QQQ Analysis

PowerShares QQQ ETF (QQQ)

Update 2/12/2018: The markets’ broad downtrend from Jan. 26 reversed slightly to the upside in what I consider to be an upward correction within a downtrend. In Elliott wave terminology, I see the rise as being the 4th wave up within a larger A wave to the downside.

I exited the options position at $0.80 with shares at $157.94. The exit price was at 47.0% of maximum potential profit.

Shares declined by 2.0% over five days, or a -148% annual rate. The options position produced an 88.8% return for a +6,479% annual rate.

I don’t plan to trend the 4th wave upward correction. I expect the next move to be a 5th wave to the downside, and I shall attempt to trade QQQ once that wave begins.

I have entered a bear call vertical spread on QQQ, using options that trade for the last time 16 days hence, on Feb. 23. The premium is a $1.51 credit and the stock at the time of entry was priced at $161.21.

I made the decision to enter the trade in my account based on Fisher Transform signals that are downtrending at the weekly, daily and 3-hour levels of granularity.

Implied volatility stands at 24%, which is 9/10ths of the VIX, a measure of the volatility of the S&P 500 index.

QQQ’s IV stands above 66% of the symbol’s IVs of the past year, and in the 81st percentile of its most recent broad movement.

The price used for analysis was $161.15.

Premium: $1.51 Expire OTM  
QQQ-bear call spread Strike Odds Delta
Long 166.50 80.3% 21
Break-even 160.99 69.1% 33
Short 162.50 57.8% 44

The premium is 75.5% of the width of the position’s wings.

The risk/reward ratio is 1.6:1.

The bid/ask spread was 5.3%.

By Tim Bovee, Portland, Oregon, Feb. 7, 2018


Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decisions for his or her own account, and take responsibility for the consequences.

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