Losing Trades - Putting aside Earnings Gapping Method

My options learning journey has not been profitable. One of the reason was not able to anticipate the direction of Dow Jones correctly hence placed the wrong trade. Past few months have been trying out the earnings gapping method but has not been rewarding. Since now I have my US Market screening software, I shall make use of the screening results to aid me in stock selection. Earnings Gapping method... will put aside for now.

As mentioned in my previous post, here's my losing trades :-

1) C, Citigroup

Current Price 54.49
Loses: ($330.00)

On 21th Dec 2006 bought 3 contracts of C FEB 2007 55 Call.
Stock price was at 54.55.
RSI indicator was high at 80 level and MACD lines above zero value.

Anticipated the earnings results will be good and finance sector was the movers and hence bought a Feb call at strike price 55.
The stocks price went up to 55.88 on 28th Dec and thereafter has been declining till now. I did not exit from the trade to take the minimal profit. Currently RSI and MACD is showing a downtrend and price action below the 22 dma. 3 more weeks before expiration, should i hold on to wait for any rebound ?

1) CIT, CIT Group

Current Price 58.64
Loses: ($450.00)

On 16th Jan 2006, i short 2 contracts of CIT FEB 55 Call.
Stock price was at 54.64.
RSI was sloping below 50 level and MACD histogram was below zero value.

My mistakes:

Never short a position when the stocks are on a uptrend.
- price action was above 22 dma then.
- RSI though slope down from 70 to 50 but bear in mind stocks will usually test this level and rebound off.
- MACD lines were above zero value, indicating a up trend.

With all these reason, I should not have short at all. If I would have call, profits is inside my pocket now as curent stock price at 58.57.

Continue To Update My Paper Trades on US Options

It has been quite sometime I did not update my observations & paper trades that I have put in. Spent past month to learn basic T.A chart reading. Primarily, I learn to use MACD , RSI and MA to identify the stocks trend.

Last Week I placed some paper trades based on what I have learnt. Some winning some losing.

Winning Trades:

1) CHL, China Mobile

On 17th Jan 2007, Stock price open at 44.19. From RSI indicator it has slightly break the 50 level and MACD lines cut each other and moves up above 0 value with a tiny blue bar. Anticipated an uptrend movement and bought 2 contracts of CHL MAR 45 Call at $2.45 per contract

Today, on 24th Jan, Stock Price at $50.15, tentatively profit of $750 a 153% ROI.

2) STX, Seagate

On 17th Jan 2007, Stock price open at 27.14. From RSI indicator was at 60 and MACD going to cut each other. Though the MACD was below 0 level, with 07' Q2 results going to be released on 23th Jan 06, I anticipated good earnings and bought 3 contracts of STX MAR 27.5 Call at $1.35 per contract. Earnings results was good "Seagate just delivered the industry's first $3 billion quarter, and 30% growth over our year-ago quarter" and the stock price gapped up from $26.18 to $27.99.

Current Stock Price at $28.40, Tentatively profit of $75 of 20% ROI. Will monitor closely as this is still not a confirm winning trade.


I will update my current losing trades on C, CIT and CCE in my next post.