Day Trader column for July 23 – 2013

The All Ords traded in a narrow sideways range last week and if it breaks out to the upside from here, I expect a quick move up. On the other hand a break to the downside would likely precede a quick move down.

In the meantime the underlying stocks of the two Minis purchased also traded sideways, so I am still waiting for them to breakout as well.

I am still working on the stop placement for the Minis and I will discuss my decisions in a future column.

I said last week it was difficult to find closing prices for Minis, as the last traded price is all my data vendor provides, and the last trade may have taken place several days before. What is needed is the final bid and ask price for the day.

As this is not available in the evening I have found one way to find a final figure is to download the Strike and Stop Loss spread sheet from the Mini providers website. The closing prices for the Minis in the portfolio position below are the approximate values listed from this source.

Continuing my thoughts and observations from last week on the use of Minis and some of their benefits for traders I will start by saying they are more or less a long dated option.

A position can be taken to profit from both a rising and falling market as providers of minis continue to roll out new long (to profit from a rising market) and short (to profit from a falling market) contracts with higher or lower strike prices and stop levels as the underlying stock price rises or falls.

I have looked at three providers so far. They are Citibank, Royal Bank of Scotland (RBS) and Macquarie. They each have slight differences in pricing and stop adjustment. Citibank have two different types of Mini. The ones I bought are GSL (Guaranteed Stop Loss) and the reason I bought these is because the strike price and stop loss level are the same. Apart from anything else, having the same strike and stop makes it easier for me to keep track of my position.

It appears the strike price and hence the stop is raised one cent per day on those I am holding. This may vary with the amount of leverage involved.

It is possible to vary the amount of leverage by buying what is known as close to the money for maximum leverage or in the money for less leverage.

More on Minis next week.

I did buy two stocks last week. The first was 10,000 Infomedia (IFM) on July 16 at 58 cents each for a total $5,820. I am looking for an initial target around 80 cents and the current stop is 53 cents. If it moves up and continues beyond 80 cents there is further strong resistance at $1.20, then $1.60 and of course the round dollar mark before that.

The following day I bought 2,000 Aristocrat Leisure (ALL) at $4.34 for a total of $8,700 including brokerage. If ALL continues up it will next met strong resistance just below $6.00 and if it moves beyond $6.00, then $8.00 is the next target level. The initial stop is $4.23.

Previous columns and information and DVD’s on my methods, are available at:- www.thedaytrader.com.au

Portfolio Position

Stock

No. of Shares

Purchase price

Stop

Fridays Close

IFM

10,000

58 c

53 c

58 c

ALL

2,000

$4.34

$4.23

$4.58

CBALOH

1,000

$4.30

$5.18

WBCLOD

2,000

$1.30

$2.02

Cash $269,606

Shares $29,180

Total $293,786