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Understanding Volume & Open Interest:
Volume & Open Interest - Definition
Volume is the total number of transactions filled on each stock options contract for the day. Open Interest is the total number of open stock options positions floating in the market place that is yet to be closed.
Volume & Open Interest - Introduction
Volume & Open Interest are one of the aspects of stock options trading that continue to baffle options trading beginners all over the world. Volume is the ultimate measure of liquidity in stocks trading but an additional measure called Open Interest is introduced in stock options trading. This led to the common misunderstanding that open interest is the sole determinant of liquidity in options trading. Nothing can be further than the truth. We shall explore in this tutorial the correct method of determining liquidity in options trading.
http://www.optiontradingpedia.com/volume_and_open_interest.htm
Option Volume Leaders & Put/Call Ratio Leaders:
http://whatstrading.com/
Now there's a coincidence for you. LOL
Sadly, I agree. Even troop withdrawal from Afghanistan is set up for just prior to next year election.
Sure can't find anything in there that I disagree with. Only variance will be the illusion of economic health propped up by political hot air attempting to benefit re-election, and that done at the expense of, as always, the taxpayer and naive investors. The economy will remain a pig on stilts no matter how much lipstic they put on it.
auroradude, GLTU too ! What are some of your plays on the short side ?
Also, what is your opinion on shorting the EURO ?
TIA,
John
Some upcoming news items will affect timing, but IMO this should be the framework of things coming up.
SDS is a great play anytime, but should do even better if this scenario plays out.
GLTU!
I think you will prove to be correct ... I trade in and out of SDS and look to make more gains through the balance of the year ...
My thoughts for the second half of the year:
I believe that if I spent enough time working over the next half of a year to 9 months, it should be the most profitable of my career (that is if I don't take too much time off haha!) and could finally get me that last digit I have been seeking for a while. As you all know I can and do change my opinions often to integrate new "knowns" and new variables, but after many hours over the last week I believe I have a good grasp of things to come given what we know as of today - so here is how I see things coming in the mrkt...
I am seeing a VERY weak mrkt right now, and not just a correction. We still have not completely ended QE2 and yet we have been going lower for the last 2months and are heading towards the low of March 16th. Lower highs and lower lows have followed these last 2 months, and IMO we will soon see lower S&P than we did in March. At around the time we see that 1249ish level, either right before hitting it or shortly thereafter, I expect several green days as the bulls try to stage a rally. This could be a very quick ride up, but short lived with an even larger decline to follow. This decline I believe should start in around 2 weeks or so and should continue until until sometime in August when we see a knee jerk reaction for more QE lead by some Euro economies, esp Germany. Following from political pressure, Ben will jump on the bandwagon as well in late Aug or Sept. Following this line of thought, I expect to see precious metals, miners and oil to see further declines short term, only to have dollar denominated commodities start to push towards new highs when this next round of QE comes into being late summer/early fall. Our timing here will be important, as we should be able to ride things up, then down again before jumping hard into precious metals next. We will have some great opportunities to ride some housing and some financials down soon - problems that the media will "rediscover" as big problems that are still around. I also believe that as economic problems get attention in western countries, that we will then start to see some of Asian problems that we have discussed last week start to show up and make the news. Of course there will be many other opportunities on individual companies, ETF's etc., and we need to start finding them. But if you look at the S&P in 2007, it is eerily similar to what we see today, and I am expecting similar things to follow unfortunately. I made a ton back then through the crisis that followed, and we should be able to do the same again.
There are some things that can change my timing, but I do not anticipate anything that will change my over all view - just the timing and magnitudes. You have heard me say before that I am not confident or fairly confident etc.....I am highly confident of my analysis on this. I realize that we have many precious metal investors/traders here, and come fall we should start seeing a large rise in prices. Physical buyers may do well to restart their buying in the next few weeks.
