but I will try and answer as many as I can...

To determine any option sensitivity, check your option greeks first.

Sensitive to time decay = theta. Theta represents how much time premium your option will lose per day. Remember the old ice cube analogy? Its true.

Don't confuse theta with price movement though. Two different elements to an option.

All these questions should be ironed out before throwing money into options. You won't learn this all in one swoop. I am glad you tried two different options and papertraded them to see how they work. You'll learn most of the nuances from market experience.

Becareful trading OTM options out of the gate. Since these trades are wrong the majority of the time, you will want to trade small. If you want a good indicator to determine an options probability of success, use the delta for this.

Thanks Jeff

I appreciate your help. I'd like to say I've had a light bulb moment - but it is still dark for me yet. Maybe it's time to take a step back.....

Thanks again, I appreciate your trying to answer my questions



Want to pick this one up over the phone???

It might be easier to turn on that lightbulb when talking it through.


Yes thank you Jeff, I really would... How do we do that?



I've been following your questions on ITM, ATM and OTM....

I feel your pain, I am in that dark place with you..never quite sure which option to buy.

And this is why we love you, Jeff.
You have a ton of stuff going on, including a new baby, yet you take the time to explain to us new traders stuff that probably is fall off a log easy to you now. Thanks for keeping this blog going and teaching us. Have a great weekend.


Randall and Michelle

Jeff, Brett and others - first an observation. It just amazes me how patient you are with all our newbie questions and reading Jodi's posts is a perfect case that makes me want to say thanks to all and especially Jeff. The teacher's heart really shows and even offering phone coaching...wow! What helped me the most was IT adv options class and paper trading ITM, ATM and OTM on several stocks tracking them all to see how they act and react. I have MUCH to learn but ITM or OTM decisions are not as troubling as stops for me. What a great community you have built here Jeff.

ESS fell all the way to long term support at 125 today, 125.01 to be exact. This has been on the watch list a long time. If it breaks through tomorrow we should see some nice downward movement. Wait until the end of day to make sure of the signal. Happy Trading. MikeH

MPG also broke support today. I missed it because as usual my other job got in the way.


I have been thinking of writing for some time about one of your previous posts. You mentioned that you had decided to trade few contracts at a time to fine tune your entry and exits. I came to the same conclusion about 2 months ago. I have the ability to trade a large account but I chose to allocate only $20,000 to my new obsession. I say that jokingly but I am obsessed. For my initial trades, I traded 5-40 contracts at a time realizing that hopefully, my financial planner was protecting me from myself. I realized somewhat slowly that for me this approach was wrong. One, my financial planner, a person I call my friend, was satisfied with meager gains. Two, I was focused on making the big gain and oblivious to the big loss. I decided for my own education, I would start trading a small amount of my trading account but make many more trades. This for me had been a huge educational tool. It limits my emotion because I have less money committed and it refines my entry and exits. I will continue to do this until I make consistent profits. I have committed way too much time and cash in studying option trading to give up. I got killed on 2/27 but I am fighting back and have learned about position sizing and the call/put ratio in my account. I know that Brett thinks some of us should not trade patterns and I appreciate his input, but I think Brett skipped his morning White Mocha so he could be first in line for a burrito at CMG.


I'm only trying to help. When you trade a price pattern, you need to know EVERYTHING about it. This includes: 1) clearly defining the pattern so you have a definitive breakout point, 2) making sure volume confirms, 3) knowing your time frame for the trade and 4) knowing your target price. After analyzing the risk/reward on the trade, and deciding that it works, you take the trade. Then, you need to execute the trade.

Even after a PERFECT setup and a PERFECT entry, the hard work should be over. Ironically, this (the execution) is where most people seem to go wrong. As Mark Twain said, "There's many a slip twixt (between) the cup and the lip."

I know this because I did it for months and months before working on myself enough pattern by pattern until i knew what to expect. I now am comfortable with retests and I plan for them. In fact, i'll almost always add on a retest if it's successful. This is my way of rewarding myself for being patient and it reinforces disclipline. I know my time frame and I don't panic when the stock seems to 'not be moving when it should.'

When I see people taking a trade on a pattern, then bailing during the pattern, that means they have a psychological issue interfering with their execution of the pattern.

