Spreads From Hell

Google inadvertently released its draft quarterly results hours ahead of schedule, missing expectations on both revenue and earnings and wiping out nine percent off it’s stock price in the process. That ought to be painful but it also makes a good showcase for one of my favorite trading related adages: It’s better wishing to be in a trade then wishing to be out of one. Let me demonstrate:

I used the TOS time machine to go back a day and take a peek at yesterday’s option chain on GOOG. As you can see even OTM we got about a 60 cent spread here.

Compare that with today – let’s ignore the obvious which is that we’re trading around 70 handles lower. What’s almost equally painful for anyone forced to sell calls (or buy back puts) are the spreads. The same OTM range now  dons a spread of $5.50!

Not that it matters much anyway – if you held calls even near yesterday’s ATM range then you just got wiped out. The ask for the 755C yesterday was $2600 – today’s bid is $140. Nasty!

Do you need another argument for the disciplined pursuit of capital commitment guidelines and positions sizing?

On to the happier side of life – which means our recent setups. Here’s one from today’s early briefing. Soybeans were a good buy near the hourly NLSL and it bounced higher rather quickly. Time to take profits now as I see ST resistance loom above.

Another one from today’s morning briefing – I really hope someone took the corn setup today – it’s time to take profits as well.

A more medium term setup which caught my attention again today. On the daily panel it’s pretty quiet and still pinned below the 25-day SMA but on the hourly side it’s moving pretty rapidly – quite a contrast. Hopefully this will lead to a break out (or failure) here soon. As I’m typing this we seem to be pushing above the daily SMA, so a long position may be good medicine.

Setups galore waiting below if you carry a secret decoder ring:
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USD/CHF – not looking very bullish right now and it’s pushing against the 25-hour BB. A breach of that could be an early way in – a failure may lead us lower. However, there is more:

Just so happens we also are most likely getting an inside day + NR7 combo today – great way to get positioned. If you are noob then please consult the cheat sheet for the rules.

The NZD/USD may be painting a last kiss goodbye – unless of course we get a breach of the SMA. Thus far it’s looking like a failure and I want to be short.

EUR/USD – I actually had to retake this one as it had dropped quite a bit. I am not sure if we get an ID on this one today – it’s less juicy than it was an hour ago.

Copper – may also paint a last kiss goodbye – watch this one and if you’re short the SMA is your line in the sand.

Gold continues to lead lower and the 100-hour SMA is proving to be a wall it cannot breach. Great way to lower a trailing stop each day just a tad above.

Honorable mention – GBP/USD – a great setup just an hour ago and I had taken snapshots. But it has since fallen out of bed – sometimes it’s tough to keep up with the tape.

Cheers,