IMO you all should seriously consider how you should plan your moves that you will take if/when these things come to pass, whether it is put options, shorting, buying inverse ETF's etc. I do not suggest just putting you money into money mrkt mutual funds to ride it out, as I see them getting hurt as well with too much $$ invested in Euro banks because they are too heavily invested in Euro debt - not where I want to be if my analysis is correct!
As always, I encourage differring views than my own, and hope we take a serious look at this and be prepared!
Thoughts?
I am holding some.
Just a small position - you?
S&P Update 6-21-11:
Price briefly tested 200MA today. Violation and close below 200MA would be highly suggestive of older support points of 1200/1242 being tested. Watch for cross of +DI below ADX; watch for ADX to curl upward confirming very strong downward pressure to existing move seen in the sharp upward angle of -DI; StochRSI still exhibiting growing negative sentiment; moderate divergence between StochRSI and CMF denote market indecision, however, expanded volume on a negative close is indicative the bulls are starting to join the bears. Today's close at 1283.50, down 0.28%, on expanded volume supports the negative sentiment seen in StochRSI and also suggests downward continuation likely.
Option Volume Leaders & Put/Call Ratio Leaders:
http://whatstrading.com/
Excellent advice on options, thanks. The chart of FXPT looks pretty good. Seeing +DI crossing below the ADX in a sharp-angled descent suggests you may see some sideways movement for a while. Not much support at .015 and volume is waning, so I'd be patient for entry. I do see some accumulation; strong buying pressure seen in CMF with StochRSI showing mounting positive market sentiment. Some divergence seen between StochRSI and volume. The problem with OTC/Pinks, the charts are not near as reliable as the big board plays. Hope this helps.
Options can be brutal as well! Too many folks starting out in options are soooooo concerned about what % they make and getting the home runs - recipe for disaster IMO! Take the profits when they are there, and the home runs will find ya is a better way IMO....Home run plays should either "find you" on a play or when you look for and find a "continuing event" and load up on these longer term plays.....and always play options with the direction of the mrkt IMO.
My penny plays I emailed out are FXPT and EGIL.
I only play a couple of pennies every few months (takes too much time watching and too little $$ working to be worth it for me) but I do want to help out the board followers and we don't let non reporting plays on the board - hence the emails.
(My record on these penny plays is not spectacular, but have hit a few out of the ballpark haha!)
Doesn't that FXPT chart look good to ya? I might actually play it tomorrow!
Thoughts?
Appreciate the invite AD. I've got a long ways to go to get up to speed on options, just now getting my feet wet, but would eventually like to learn futures. What are the 2 penny plays you're emailing out? I just signed up for your emails a minute ago.
Hahaha!
My asst MOD's did the entire Ibox - I am too tech challenged to even get in there hahahahaha!
Futures mrkt is brutal and most folks fail quickly - I don't encourage anyone to get in w/o a ton of paper-trading. I am asst. MOD of this board if you are interested:
http://investorshub.advfn.com/boards/board.aspx?board_id=9144
Of course most of my comm. post are on ATM....
Feel free to steal anything in there bud - I would LOVE to see this board grow big time!
Okay, got it AD, thanks. I was just looking at your iBox at ATM. Very very nice! Excellent insights on CAT, and I agree totally. Makes perfect sense. I've never tried my hand at trading futures, so it goes over my head easily. Thanks again.
On CAT - I expect a big slowdown in China construction within the next 6-10 months affecting non precious metal mining and construction sales severly. As a ton of gov's around the world have debt issues, I expect little ordering there. CAT has had great sales over the last several years - many new rigs out there nearly saturating all demand and providing secondary mrkt if precious metals continue to go up in price and mining activity in non precious declines... resulting in fewer sales. Time is not perfect yet, therefore I am building a position and not "all in" yet - but time draws near my friend IMO....
On corn, I was referring to futures mrkt ( I make most of my money there usually) and not CORN that we were discussing the other day - sorry for the confusion. In the futures mrkt today, corn hit "limit down" which means it went down as much as was allowed within the trading day. Here is the daily limit on corn contracts on the futures mrkt:
"$0.30 per bushel expandable to $0.45 and then to $0.70 when the market closes at limit bid or limit offer. There shall be no price limits on the current month contract on or after the second business day preceding the first day of the delivery month."
