Wall Street Forecaster

Binary Options Summary

Last week I decided to investigate binary options, and compare them to trading futures.

I opened an account with Optionbit.com for just $500. Did it all on-line, and was all set to go in less than an hour.

Each trade (these were paper trades) used a $100 option.

Each day I showed a profit.
Monday......$125
Tuesday.....$100
Wednesday...$225
Thursday....$50
Friday......$75

Total profit for the week: $575

I am amazed!  All I used was my usual indicators.  When a number of indicators came together AND there was less than 10 minutes left before expiration, I placed a trade.  After to admit, there were a number of trading opportunities I passed on because I did not feel comfortable with larger amounts of time till expiration.

If you are not familar with binary options, they expire every 30 minutes.  Well, that is how it works at optionbit.com.

All-in-all, this was a much less anxious and more profitable experience than I have ever had with playing the EMINI futures.

I'll be back next week.

Binary Options -- Day 5

Day 5

Only one trade today, but it was antoher winning day.
There were a number of trade opportunities today, but all appeared when too much time remained before expiration.

I turned a profit each of the 5 days.  Hmmm.... Remember, these were all paper trades.  We'll see how well I do when real money is at risk.

Now that I have completed my one week of investigating binary options, I find them easy to work with; far easier than futures, and more porfitable.

9:16 AM 12/9/2011 -- SPX Call 1243.3 exp 13 minutes
9:34 AM 12/9/2011 -- exp @1241.25, profit: $75, Total: $75

Binary Options -- Day 4

3 trades, 1 loser, 2 winners, profit $50

Hmmm.....   4 days and they have been winners.  Beginners luck?

10:32 AM 12/8/2011 -- Doji on 5-minute chart.  Market holding at that level.
10:34 AM 12/8/2011 -- 26-minutes to expiration.
10:36 AM 12/8/2011 -- Pennant formation.  Lower prices.
10:38 AM 12/8/2011 -- Pennant taking affect.  Too much time till expiration.
10:41 AM 12/8/2011 -- SPX Call 1233.90.  Exp 17-minutes
11:02 AM 12/8/2011 -- Profit: -$100 Total: -$100
11:24 AM 12/8/2011 -- SPX Put 1239.75. 5 minutes to expiration.
11:30 AM 12/8/2011 -- Exipired @ 1238.50
11:31 AM 12/8/2011 -- Profit: $75 Total: -$25
1:22 PM 12/8/2011  -- SLV Put @ 31.62. 7 minutes to go.
1:30 PM 12/8/2011  -- SLV expired @ 31.612.  Talk about a close call!
1:31 PM 12/8/2011  -- Profit: $75 Total: $50

Binary Options -- Day 3

Got a late start today.
Feeling a little more comfortable with my trading.
Much less anxiety than playing the EMINI Futures.

3 trades today.  All winners.  Profit $225

12:35 PM 12/7/2011 -- SPX moving sideways
12:42 PM 12/7/2011 -- Trading in a range of 1258 to 1255
12:43 PM 12/7/2011 -- Most likely is a breakout to the upside.
12:43 PM 12/7/2011 -- Exp 11 minutes
12:48 PM 12/7/2011 -- SPX Call 1255.17
12:48 PM 12/7/2011 -- Exp 11 minutes
12:55 PM 12/7/2011 -- Call expired @ 1257.75.
12:55 PM 12/7/2011 -- Profit $75 Total $75
1:14 PM 12/7/2011  -- SPX Call 1253.75
1:14 PM 12/7/2011  -- Exp 10 minutes
1:35 PM 12/7/2011  -- Call expired @ 1255.50
1:36 PM 12/7/2011  -- Profit $75 Total $150
1:52 PM 12/7/2011  -- SPX 1252 Call, Exp 7 minutes
2:00 PM 12/7/2011  -- Call expired @ 1252.50
2:01 PM 12/7/2011  -- Profit $75 Total $225
2:02 PM 12/7/2011  -- We should see the 1250 area revisited before the Close.

Binary Options -- Day 2

Six trades today.  Profit: $100.
Decision making today was a little more difficult than on Day 1.  While I could see a number of entry points during the day, I had to ask myself if the market would be where I wanted it to me at the exact time of expiration?  With 20 or even 10 minutes to go before expiration, the market could move in my direction, but then have moved away by the expiration time.  Tricky to figure this out. Seems futures would have been easier to handle, but much harder to get started with.  Openning a Futures account requires some work and time, then there is the $3k or $4k you need to deposit.  With the bianry options, you just open an account on-line, fund it with your credit card, and your trading in less than an hour.

The winning trades all won by less than a point.  That's a little scary. It got me thinking that a strategy here might be to wait till the last few minutes before expiration, then place a trade with the prevailing winds.  Think I'll try that tomorrow.

