Facebook Earnings Play

I just figured out why my Facebook trade is not working out as quickly as I wanted it to. I got into a put spread with the wrong expiration date.

I have a bull put spread with the 72 strike and 67 strike expiring the last week of January.  Facebook is announcing earnings at the end of that week.

I wanted to take advantage of volatility during earnings  but I did the wrong thing.  I should have sold my put spread a week before earnings and not the week of earnings.   This would allow the volatility and time decay of earnings week to eat up the premium  faster.

By selling the put spread during the week of expiration  I exposed myself to the volatility of expiration week.   As it looks now I may have to wait till the week of expiration to exit my trade for a profit.

Using Fibonacci To Time Your Trades

After some more study about how to better time my trades, I had an epiphany today.  If I could use the Fibonacci series on time cycles I can plan the best moment to place a trade.  Of course there is no crystal ball but nature’s own math can help you come close to being in harmony with the “organized” chaos of the market. 

I was introduced to the Fibonacci Queen Carolyn Boroden through watching Jim Cramer.  Her analysis turned on my light bulb about using the Fibonacci series over time and not just over price action.  I started using the Fibonacci time tool in Think or Swim this morning on my Facebook trade and realized that I could have made a better decision about timing my entry point than I did.  I entered in on Monday when I could have waited till Tuesday before I entered the trade.

If you look at the chart you can see where I placed the Fibonacci tool at the beginning of the trend and it traces the moment where I could have placed the trade.  I placed my trade on Monday (yellow circle) but I should have placed my trade on Tuesday (blue circle).  The line drawn in black shows the Fibonacci measurement at where I should have been focused.

I used the tool on the 5 minute and 1 minute chart too and it works just as well.  This is groundbreaking for me because I learned from trial and error that it is always best to wait for a pullback before entering a trade but the key is timing the end of the pullback.  This Fibonacci tool will help me plan my entry a lot more efficiently. 

Trading Notes From December 2014

I wasn't able to post as frequently over the holidays so I am putting my trading notes for December in one collective post.

Trading Notes 12-11-14

After pulling out of this Facebook trade I learned some valuable lessons . One key lesson is to always take profits when you can even if you think the stock is going higher if you set a stock price target stick to your game plan

Looking forward for the next couple weeks I want to see what the historical data is on certain stocks, are they usually up or down going into the new year.





Trading Notes 12-17-14

I felt good about my trade and I had done all the necessary research in Facebook I looked at the technical analysis as well as the fundamental analysis and there were great news stories that supported the stock going higher.

I held off on making a Monday trade because I remembered what had happened in the previous weeks.

So I placed my trade on Tuesday as I had planned I waited for the stock to go down after it had bounced and it was heading back to an area of support.

What I hadn't planned on were the global market conditions. With the declining price of oil along with the Russian currency collapse in the upcoming Federal Reserve meeting the market was very fearful. This caused Facebook stock to plummet despite all of the positive signs of growth and stability in the company. Even with the announcement of China allowing Facebook into the country the stock went down.

This made me nervous about staying in the trade but I wanted to see what the Federal Reserve was going to say. My management strategy was to roll over my credit spread into the next week's options. That would have given me some extra time for my trade to play out.

When the Federal Reserve at their conference call said that they were not going to raise rates, this caused the market to shoot up higher making my trade a profitable one.

Some of my takeaways from this experience are to always believe in yourself. I had done the research and new at what levels to enter and exit my trade.

I also knew that the probability of me winning was 78% and this was what I needed to believe in. Yes I could have made more money but I stuck to my plan and made what I wanted to make on this trade.

Trading notes 1-1-15

After watching the market over the last few days and seeing the Santa Claus rally I feel confident that my instincts are good about where the market is going.

There may be a pullback at some point these next few weeks so I am going to watch the market carefully. People are getting out of positions now that they couldn’t have at the end of the year because of tax implications.  I am of course going to play the probabilities but I want to time my trades more effectively.

The stocks I am watching are Apple, Yahoo and Facebook I think that Apple may pull back based on the lack of confidence in their upcoming products. I think that Yahoo can go either way based on what Marissa Meyer announces in the next few days or weeks about what they're going to do in regards to their Alibaba shares. I think that Facebook is the more promising company for growth because it has a lot of other businesses under its umbrella I just think the other people playing the market don't have the same confidence in the company because they don't trust a young Mark Zuckerberg. But as Facebook keeps outperforming and over delivering I think the stock will go higher.

Strategy Update

I successfully exited my bull put option spread on Facebook today.  It was a volatile week and I had hoped to have gotten out yesterday, but there was a lot of negative chatter about the effect of oil prices on the market.  That kept Facebook from bouncing up on the positive news from the Instagram announcement.  Instead the bounce came today which was helped me exit my trade.  

After a month and a half of successful trading and 7 consecutive wins, I can now confidently recommend my strategy.

Here it is again if you missed it:

YCTT Bull Put Spread Trading Strategy

Alibaba IPO

It's a staple of China's internet economy. It is Paypal, Amazon, Linked In, Youtube, Twitter and a bunch of other companies all rolled into one in a country of a billion people. Now it's making a play for the international market namely the U.S... will it continue to grow? Will a billion people make more people...uh yes. Market movement is not absolute but population growth is.

Alibaba may have a rocky start, we all know how IPOs are...chaos... it may fluctuate for a day, 3 days, a week, a month...but like Facebook who had a horrible IPO it recovered and kept moving up...yes it is a guess but it's not about will it go up but when.

Facebook Is A Buy And Hold Play

Normally I wouldn't say buy a stock if it is not paying a dividend, however because of the way Facebook is handling it's business I can see this stock appreciating in value like Apple.  I bought FB at the initial IPO and then sold it after the drop.  In retrospect I should have held onto it but I was day trading at the time and needed the cash for other stocks.  

The way that Facebook is buying other businesses and monetizing ads for users makes a lot of sense and I can see these new additions bringing in larger and larger revenue overtime.  I bought some shares last week and I expect it to go up over the next few quarters.