Is that a good explaination? And sorry for the confusion....
Interesting thought on CAT. That's one strong company, but... I do anticipate a global growth slowdown, so you may be spot on. I've got to laugh at myself here, please explain "limit down" to me in relation to CORN. I think it means the most a stock can go down in one day, but remember, I'm still learning the ropes, so I'm not clear what you mean.
Perfect agreement with every statement.
Hey phrantic -
It may also be a good time to consider longer term positions if your 6 month view is the same as mine - I am currently building on the short side of CAT and GE, among other...
Also waiting in anticipation to load up long on corn after todays sell off and limit down...
That's a good choice, also. RYL seems to be attracting the majority of put volume, but I'm just not attracted to that one. Interesting note on homebuilders, that industry is extremely S&P sensitive. If you look at my earlier S&P update, you'll see a mirror image in the volume/price relation I described with KBH for the last 8 days or so. Something to keep an eye on for entry advantage.
Nice choice!
I am seriously considering shorting PHM tomorrow [for the twentieth(?) time]
I agree. I really like the homebuilders, just don't see any strength in the industry which jusitifes their recent rise. IMO it's nothing more than emotional tripe. KB Homes (KBH) looks ripe for puts. The chart is showing price ascension (last 7 days) on receding volume, then today on expanded volume price is only moved .13 with intraday spike to double-top, then quick withdrawal to close below resistance. The market quit supporting price elevation last Friday as seen in volume/price relation.
http://finviz.com/quote.ashx?t=kbh&ty=c&ta=1&p=d
Looking like time for some more puts If dollar doesn't act up and no surprises on news tomorrow....
Option Volume Leaders & Put/Call Ratio Leaders:
http://whatstrading.com/
S&P Update:
Today's close violated support (prior resistance). Price needed a close above 1289 to offer the suggestion of trending positive. Price/volume tell the truth. The "market" discontinued price support above 1272 last Friday which is readily demonstrated by descending volume in the face of rising price. I believe we'll quickly see a return to 1272 for a test of market support at that level. All indicators support my interpretation. The current market has indecision written all over.
Today's Option Volume Leaders & Put/Call Ratio Leaders:
http://whatstrading.com/
Revised:
TOP DOWN OPTIONS APPROACH: (Conservative Approach)
1. Affirm general market trend.
2. Affirm sector trend.
3. Affirm industry trend.
4. Know the TA/FA on your stock.
5. Maintain a preference for volatility in your selection.
6. Buy In The Money.
7. 90 - 150 day expirations.
8. Confirm liquidity.
9. Monitor sector rotation.
10. Know market cycles for different stocks.
11. Entry/Timing are key
12. Take 10% contrary position to calls/puts. (Cheap Insurance)
13. Concentrate on low float securities. (40M or less is best)
Thanks for your great input AD, very well done.
Hope I didn't sound anti-wheat, I am not. Your reasoning is both sound and valid as wheat is often used as a corn substitute in a variety of applications, such as livestock feed, ethanol production, etc. As far as ethanol goes, a bunch of the US facilities would have to add some infrastructure to accommodate the change. As far as livestock food, it is a good temporary substitute.
Thanks for the warm welcome :)
Nice info, thanks a bunch.
Thought y'all would enjoy this:
50 Richest Members of Congress in 2010:
http://www.rollcall.com/features/Guide-to-Congress_2010/guide/-49892-1.html?zkMobileView=true
In Chart Format:
http://innovation.cq.com/media/50richest2010/?ref=rc
Top 15 Stocks Held by Members of Congress:
http://www.businessinsider.com/15-top-congressional-stocks-2011-6?op=1
ADZ is a short ETF. It contains equal weightings of corn, wheat, soybean, and sugar futures contracts.
AGA is a double-short ETF with the same weightings.
AGF is a long ETF with the same weightings.