Notes I made during the day:

10:52 AM 12/6/2011 -- Boardening wedge formation pointing to lower prices
10:53 AM 12/6/2011 -- One minute before expiration.  Don't see anything worth gambling on.
10:55 AM 12/6/2011 -- Option expired at 10:55
10:56 AM 12/6/2011 -- Market jumped up 2 points.
11:02 AM 12/6/2011 -- Silver has moved up strongly in the last 10 minutes. It was ready to breakout of a wedge with 3 Doji's on 2-minute chart.
11:04 AM 12/6/2011 -- 20 minutes left before expiration
11:08 AM 12/6/2011 -- Reversal signal at 11:20 for silver.  Will be watching.
11:12 AM 12/6/2011 -- expiration in 12 minutes.
11:16 AM 12/6/2011 -- Silver put 32.35. 8 minutes to expiration.
11:19 AM 12/6/2011 -- Silver @ 32.30. Expiration: 5 minutes.
11:22 AM 12/6/2011 -- Silver @ 32.30. Expiration: 2 minutes.
11:25 AM 12/6/2011 -- Silver expired @ 32.27. Profit: $75. Total $75. THAT WAS WAY TOO CLOSE!
11:27 AM 12/6/2011 -- SPX in upward channel.  Expecting break to the downside.
11:36 AM 12/6/2011 -- SPX showing signs of lower prices below 1255.  Expiration: 18 minutes.
11:39 AM 12/6/2011 -- Ascenting triangle spotted on the 15-minute charts.  Maybe a breakout to the up-side. Expiration: 15 minutes.
11:44 AM 12/6/2011 -- 10 minutes to expiration.  No clear signals yet.
11:47 AM 12/6/2011 -- Downward channel spotted on 2 minute chart. Expiration: 7 minutes.
11:51 AM 12/6/2011 -- SPX Put @ 1256. 4 minutes Till expiration.
11:55 AM 12/6/2011 -- Expired @ 1256. Loss $100.  Total -$25
11:57 AM 12/6/2011 -- SPX reversal spotted at 12:30.  Likely to break to the upside.
12:01 PM 12/6/2011 -- 24 minutes till the next expiration.
12:06 PM 12/6/2011 -- 20 minutes till the next expiration.
12:06 PM 12/6/2011 -- SPX is flat.
12:10 PM 12/6/2011 -- Ascenting triangle on the 2 minute chart.
12:18 PM 12/6/2011 -- Strong feeling it is going to break to the upside.
12:20 PM 12/6/2011 -- SPX @ 1257.45. 4 minutes till expiration.
12:25 PM 12/6/2011 -- Expired @ 1258.20. Profit $75.  Total +$50
12:38 PM 12/6/2011 -- 1 and 2 minute charts are showing a move higher before the reversal kicks in.
12:39 PM 12/6/2011 -- Expiration in 15 minutes.
12:42 PM 12/6/2011 -- SPX 1258 put. Expiration in 11 minutes.
12:55 PM 12/6/2011 -- Expired at 1257.96. Profit +$75 Total +125.
12:56 PM 12/6/2011 -- YIKES! The profitable trades have been successful by less than a point.
1:39 PM 12/6/2011  -- SPX 1260 Put.  15 minutes to expiration.
1:53 PM 12/6/2011  -- SPX 1263.5 Call. 2 minutes left.
1:55 PM 12/6/2011  -- 1260 put -$100, 1263.5 Call +$75 = -$25. Total for the day $100.

Binary Options -- Day 1

Been meaning to look into binary options for sometime now.  This weekend I signed-up with a binary option broker optionbit.com. 

So, I got out pencil and paper today, and started doing some paper trading.  The first three trades were based on a gut feeling more than anything else, but that is OK, I was just trying to get a feel for things.

The payout at optionbit for S&P index is 75%. 

I was a bit surprised that my sloppy trade landed me two winners and one loser.  At $100 per trade, that would have left me with a $50 profit.

The fourth trade of the day was based on a double reversal signal generated by one of our OSS INDICATORS applied to intraday trading.  That trade was generated at 3:26, right after the markets took a sharp downturn.  I had about 26 minutes before the trade expired. A lot can happen in 26 minutes. The market went sideways for a good portion of this time.  I thought the reversal might not happen, or it might come after the option expired, but with only a few minutes left, the reversal kicked-in, and I won the trade.  That added another $75 to $50 I have already made, so I ended the day with a $125 day profit.

I'll continue blogging the next few days about my experience with binary options. 

--Rob

Options Trade -- NKE FEB11 85 CALL

Bought at the Open for .78.  Made a high of 40%, but we held till the end of day at which time our profit was 28%

Option Alerts

Both EDC and NKE are showing signs of a move higher.

Trading results for the week beginning 11/29/10

Trade Results

       OEX DEC10 495 PUTS +40%

• Bought at the Close on Friday (11/26/2010) for $1.80.
• Recommendation: Close the trade by before 12/01/2010
• Hit a high on Monday (11/29/2010) of $2.63.  I recommended the position be closed.

       OEX DEC10 550 CALLS   +294%

• Bought Tuesday (11/30/2010) at the Close for $1.60.
• Recommendation: Close the trade by before 12/03/2010
• Hit our target of $3.20 (+100%) on Wednesday (12/01/2010)
• Hit a high on Thursday (12/02/2010) of $6.30 (+294%)

       OEX DECWK1 540 CALLS +1054%

• Bought Tuesday (11/30/2010) at the Close for $0.65.
• Recommendation: Very risky!
• Hit our target of $1.30 (+100%) at the Open on Wednesday (12/01/2010)
• Hit a high on Thursday (12/02/2010) of $7.50 (+1054%)

Trade Update

Our OEX Nov10 530 Put bought on the 5th at $1.30 is trading above $3.00.
I expect next week to see lower lows.  I know, the fed has been manipulating expiration week, but I think they screw it up this time.