I suppose I may have been too harsh in saying many people shouldn't be trading price patterns. After all, how else would they learn? What I should be saying is: Every time you screw up and sell an AVB early in the day or bail on AKAM because you see a couple of dojis or dump HWCC when it comes back to retest the triangle apex, see why you bailed and train yourself to hang tight. Keep a journal identifying your time frame and target and check with that journal when you try to sell early. Know that the only exit you're allowing yourself is if the trade fails absolutely. That is the most valuable education you will receive. And if that doesn't work, my 'little person' would be happy to pay you a visit.

Also, since i'm on a Kit-Kat Blizzard-infused roll, never close a trade because 1) you 'feel' the market is going to turn, 2) you 'think' the stock has already had a great run, or 3) you 'fear' that you're going to give up your profits.

And Sean, I don't get WM's Tuesday and Friday b/c my morning hoops game is too far from Caribou. But i'll be there with my laptop tomorrow morning for the first few hours of the market action.

And lastly, if you haven't gotten your Blizzard with twist ice cream...well, you have no idea what you're missing.

Tim, Sean,

I too started trading smaller positions sizes and more option trades at one time on a Marketcast suggestion in the post 2/27 hangover. I was lucky enough to heed the advice of the MC Crew and work in some protective puts prior to that fateful day. I also noticed the same thing that you two did about not overanalyzing each trade and exiting based on my analysis. Having more positions helps you be more diversified across industry groups and continents. This in turn helped me in becoming more patient because the daily swing in your account isn’t as large. I also noticed that with very few positions, all your trades could be moving against you the same day and with more positions there always seems to be a clear winner each day and not always the same position.

My advice to everyone who is thinking of doing this would be to only add more positions if you can manage them and knowing when you are going to exit based on your analysis and only based on your analysis. Also, don’t take on mediocre trades to have more positions. Take only the best trades that fit your rules, tolerance and personality. In time, you will become more efficient and be able to spot good trades quicker.

I am a long way from the Promised Land, but, I learn something with every trade.

Tim, I have read that Matertalk quote on your next trade being only one of the next one hundred you will make several times.

This blog is great!

Wow, Brett that was perfect. Thanks. Somehow I knew exactly what you meant. Kit-Kat Blizzard huh?

Are you bulligh or bearish on DSW ?? The reason i ask is on a 2yr and 5yr chart it looks like it is setting up for a support bounce off a diagonal trend line, but in the shorter term it looks kinda bearish. I was just wondering how you were seeing it.

Bob & Pam
To tell you the truth, in this crazy bullish market, I have not done too much with the $SPX trading system. I am 100% confident in the system and there will be a time and place to use it, but for the time being, i will play an occasional bullish trade but there has not been enough signals to get my "trading fix".

Still in AVB and PSA (patience is truly a virtue that i have only recently got a true grasp on, thanks to jeff, brett, and all the bloggers here)......All my trades did exactly what they were supposed to today, except one (NOV) and it was just "exhaling" a little.

For the record, I love this blog and have learned so much here. I am sending a big hug to everyone. And Jeff you really are a saint with a heart of gold, the way you offer help to your league of followers is amazing....Jodi, take advantage of the offer.

Excellent comments and information...

And now I'm about in a panic about EEP, have been watching it go up and up, heading down yesterday and appears in the pre-market to be continuing that downward movement, so watching 'unrealized' profits evaporate.

Oil related stocks and Oil are down.

I'm patient in following patterns and not bailing at a moment's notice. Although this was a bounce and bought near the bottom of that bounce. It came close to my target of $61, so should I have exited based on that fact alone or wait it out to see what will happen today?

I was tempted to exit yesterday, but was called away and missed the close of the market...aaaaarrrrgh!

Perspective's appreciated...



It looks like todays pre-market has the price right at the 30 DMA. Not that I use it, but it has acted as a level of support in the past.

I drew a horizontal support line, though weak and not significant, right at $58.30, just below the current pre-market price, and it coincides with the 30 DMA.

The stock is in a nice overall trend, I'd be looking at the end of days price action, and looking at what my rules and strategy when I entered the trade.

Good Luck!

Chip, what is your exit strategy for trades like EEP? My typical approach is to let it close near or above it's previous high and then start using the ATR method. This one didn't hit it's high, so I would use a horizontal or diagonal trenline and wait for a definitive close below those areas. To me, it still looks like it's above both horizontal and diagonal support.

