Monday, July 13, 2009

Price Confirmation

One way I know when a trade is not working is by the "price action." Many times it quickly tells me if I paid too much. This morning I had a set up I liked in IPI. I used the puts to express a short view. Although the stock was somewhat weak, the price action of the puts was not confirming it. There was no urgency, no buying puts on the offer. If this name was to perform like I thought it would, I would have seen volume on the offer of the puts. Instead the bids were getting hit, eventually IPI stock followed the overall market rally today and went up. I did not need to wait for a stock rally to decide to get out of my position for a small loser.

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