Yesterday, I heard from CNBC that FRE had a very bad earnings results . I had been monitoring the housing market. Checked both FRE and FNM. It was down for more than 20% at pre-market. Watched the stocks when the market opens. Both gapped up. Since I expect the stocks to go down further, I waited for the stocks to complete its retracement, typically 50% or 61.8% of Fibonacci level (measured from yesterday's opening price and the previous day closing price.)
.................FRE...................................................... FNM
Made the following entries:- FRE Dec 25 Put @$1.60 (when FRE was $28.89)
- FRE Bear Call Spread Dec 25/30 Call @$2.80 (when FRE was $28.59)
- FNM Bear Call Spread Dec 30/35 Call @$2.50 (when FNM was $32.00)
- FNM Dec 30 Put @$3.70 (when FNM was $29.82)
Closed part of my FRE Dec 25 Put at $2.65 after lunch time (not at the best price for the day though). I thought the market would continue its slide after 2:00pm (EST). It happened that the market reversed and enjoyed a short rally. Anyway, it was good money earning 65.6% from that play.
I have kept the rest of my play for today. So far, the market is still in my favour.
Note: When a stock tanked like FRE and FNM yesterday, the time value for the options increased substantially. It would be good to sell the options (in my play, I played the credit spreads). The time value would drop substantially by the end of the day.
- PersianCat04 (Millionaire-in-progress)
4 comments:
Hi Persiancat,
I am just curious to know when do you use the 50% and 61.8% retracement.
If level II quote is bullish will you still enter the trade?
The Fibonacci 50% and 61.8%retracement can be used in many areas. One of them is when the market gapped down so much like FRE and FNM (to get the intraday retracement). At other times, it is good to check it in a daily chart over a period of 6 mths.
When you say Level II quote, is it the real Level II quote (those that you have to pay) or the Depth of Market (DOM) which is free. I do not have the real Level II quote so I cannot answer your question.
- PersianCat04
how do you determine the right price when you buy or sell ?
My decision to buy or sell is mainly based on how the candlestick charts looks like with the various indicators. Some of the things I look at are the candlestick formation, trending (e.g. using moving averages), chanelling, support & resistance, etc.
- PersianCat04
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