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Thursday, February 22, 2007

Watchlist: Ascending Triangles

Here's a few ascending triangles forming to keep in view. Do wait for confirmation of breakout, i.e a break above the horizontal trendline before entering. Depending on when the breakout occurs, I will be looking at current month or next month option. As always, I'm looking for ITM options, with time value component not costing > 30% of option premium.

Eg. 50 strike call cost $2.0
Stock trading at $51.5
Intrinsic value = 51.5-50 =$1.5
Time value =option price - intrinsic value = $2-$1.5 =$0.5
=> time value is 25% of option price (0.5/2.0)







WMT and CENX have already broken out of ascending triangle recently. Wait for pullback for entry





9 Comments:

Anonymous OMDM said...

Hi,

i had pretty good results trading ascending triangle and wedgest before. What I find is that a breakout with large volume usually will be a successful one. So need to look out for volume.

So, how do you scan for such stocks? BTW, I signed up for stockfetcher and i love it!

9:09 AM  
Blogger Simply Options Trader said...

Hi omdm,
You are right. High volume breakout are higher probability setups than not.

Glad you love SF!I'm using the free beta version now, even better! Are you using the subscribed version? I'm using the "patterns" under "more screen" to scan for ascending triangles. But I do alter the criteria for volume and stock price though

11:04 AM  
Blogger AJ said...

Wonderful charts! Thanks for sharing.
AJ.

11:50 AM  
Anonymous OMDM said...

I am using the paid version, the cheaper one. I use it to scan for some candlestick patterns with a little customization. I am planning to share them on my blog soon.... and probably including the stockfetcher code... hope it will interest you.

OMDM

9:52 PM  
Blogger Simply Options Trader said...

That is cool! I will definitely drop by every now and then.Look forward to your sharing.

p/s: Btw, with the paid version, I'm pretty sure you can scan for patterns like ascending triangles.

12:07 AM  
Blogger Mike said...

Hi,

What a great blog you have here! I have started adding option trades on MY blog and thought you might be interested. Maybe. Maybe not. Anyway, keep up the great work!

Mike

http://stockmonster.blogspot.com/

12:28 PM  
Blogger Simply Options Trader said...

Thanks Mike! Glad to see more options bloggers out there. I will check out your blog.

8:41 PM  
Blogger Pete said...

Hi,

I like your blog and thought all along I had you linked in www.1option.com. Sorry about that - it is done. I am hosting a big open house M-W this week. Lots of free trades and no registration. A long term ascending triangle that I used in my Weekly Report is GRMN. You have to look at a weekly chart to see it. The longer the formation the bigger the breakout. I hope you can stop by. If you would like more info, send me an e-mail.

3:12 AM  
Blogger Simply Options Trader said...

hi Pete,
No prob, thanks for the add. And I have also announced to my readers about your open house. Hope you'll have lotsa visitors!

11:42 AM  

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