The quote from this link three days ago continues to be my prevailing opinion on the market action for stock options:

#DayTrading Stock Options in the Fool’s Game

With the all-important long-term breadth now declining, stock options trading has shifted to the puts. Long-term breadth turned down on 2/28 triggering sells, and bearish swing context for the general market from the open of 3/1. Despite the blip up Friday, market direction remains most likely to be down. In additions, short-term breadth turned down today in negative territory, and prices across the indexes reversed a gap up on the day. Hence, going long puts. See posts below for more discussion on criteria for the trades.

Today, the big four bellwether stocks I’m using for this options strategy — AAPL, BABA, NFLX, TSLA (see charts below) — racked up a 57.4% gain for the $10k committed to the trades ($5,341).

Still, for the record, today’s gain merely brings the week’s total so far to breakeven. Although the market turned negative with long-term breadth turning down, the rollover to the downside has been slow, and has just begun to register in the options day trading.

In general, the market could bounce here. There is news tomorrow – the employment numbers — and the trading going into he rollover was so tight the market is getting overbought rather quickly on the pull back. None of that matters to this day-trading strategy, which opens each day some time (and only sometimes) after each open and always is closed on each close. On an overall positive day it’s likely the buy signals in the puts will not trigger.

(click on the charts for a larger view)



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