Kevin M. O'Brien's  Instablog

Thanks again everyone who has inquired about meeting up with me in San Diego in regards to the training of the daily options strategy. I have received many requests and currently have weekly sessions booked.

I wanted to let everyone know where I stand in terms of open weeks available. I do have some confirmed in the following weeks, and others that are pending. It was suggested to me that this would be an easier way to communicate my schedule.

February 20-24 - booked
February 27th - March 2nd - booked
March 5th- March 9th - booked
March 12- March 16th - booked
March 19 - March 23rd - currently open
March 26 - March 30th- Booked
April 2nd - April 6th - currently open
April 9th - April 13th - requested, not confirmed.. currently open
April 16th - April 20th - booked

May 14th- Booked

May 21th- Booked

May 28th- Booked

June 4- Booked

Thank you all again. If you have any questions, send me an e-mail or leave me a comment.

One of the keys to trading (or investing) is having conviction in what you believe. I have never been the type of trader or writer who gives a convoluted take on where I think a particular stock is going. Please see many of my previous long call buying recommendations on Seeking Alpha, which included trades on EMC Corp. (EMC), Wynn (WYNN), Apache (APA) and others. Have I always been right? Absolutely not. However, many of these will always depend on when someone decides to exit a trade. For example, on March 5, 2012, I wrote an article on how Priceline (PCLN) was due for a pullback. I recommended purchasing put options. The next day, Priceline.com fell almost $21.00/share. At that point, I sold my trade. The put options increased in value so much, I saw no reason to hold it any longer.

This brings me to a point about having a set goal in mind ahead of time before even making a trade. One of the worst traits to have when investing in stocks or options is greed. I have seen very good investors and traders fall hard to this trait: when to let go and be content with your gains.

After Apple (AAPL) reported earnings last week, the stock shot up past $610.00/share. This was still a far retreat from the $644.00 52-week high it reached, but was a nice comeback nevertheless.

Since then, Apple has again come back down very swiftly. Financial news stations and talking heads are very good at making the world seem as though it might end when Apple's stock price falls, which is pure panic and media entertainment. Apple is a great company. This is not a stock that is overvalued in the least. How many companies can sport a price-to-earnings ratio of 14.23 and a earnings-per-share of 41.04? That is beyond cheap. Here are some other fundamentals:

Price Target Summary

If apple is not at $700.00/share by September, I will be shocked. It is also important to remember that China Mobile is only going to increase Apple's earnings-per-share (EPS). While Apple notoriously low-balls future estimates, this is actually a benefit to investors, as they almost always blow past these estimates.

Often, when a stock as heavily traded, liquid, and as media-infuenced as Apple has been falls even slightly, there is a natural tendency to panic and follow the sheep. Do not. This stock is going to recover and it will be dramatic. That is a guarantee. I encourage anyone and everyone in September 2012, if Apple is not trading at least $700.00/share, to call me out on this. That is my conviction.

If you are holding stock, I recommend not only holding it, but to increase your position. If you own long calls, I would suggest averaging down if you have taken a hit lately with the stock moving down as much as it has lately. You will be rewarded.

In my opinion, Apple trading at $583.98/share is a complete steal. Panic selling and short traders love this. It is their bread and butter. The January 2013 $620.00 call options are very attractive right now. How long they will stay at their current lower price is not something I will pass up, and I will be adding to my position.

If you have any questions, please leave a comment or send me an e-mail.

Disclosure: I am long AAPL.

When I began developing my daily options trading strategy over eight years ago, I initially began with only a few select stocks. The first was Potash (POT). As time moved on, I began implementing more stocks into the strategy and eventually came up with the current list of nine (9) main stocks, which are basically ones that are over $100.00/share, have liquidity with their options, large daily price swings (ranges), and that also have a fair bid/ask spread. To read more on my strategy, please see this link here seekingalpha.com/article/304428-a-daily-options-trading-strategy-for-high-flying-stocks. Here is the link www.amazon.com/Breakthrough-Consistent-Strategy-Volatile-ebook/dp/B006Z4HSRI/ref=sr_1_1 to my e-book on this daily options strategy.

