Trading Options: Using Technical Analysis to Design Winning Trades, + Website

CHAPTER 11

Trading Plan

Now it is time to put all of this together and show how we develop a trade plan. Starting from the trend identification, through security selection, to the actual trade plan for each stock, the process is very detailed. The process to this point is a guide and the plan that follows is the result, starting with the trend analysis. I have abbreviated the normal weekly work to include only the U.S.–centric pieces for brevity. Normally the weekly review would also analyze the Shanghai Composite, emerging markets, as well as the Russell 2000 exchange-traded fund (ETF) (IWM) and the NASDAQ-100 ETF (QQQ). I have also abbreviated the individual trade plans to only five stocks, and have added two earnings plays. These are specific event-driven trades designed to profit from the technical analysis, options activity, and other factors to take advantage of a specific event and are put on the day earnings are reported. Both the trend identification and the trade plan were culled from an actual plan for the week of July 15, 2013. The earnings trades are from the beginning of the second quarter of 2013 reporting period. The analysis for these plans was all done over the weekend after the close on Friday, July 12, 2013, and preceding Monday, July 15, 2013—a tight window.

■ What to Look For

As you read each set of analysis, look for the details discussed throughout the book. Notice which way the major trend is moving and how it might be influenced. Then, for the individual ...