I just bought 35 Puts on Advanced Micro Devices (AMD) which is a long Put Position.
Looking at the AMD candlestick chart, I see a very good stock on a big run ready for a short term pullback. Many would say this is a ballsey move but I have to go with what I see. Take a look at the snapshot of the daily candlesticks below. Click on the chart to make it bigger.
I have 3 moving averages on the chart. The red is the 8 day MA (the T line), the blue in the 50 day MA and the white is the 200 day MA. Take a look at the chart all the way to the left and look at the red line (8 day MA). Follow it to the right. You will notice the red line is moving higher as you go to the right. However, it does take a few dips down to the blue line (50 day MA). Take a look at the red line all the way to the right. It looks, to me, like it’s at it’s furthers distance from the blue line and will start down to the blue line again.
Now take a look at the last 2 candles all the way on the right. The last candle is today’s candle. The 2nd to the last is yesterday’s candle. Yesterday’s candle looks, again to me, like it’s a reversal candle. It has a long high wick with a red body. This is an indication of a reversal.
Take a look at the candle 25 candles to the left of our “reversal candle.” That candle is at a high point. It also has a long high wick with a red body. At that point the stock reversed and the red line (8 day MA) moved down almost to the blue line (50 day MA).
I feel this very good stock will pull back for a few days. Believe me, I know anything can happen but I’m betting it will pull back a little. And because I feel it’s gonna pull back I bought Puts. When the stock goes down my Puts will increase in value. Not only did I buy Puts, I bought 35 Puts! This is a sizable position. If the stock does not start down I’ll be bailing out quickly. The rest of today and tomorrow will tell.
Buy to Open 35 AMD 8/16/19 $34.00 P @ $2.29 ($8015)
I would like to make 30¢ or 40¢ on this position. I’ll be able to do that with a small pull back. I think I’ll be in this position for 1 or 2 days. I went out to Aug 16th just in case I hang in there a little longer. It gives me a little protection. When I bought the Put the stock was at $34.02
This position is a Long Put on a very hot stock so I give this trade a Risk Factor 5. If the stock goes up I start to lose some money. To buy this position, with a Risk Factor 5, is an indication of the confidence I have in the technical Analysis.
Wish me luck! Any questions, send me an email.
Steve
The Options Coach