The Morrisian Indicator

Well, I’ve finally taken the plunge and invested real money in the options market.  I’m currently invested in 4 positions.  I bought put options for CBG, CX, OAS and call options for SLV, which is Silver.  I attempted to buy put options for DNR and TCK plus call options for GLD put none of the underlyings moved in a way to allow me to get into those positions.  Let me go over how I made the decision to buy the options I did.  For the positions CBG, CX & OAS I got into because my indicator crossed below the centerline for all of those positions.  I am not tracking SLV using my indicator, but it is clear that Silver like Gold has to potential to benefit from continued low interest rates and possible monetary easing from the Federal Reserve and as a result getting into SLV on the long side is a no-brainer.  Once I’ve determined which way to go for each of these positions then when buy put options I look at the latest high for that underlying position and divide the price by seven.  Then I subtract one-seventh of the price from that high and the nearest available put option is what I go with.  Then I limit my purchase to $400 or less.  The options I buy are then bought in sets of 3.  I buy either 3, 6, 9 or any number of options divisible by 3 and I do this for a reason..  The reason is so that I can sell a third of the options when the price rises by a third.  I sell the second 3rd when the price rises to 2/3rds, and I see the rest when the price double.  I also set my stops so that I do not lose more than $200 per position.  This should give me a higher upside than downside for most positions; also there should be a greater likelyhood that once a crossover occurs the stock will continue in the direction of the crossover.

I should note that according to my latest charting there are some crossovers that are beginning to occur to the upside.  AMD achieved crossover to the upside and AKS is threatening to crossover.  MT is at the centerline sitting at zero on my indicator and MTW has acheived crossover to the upside.  One thing to note about AMD and AKS is that both stocks are under the 20 period moving average.  I would not want to get into either of these positions until the underlying makes its way above the 20 period moving average.  Even though somehow MTW moved above the centerline, when one looks at a daily chart of MTW the stock does not look so good because it is curruntly bouncing on the downside below the 200 period moving average whele MT actually gaped upt to its 20 period moving average, it is now hovering a bit above this moving average.  I will definitely look at buying calls on MT.  Before I close I should mention that EXEL is almost to 2.0 on my indicator.  It is currently sitting at 1.97.  It is the only stock threatening to go to 2.0 and over which means that the stock may be getting over heated.  When a stock rises above 2.0 we should start looking at possible indicators that the stock should be sold.

 

EC Morris

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