I Came...I Saw...
Friday, March 14, 2008 at 09:17AM 
"Don't act like you're not impressed."
Last nights BSC alert was invaluable, but according to some wasn't enough. If you were one that felt I did you a disservice by not telling you exactly how to trade, then that worries me. Be able to read between the lines. Better yet, be able to analyze hand fed data and make decisions. I gave you the assist, all you had to do was push the button! The way it traded today, you had more than enough opportunity to get in. It's not like it gapped down at the open. Just realize for future reference, volume is the best indicator available. Volume tells you exactly what is going on and to what extent. In the case of BSC, the volume on these options and the rise in volatility indicated that institutional money knew that the company was in dire straits, despite their constant denial.
You'll notice this time and time again. Ahead of big announcements and price swings, option volume will typically go off. Depending on whether the volume takes place in the calls or in the puts ought to tell you the sentiment of the market. For those of you wondering how I traded this...this should be an easy process. I don't sell options; I am a buyer. The set-up was bearish, meaning I am not buying calls.
By process of elimination, I bought puts. Mar 50's at the open for $4.20. I figured I was willing to risk the premium for a big move in the stock. After all, it traded 70 million shares yesterday.
If you want to buy my puts, they are no longer available. I sold them north of $18.
Reader Comments (74)
I'm impressed, I'm very, very impressed....
Way to go Jeff can you do it again on Monday? Ha ha
Jeff, As usual a brilliant call.I didn't trade it but I did learn a lot.To me that's more important..Thanks
Jeff,
Thanks for the timely post.
We really appreciate all you do.
Berkshire
Great trade Jeff....the hits just keep on coming.:)
Congratulations Jeff
Nice trade Jeff. I especally like the fact you bought the puts for $4.20. You were probably willing to pay more to get executed that price weren't you?
I learned a lot too. Thanks for explaining more about how the volume on the calls or puts is a tip off. I got confused because the could have sold puts, but if I read between your lines you are saying that it is relatively safe to assume that volume is on the buying side (so who got screwed?).
Thanks again.
Dandle,
I am sure the market maker took on the most of it, but had to hedge themselves with a considerable amount of the underlying; hence the high volume.
Don't look now, but there is still a lot of volume firing off in the March options. Check the 20's...
Uncle Ben speaking later! Yay!
Just found the site a few weeks ago and just wanted to come out of the shadows. All I can say so far is that I'm amazed.
calmwater,
Welcome; make yourself at home.
Good gravy.
Jeff you da man.
Jeff,
Thanks for BSC, I got in in the middle 40s and sold when it was in the high 20s. Great trade for sure.
Made my week back with that one.
For anyone looking for a good daytrading pattern,
check the indices on a 1 day chart.
Should be an interesting move before the close.
Jeff,
That is absurd (20 P volume) 31K already. Whew.
BSC Shares=118,091,00
BSC Volume Today=113,700,00.
They could trade every single share today.
This makes my head spin.
Berkshire
$VIX exploded above 30 BTW
I'm wondering how you knew about the put buying yesterday? is there a scan you use. I heard it on the news last night,but am wondering how you look for these kinds of volume spikes?
Are you suggesting a huge (1 min) triangle?
Or am I breaking #6 again.
Berkshire
Indices are coiling waiting on BSC and Bernanke conf call. I bet they break lower.
Great trade for those who got in!
The volume on the 20's is huge, and the volume on the 18's is starting to pick up a bit.
18's = 10's. Sorry for the error.
Good chance Gecko,
Berkshire
BSC bear flag?
Great catch Jeff
BTW, is there a search or something you use to find situations like this. You can't be checking all the option charts with such a large watch list.
john
I saw last nights post, thought about getting in. Woke up this morning and saw BSC down just a tad. My son woke up and I went to get him ready for school. Next thing I know it's down 40%. I guess that one is coming out of his college fund.
Jeff, you are the shit.
Sarah,
ToS has one, and there is also a link on my left hand column that takes you to "Unusually High Options Volume."
Berk,
You got it. I shorted the ES and bought puts on Q's.
Jeff,
BSC...548% gain today!
:}
Thanks for the heads up on the day trading opportunity.
Someone asked this morning where to find options with unusual volume, and I just remember that Jeff put links to that kind of stuff on the left side of this blog a week or two ago. Anyway, look there.
Dag, Jeff beat me to it.
Jeff,
I had no doubt what last nights post said, but shamefully I thought it best to step aside and let the big boys and girls take this one. I was certain it would break, but was not sure what I would have done if it didn’t.
Two questions: 1) The all important position size would have been based on 100% loss right? 2) If the trade went against the puts would a quick decision have been warranted or still wait for the end of the day?
Congratulations on a great trade!
Thanks for the teachings,
Denver
Jeff I have 5 things to say:
Utah State covers over Boise State in the WAC tourney, either way no WAC team gets out of round 1.
You are the Man! Can you hit my ball off of the tee too?
Raimo is right "IT IS TIME!"
And for those that didn't sell most of their BSC puts below 30 - For Fucks Sakes!
Lastly, Jeff I was wondering, is it too late to get into GOLD? I don't get it!
AHHHHHHHHHHH I AM OUT!
Cheers,
Arty
Thanks for BSC Jeff. I made a nice 500% this morning on the 25s. :)
Arty,
"God I admire you."
Jeff,
I am listening to the BSC call right now. The runor was dead on, nobody wanted to do business with them. (Wanted them as a counterparty, or primebroker)
VIX over 31
ACI-Is this hitting support? Looking at EE at 45 for a potential to hit 55. Am I doing this right?
Also want to note, for people that are saying you would have broken your rules by making this trade. The point of having rules is you force you to reduce your risk/reward ratio, and makes rules around
The risk/reward ratio on this trade was incredible.
Denver,
Yes. Risk the premium, buy less contracts. Take your typical position size and buy as many contracts as you can.
I broke my rules and increased my size on this one. I jumped back up to 2%.
I like the result much better.
It was the HUM trade that made me decide to up the ante. A 2000% return feels better when you have twice as much invested.
DOW 11750 then 11600
Jeff,
I noticed the March Madness Link yesterday. What do you have in store for us?
Check AMZN, I'm taking down some puts.
AMZN looks like it's back at good E/E. I took Puts two days ago, got out yesterday when it closed above the trendline I had drawn but will probably hop back in today.
AMZN Looks Great - Took some PUTS
AMZN - Retest from a breakout? At resitance for sure, around 70.
Is the targe move on a retest the same as the orginal target for a pattern, or from the breakout point(resitance) to the low before retest?
Westy,
I am a bigger fan of college basketball than I am of trading. In fact, I wanted to play basketball instead of becoming a trader.
I want to have a "bracket challenge."
This would give us a way to break things up a little, build a little comraderie, and make some money.
I was thinking about setting up a paypal account, and setting up a pool that pays out to the top three winners. What do you think?
Scooter
Would it be too much to ask to have you throw up a chart on AMZN or whatever, and show how you see it. I really seem to be struggling with puts and good timing.
Is it possible to be too much of an optimist to trade in a bear market????
Jeff,
Thanks for the heads up on BSC. I to made a large amount of $$$ and have you to thank.
So, short and sweet..
Thanks!!!!
MJ