My (limited) experience has been that this could be setting up a symetrical triangle which will eventually continue higher. If it doesn't break through those trendlines, I would give it time.

I know it stinks to see those unrealized gains disappear, but I haven't yet figured out in all of trading how to keep that from happening. Unless you are going to try and pick the top, you have to be willing to give some back.

Of course, I say this after having just yesterday closed out my PFCB trade because I was picking the bottom...

To Jodi and everyone on the topic of OTM, ITM and ATM options. The most helpful thing to me in learning how these different options respond has been using the ThinkOrSwim analyze tab on the desktop software. You can load up an option and watch how it will respond as you change the date, price and volatility. This gives you a great ability to easily see how an option will react in various conditions. It can be a great learning tool.

I also use this tab instead of Black Scholes to calculate everything ahead of my trades because I find it much faster.

I took a bearish trade on DSW. I was looking at a 6-8 week trade with a target of 30. It broke support and is filling in that gap and the next level of support is 35.10.
I did look at the 2 and 5yr charts and see it as breaking thru those levels. I didn't look at it as a support bounce off a trend line because it so far below the moving averages ( I use the 30 and 50 MA).

This is the way I do it. Take a look at DE. Diagnal support from 8/15/06. Plus, positive trend using the 30 and 50 day as support. DE went below diagnal support and MA's on 5/1. On 5/2....BOUNCE...I enter the trade. Option up 300% now ( and still holding because Brett is right about patience).

I did throw this one out there on the blog and I am not sure anybody took this trade or not.

I don't see that on DSW.

Good morning, all.

Love the picture, Jeff. That is cute and funny.

Randall and Michelle


Pre-market has it right at resistance...may be a good time to add/get in...depending on todays price action...I like the risk/reward here..let's see what happens by days end...i need some bearish plays here...


Thanks, you've helped sooth the Savage (Panic) beast within!

I had my support set at 57, I can see why/how you set your support at ~58.30, more appropriately.

Bob, Tim,

My original target was 61-62 with the expectation that if it broke through 61, it would continue higher, of course it never made that and I stood by my plan, although it is still rather disconcerting to watch hundreds of 'unrealized' $$$$ go bye-bye. Of course, I do realize that it may bounce to make even larger gains.

I have time, June options, so should be plenty of time to bounce again, recover and move higher.

I am patient, although it's still a little unnerving to watch this happen. Like many others, I'm relatively new to this, ~7 months or so, and am sure as I mature in my trading experience, I'll learn the valuable lessons of those that lead the way. Thanks to all of you who do that!

I think we as a culture want everything fast, fast, fast and it just doesn't work that way, when you're trying to grow things, plants, relationships...and uh...trades!


Nice job, Jamie. And DE is looking good so far this morning off of earnings. I took a small trade on it for earnings yesterday. We'll see.

JBX also looking sweet this morning on earnings. Congrats to those who took it. I wish I were in on that one.

Disclaimer: If by the end of the day these two trades have reversed and given back early gains, I will deny I ever made this comment.


This trade isn't for everyone. It's very volatile, spreads are huge and earnings are monday.

that being said, TSL broke down yesterday from a sym triangle with a MASSIVE target. I originally had a call play on from monday that went south quickly. The triangle also coincides with a decent trendline broken.

If you have the guts and can position size accordingly, this is a huge r/r trade.


Thanks for the post last night. I will try that "blizzard with a twist".

Basically any blizzard should be gotten with twist ice cream.

Looks like TSO is cuddling up for a dirt nap. Of course, there's a whole day left, and this stock has pulled many a rabbit out of its hat, so let's see how it does once again with its back against the wall.

Got stopped out of EEP shortly after the open. Based my stop on the closing price on the 7th, the day it bounced. It closed at 58.05, had my stop at 57.85. Seemed like the 30 DMA was support which was broken this AM. Not sure if I was "right" or not. I guess time will tell. I think the oil news out of Nigeria hurt prices. The good neww is COL, DE, JBX, and PLCE are all doing well. I also entered a trade on MPG this AM. Got to have a couple on the downside!

Anyone else having trouble looging in to Invest tools?

They seem to have website troubles often.


I can not get access to Prophet charts on the Investools site. This happens every so often.

Have to go to back up sources for now.

Prophet charts are all screwed up today, Bob.

Jodi, I suspect your AVB puts are doing quite well today, no matter whether you have the $125 or the $120?


