One of my favorite QQQ indicators just gave me an example of clear sign on how to trade it and I wanted to send it right out to you. Read below for the chart that showed the signal in this example, why options offer great advantages for trading it, and an update on a previous trade.
QQQ, or the Invesco QQQ Trust, is an exchange-traded fund that trades on the Nasdaq under the symbol QQQ. When I look for QQQ trades I want to know what the recent activity on the NASDAQ has been. Here is what I look at:
This chart image is courtesy of FINVIZ.com a free website and gives a quick view of each day’s movement.
Next, I go to my Fibonnacci Exponential Moving Average (EMA) indicator on the QQQ chart. It is shown as three colored lines that help provide a visual of the direction QQQ is moving and the strength of that trend. It can also help me find a price target that I will use to build my trade. To get the nuts-and-bolts explanation of the EMA, click here.
How To Build This Potential Trade
In the highlighted area above, we see that QQQ is moving up. If the price rose to $399, you could consider a call trade. $405.00 is the short-term target.
Options allow us to keep the risk down and the potential profit up. To buy stock shares of QQQ today would cost approximately $398.67 per share (as I write this on Tuesday). If price went up to $401 you would make $6.33 per share.
Let’s discuss a Call option trade for our example. If you bought one Call option that covered 100 shares of QQQ for the 399 strike, it would cost about $8.33 for the Jan 19th expiration date. This would be an investment of 833. If the price rose the expected $6, you could expect to make approximately $3.00. This would be a $300 profit on your $833 investment, or 36% profit.
Option trading is truly unique in its ability to give traders the opportunity to trade an equity’s price move in either direction.
I have provided many trading examples and additional explanations of my favorite indicators on my site. Be sure to check it out here.
I wish you the very best,
Past potential trade update:
Last week we discussed buying QQQ Calls. On 12-7 the Jan 15h 388 call was $10.49. You could have sold on 12-12 for $16.25, a 55% profit.