Finding Big Trends in Trading

Stocks & Options

May 11, 2010

Price Headley, CFA, CMT

BIGTRENDS
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BIGTRENDS
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 Dow Diamonds (DIA) Daily Chart

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 Williams %R - The BigTrends Way:
Trading the Extremes to Find Major Trends
 Williams %R is similar to Stochastics in measuring
overbought & oversold levels – the traditional scale is
from 0 down to -100, I use a +100 down to 0 scale.

While most use a 10 or 14 bar setting, I use a 30-bar setting –

smoother but still responsive

 BULL TRENDS: Look for “overbought” reading above 80, followed

by a close above that bar’s high

BEAR TRENDS: Look for “oversold” reading below 20, followed by

a close below that bar’s low

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 Options Shark: Monsanto (MON) Daily Chart

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 Options Shark: Amazon (AMZN) Daily Chart

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 In The Moneys as a Stock Substitute

 Buy In the Money Options to Get Rid of Time Value =>

Focus on Intrinsic
 Sell 100 XYZ shares @ 56.60 = $5660
 Buy 1 July 60 PUT @ 4.70 = $ 470
 XYZ goes to 50 before mid-July:
 Short Shares gain $660, or 11.7%
 ITMs gain $530, or 112%

BIGTRENDS
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 Options Shark: State Street (STT) Daily Chart

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 Options Shark: Newmont Mining (NEM) Daily Chart

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 Gold (GLD) Daily Chart

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 The Concept of Efficiency

 Answer Poll Question: On which of these trends would you rather

buy an “At The Money” call position?

BIGTRENDS
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 Options Shark: Wynn Resorts (WYNN) Daily Chart

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 Keys to be an Options Shark

 Key Elements of my daily Options Shark service

 Buy In the Money, or keep a time stop of 5 days on out of the

moneys if not winning
 Usually buy 2nd month options
 Target 100% on first half
 Shoot for 300% or more on rest when we can
 Invest 5-10% per trade of capital allocated
 Seek to keep losses at -30% or les

BIGTRENDS
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 Options Shark: Yahoo (YHOO) Daily Chart

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 Options Shark: Wellpoint (WLP) Daily Chart

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