I can't get on Investools either and on the TOS website they posted that Prophet Charts are not available but that they are working on it.


Looks like a very good potential on TSL. I read that they filed to issue over 5 million more shares, do you think that is already priced into the stock.

What do you think of ECA, recently passed all time highs


I'm in TSO & biting my fingernails now. My stop is 114.50, & I'm being good & waiting till end of day. my name is Pat, & I'm a bailaholic. But today I will not bail!

Prophet charts are down on the TOS platform. Looks like they're having problems in the InvesTools site too.

I agree with the comments made here about price pattern trading.

I would just add, it's part art (not bailing, Brett's little person, ...) and part science (the numbers, stops, targets, ...).

My $.02 -- I personally have tried to:

1. See the pattern first. Make sure I believe in it.

2. Buy ahead (anticipitory) or on the retest. That way, there is less emotion within the pattern. I do miss some trades this way, but there are many to pick from these days.

3. I'm not afraid to take profits -or- let value run to $0 if I'm wrong.

4. Let big winners run.

It really does get back to good entry points, good exit points, and position sizing for me. When I was not doing well in the past, it always came back to one of those basic things.


Jeff, Brett, All,

EEP: now that it gapped down, I've lost all of my 'unrealized' profits and then some, it's 'currently' down below the 58.30 support, although above 57 as I originally drew it...I'm still in it and will watch to see where it ends up at the end of day and likely after.

Question: From a trading perspective, would there have been anything 'wrong' with getting out yesterday at the close, watch it drop today and re-enter at a lower level to watch it go back up instead of burning time in the process.

The reason I ask is that I have done this 'some' in the past, mostly successfully, although am pulling back on my reins, in order to follow my trading plans...but it is a very strong-willed horse, who wants to RUN like the wind!

Between Chris' bag of hammers, Brett's "little person" and my own self inflicted injuries...I'm licking my morning wounds, not just EEP, much is down...

Keeping me somewhat afloat: AVB, BA, BNVI, GS

And what happened to DE...yikes?


Yes Brett

Interestingly enough, they are almost equal. The ATM option is now in the green $30 and the OTM option has gone down but is in the green $75.
I'd still love to say I get it - but it doesn't make sense that the OTM goes down in price as it becomes ATM.
Must be IV at work?


BTW Brett, I appreciate how you shoot straight from the hip.


DE really sucked had a gain came so close to getting out at the peak and it turned into a loser.

It is definitely an emotional roller coaster.

on the other hand BSCI had a losing position worth 0 and it gapped up today to make a profit.

Since I posted that my 120 ITM put went to $40 in the Red and my 125 OTM put went to $140 in the green.


Seems like DE broke up on it's earning news and then got pulled back with the broader market. Hopefully, others will see it as an opportunity to buy and will be up the rest of the week! (How's that for a glass half full analysis?) Anyone have a hammer they can beat me with?


Is there anything that should make me think that exiting intraday would be smart? This thing just keeps dropping.

Cheers to patience!!

I'm in the same boat, Amy - TSO is scaring me...
Thanks for the confidence, Jodi!
it's frustrating not to have any charts!

I'm in EEP as well and it hasn't been a fun morning for me but it hasn't hit my out. I have it around 57.30 and it's not even close to the end of the day yet. But I'm up nicely on PLCE and PSA and PVTB. Don't know why all my Puts begin with P.

pasadena, ca

If it makes you feel any better (and it never should), I've got horizontal support for TSO around $112.50.

Also, seems like BIDU has retested the little pennant gap breakout and I have officially cleared it for takeoff.

I have almost no time again today to watch the market and WOW my account has a black eye anyway. I have about 40% PUTS and they just cannot keep up with the CALLS dragging the account down. Probably good that I will not be here and can just let my rules run. Did have a couple stops trigger today as they should have and ok with that. I feel your pain on TSO and not to happy with X and VIP either.

Amy and everyone on TSO. I am there with you.

Brett has given me some thoughts about intraday exiting that I am trying to employ here. It's not concrete stuff, but here's what I'm trying to do:

1) Figure out where it would have to be by the end of the day for me to stay in. For me, yesterday closed right on the trendline and a definitive close below that today would take me out.

2) Don't do anything until about midday -- but take a look then (around lunch) and see if there's been any recovery at all and see what you think the likelihood of it getting back to your line would be. That's the subjective part.