I like to start every article with the basics on how to use this strategy with the five technical indicators. Here is a quick summary:

• Bollinger Bands - I use the 12,2,2 as my parameters, i.e. (12) as the Simple Moving Average (SMA) and standard deviation, (2) as the standard deviation of the top band, and (2) as the standard deviation of the bottom band. As a personal preference, I will not begin to even consider making a trade until I see the current price action move below the bottom band (calls) or above the top band (puts), but this is only one of the indicators needed out of five (5) total.
• Relative Strength Index - I use a length of twelve (12). The RSI is an indicator that shows when a stock is at overbought and oversold levels. It has a range of 0-100. A reading on the RSI of 70 indicates overbought levels, while 30 is considered oversold. Some traders like to go even below the standard 30 level for a buy confirmation, but it is ultimately the trader's choice.
• Intraday Momentum Index - The IMI is invaluable as far as I'm concerned for an options trader who gets in-and-out of positions quickly. The Intraday Momentum Index is similar to reading the Relative Strength Index, in that both of them have a range of 0-100. Again, 70 indicates overbought, while 30 is considered oversold. I also use the range of twelve (12) to correlate with the RSI. Again, it is the trader's preference as to what length works and what he or she likes to use. The Intraday Momentum Index is a very powerful technical indicator to use for any type of trader.
• Money Flow Index - The MFI follows the IMI as the next indicator. The MFI is a momentum indicator that is used to determine the conviction in a current trend by analyzing the price and volume of a given security. The MFI is used as a measure of the strength of money going in and out of a security and can be used to predict a trend reversal. The MFI is range-bound between 0 and 100 (like the RSI and IMI) and is interpreted in a similar fashion as the RSI and IMI. The fundamental difference is that the MFI also accounts for volume, whereas the RSI only incorporates price. It is also different in the fact that instead of the number 30 indicating oversold levels, the Money Flow Index uses 20 as oversold and 80 as Overbought.
• Full Stochastic Oscillator (do not use only the Fast or Slow Stochastic) - Used by many Forex traders, I find the FSO tremendously helpful in my trades as another indicator that confirms what the previous four have already done. Combining all of these indicators together really validates when it is an opportune time to buy. The FSO is a combination of the Slow Stochastic and the Fast Stochastic and is more advanced and more flexible than the Fast and Slow Stochastic and can even be used to generate them. Readings above 80 act as an overbought signal while readings below 20 act an oversold signal. The parameters I prefer to use are (10,6,6) for daily trading.

The stocks that I currently use with this strategy with are the following:

• Apple, Inc. (AAPL) - is right up there with (CF) as a favorite.
• CF Industries - strategy works great with this stock.
• Google (GOOG) - Google works extremely well, too.
• Baidu (BIDU) - while I don't trade as frequently, I have always had success when I do.
• Wynn Resorts (WYNN) - another stock that works very well.
• Netflix (NFLX) - look for put option opportunities.
• VMware (VMW)
• F5 Networks (FFIV)
• Salesforce.com (CRM) - look for put option opportunities.

There is probably no other stock around that is so easy to spot a daily low point than Apple using this strategy. Understandably, it is very expensive to purchase Apple stock outright. Apple is currently trading at about $610.00/share, and just 100 shares alone requires substantial funds to put your money to work. Not only that, but you are basically hostage to the stock going up. My strategy aims to get in-and-out of your trade as quickly as possible, usually in minutes.

Apple has become my favorite stock to trade using this strategy, followed closely by CF Industries. The key is to wait until the Bollinger Bands start expanding (never make a trade when the bands are narrow), and to get your trade ticket ready. Apple moves so fast and so quickly that any delay or procrastination in doing so may cost you some serious cash. It is also important that you wait for the other four indicators (the RSI, IMI, MFI, and FSO) to hit their buy points. Once that is reached, it is all about the Bollinger Bands. Never make a trade until the price line 9action) is below the bottom Bollinger Band. In fact, I like to let it "bleed", which means that when a stock is falling fast, that you allow it to sit below the bottom Bollinger Band, stay there just for a bit, and then pull the trigger on the call option trade.

There have been numerous examples over the past six months when Apple was in a downtrend, riding the bottom Bollinger Band, and continued to fall, even though the price action fell below the bottom Bollinger Band. This is what I am talking about when I mention, "letting it bleed" until there is a stoppage in the stock price falling.

Now that the implied volatility has come down after Apple reported earnings on Tuesday, the option prices are much cheaper than they were before the release. This allows for more contracts to be purchased without having to pay too high of a premium.

To summarize, keep an eye on Apple at all times and have your trade ticket ready to go when you see Apple's stock price falling quickly, as a trading opportunity can literally present itself in minutes. There is no other stock that I use with my daily options strategy that gives the trader the chance to make a trade and have the high probability that they will be able to sell it just as fast.

If you have any questions, please leave a comment or send me an e-mail.

Disclosure: I am long AAPL, AKS.