DAG is a double-long ETF with the same weightings.
DBA is a long ETF similar to AGF.
GRU and JJG track grains as a whole.
Currently, there are no wheat-specific ETFs, but I think DBA gives you the most wheat exposure.
BTW, FINVIZ has all of these futures charts. Here is wheat's:
http://finviz.com/futures_charts.ashx?t=ZW&p=d1
Wow, this is unbelievable stuff, aurora. I'm not nearly as educated on commodities as you are. Please continue to contribute here when you find the time.
The reason I had asked about wheat was because I had read it's a replacement good for corn in many respects. Thus, an increase in corn prices would cause more folks to shift towards buying wheat, thereby making both investments attractive as a result of corn being attractive.
Not nearly as much as corn, though it does have some fundementals working for it and we are seeing a tech bounce today. I like rice more than wheat but less than corn, but rice does have some potential for a large spike later in the year IMO. Besides some possible weather issues, I am concerned on 2 major diseases, tungro and bakanae.
As you may know/remember, tungro has been a devastating problem in the past, esp. in the Philippines. My current concern is not so much for the Philippines this year (and for the foreseeable future) as much as Thailand, Vietnam and India. The reason being that (besides these countries being the largest exporters of rice) these 3 have suffered some major loss’s in their frog population in recent years, along with other predators of green leaf hoppers, who are the ones that actually spread this virus. And considering the big move over the last several years to hybrid rice in these countries, I anticipate that these new strains of rice will have little-to-no natural resistance to this virus. So wrapped up in a nutshell, more leaf hoppers spreading a virus to undefended plants.
Bakanae – probably will not be a problem, but possibility exists for it to be a huge problem. While often associated with cold weather and other causes, it can also be spread by contaminated soil. So here is my thinking on possible outbreak. There is a big push in Thailand (top exporter) by the gov to get farmers to wear boots instead of planting barefoot. The push is on because of diseases the farmers can catch from planting barefoot. If they are successful getting their farmers to wear boots (similar situation occurring in China) the possibility increases exponentially for the introduction of contaminated soil. Hence, a bakanae outbreak…an additional thought here, IF we do see an outbreak of bakanae, I would be selling within a week of the spike in prices, as this is often a disease that attacks the young plants , leaving the possibility of yanking out the plants and replanting. I would then look to reenter after a couple additional weeks as I doubt that they will see the actual cause and once it is in an area it is tough to get rid of. Finally, this is a nasty one that is VERY genetically diverse, which would make it a tuff one to control when infecting hybrid plants.
So far, neither is a problem but the possibility certainly exists...
What's the ETF for wheat?
I'm guessing if you like Corn, you like Wheat as well?
Another big plus for corn - much more meat consumption in developing countries (corn feed chickens etc.) - heck, China is opening KFC's right and left! These new urban dwellers will also be eating much, much more processed foods and corn is a major component in many.....lots to like about the future of corn...
Impressive info, man. Thanks for sharing. Your samples bolster my opinion that there is still a lot of upside left in corn, even after this enormous run. And with inflation looming around the corner, the case for corn only gets stronger.
Corn will be an interesting play for several years IMO. My weather model, which has been fairly reliable, is showing me more of the disruptions to production that we are now seeing. I am also concerned with some of the flood plains where corn is grown, both domestically and internationally, as some of my early soil samples are showing some elevated chemicals from recent flooding in the states - haven't received foreign samples as of yet. With some areas showing toxins in the soil, agencies will be monitoring the future crops to see if they are contaminated...loss of ethanol subsidies could effect planting plans and needs to be watched as well IMO.
Well, hat's off to you Bud, you're doing it right.
Nice work phran.
Thanks aurora!
I think I'm going to take profits if they fill me and then hope for a dip and possible gap fill tomorrow. I think CORN is a good one to be in and out of over the next few months. Supply pressure should rear its head by September. If there's even one major disruption due to not enough or too much rain, corn prices could rise another 50%.
Nicely done on CORN bud :)
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