The reason to hang in there is because IF it were to recover and climb all the way back up, you'd have a really nice hammer there at the bottom and things would be looking good.

The verdict's still out for me but at least right now it does appear to be off it's low for the day.

EEP news and likely explanation:

Enbridge Energy Partners, L.P. (NYSE:EEP) announced today that it has priced a public offering of 5,300,000 of its Class A Common Units, which it expects to close on May 21, 2007. Enbridge Partners also granted to the underwriters of this offering a 30-day option to purchase up to an additional 795,000 Class A Common Units.

Basically watering down the available shares, driving the price down...

I too feel the TSO pain... and yes, I'll watch it for a little while to see what develops.


Looks like a breakout today....

ESS has finally broken through its very strong support at 125. The volume is not impressive.


Make sure there's a volume pickup on BNI before jumping in. just my $.02.

Also, check out the retest on BG right now. That will be an interesting battle at $75.


Volume is key, thats waht I am watching, that and end of day...

I also like EQIX, but I don't like the potential support at $75..

I am all over AVB as well, waiting to see if I can get a good entry later today...


Re-testing it's breakout from 3/16.....

This is going to be a special afternoon. A white mocha to start the day and i'm on my way to make an early CMG run.

The double trouble never disappoints. Strap your accounts in tight because they're going to be rocking and rolling this afternoon!

Take a look at all the buyers at $132.50ish. I will watch for break in next few days/weeks.

PCLN bouncing off solid support of $54.25. If I have drawn my channel right this stock has a $7.25 channel. As of this posting it is $2.00 below the channel for a potential $9.00+ move. Volume is picking up for a good support bounce. Reward to risk is great! My $.02. Am new so let my know if I am in error.



I like the way this is setting up. Nice strong uptrend, support at about $110, support at a dig trendline, as well as a sym triangle setting up...Keep this on the radar...see if we get a bounce or it breaks down...

I'm not sure whatz going on with TSO. May i know what everyone is planning to do. what a drop!

thanks, Meena


I am not in the trade.

Looking at it though, it looks like it is going to retest the 4/25 breakout from $110...


I've been follwing this for a while,in a nice uptrend. $39 looks like a nice support bounce, low risk entry here.

Hello All,

Quite the day today for my trades as well. Everything is going the opposite direction and the account is down 9% from this morning...not that I'm keeping track. I'm holding firm on my trades since they are not at stop levels yet (just all pitching in and taking a chunk).

X - anyone have deep thoughts about this and the additional stock offering to pay senior notes? Wasn't sure if something like this typically de-rails a good uptrend or if it's a 1-2 day dip.


Check out the movement and the volume on ONT (lots of news and very cheap) and look at its 5 year chart. It will complete a huge saucer pattern at about $3.50.

Debbie Davis
Antioch, IL

YAY! ProphetCharts are back - both on InvesTools & TOS.
TSO looks like it's starting to feel better. I'm still in - I haven't panicked yet!

Here come the bulls..

That, and Brett must be really throwing down some mochas and burritos...

I bought some ONT recently at 2.50 and this was my original target. Didn't expect to get here so fast.
Now I'm wondering if I should buy more or just tighten my stop. As usual, this Doji Girl can't make up her mind.

And when that isn't enough, i start popping those chocolate-covered expresso beans (Reindeer Nibblers).

Hey Brett, be careful which end of the Reindeer you get those from, they look similar to something else!


That comment about Brett..well, that was un-called for...I spit coffee all over the place!!!

Too dang funny!

thanks Bob, appreciate you're comments on TSO.


Hello Jeff,

I've been staring at your PLCE example and don't get/see the triangle you are referring to. Would it be to much to ask for you to post a pic of the stock with your lines drawn in? Yea I'm starting to get the shapes but this one is eluding me. I see that was a great place to exit on PLCE and that seems to me the biggest unknown for me....when the hell to get out! For me it's a very hazy line (ok I'm only 2.45 months into the program), when to stay or when to go. I find most (all?) indicators lagging, but they seem to help me pick decent "buy" times. On your example from what I see on the indicators I would have ended up giving most if not all of the profit back just because I would have hung on to this trade for at least 1~2 days more before I saw the sell signal.


ps: Give Eric a hello for me!

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About me

  • 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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