The objective for this section is to demonstrate a few features of the Optionetics Platinum site that perhaps many people don't use. We are going to do this by showing you a trade that was made in Texas Instruments in October 1999.

Texas Instruments is a volatile stock that was very bullish and volatility in 1999. A 15 to 20 points move down from it's 52 week high is normal for this stock, and it can happen in only a few days.

The way we play this is to subtract 15 from the 52 week high, and then enter a limit order to buy calls when TXN hits this price. The question is: WHAT ARE THE CALLS WORTH WHEN THE STOCK IS AT THAT PRICE?

On the Optionetics Platinum Welcome page, select the date 10/14/99. The web site range of dates moves forward in time as a 2 year window from the latest available date. If 10/14/99 is no longer on the web site, select your own more recent date in the past to use for this example.

New users will not have this date showing! You will only have the last 5 days, which is default. We can get more dates to appear using My Personal Data. Click the My Personal Data button on the Welcome page.

• Click My Personal Data.
• On this screen:
• Change "Access from: " to the earliest available date.
• Scroll all the way to the bottom and click the SAVE button.

Now choose the date to be the one you desire. The date used here is 10-14-99.

• Type "txn" in the stock symbol box.
• Click the Create An Option Trade button.

• Enter the first few letters of the stock name in the text box.
• Click "Search".

• Enter the symbol name in the stock text box.
• Click the "Search A Create An Option Trade" button.

What you should see now is the chart of TXN as if you were in the past. There is NO INFORMATION here from the future. If you look at the Upper plot axis limit in the yellow control box for the chart, the upper limit defaults to the stock high over the plot range that was 94 1/8. Subtract 15 and you get about 80. As you can see from the chart, TXN is headed down, but it hasn't hit 80 yet. We want to determine what a call option will be worth if TXN hits 80.

So let's buy a call and save it as a trade, and then ANALYZE that trade!

We always choose the at the money call with at least 25-30 days left, so scroll down to where you see "Choose a new TXN combo on 10-14-99" and look at the USE selection box. It says OCT options have 1 day left. Nov options have 36 days left.

Change USE to "NOV99 36 days".

This selection of NOV99 effects trades in the matrix below. When you click "Buy Call" in the upper left hand corner of the matrix, the program will use the Nov options.

• Click the "Buy Call" radio button.
• Scroll down and click "Update Option Trade"

• Scroll down to the middle and look for a button called "Update Option Trade"

• Change 85 to 80 by clicking in the text box, backspace out the 5 and enter a 0.
• In the selection box to the right of 80 you will see a "Purchase Price" of 5.25.
• Select the Market Price.

• Click the Update Option Trade button.

• Save it and exit.
• Scroll all the way down and click "Save Option Trade" button.

Report number one is now the call we want to buy. We now want to create a matrix of prices, so we can see what this call is worth when TXN is at 80.

• Click the "My Matrix" button next to the trade.

• Uncheckmark PROFIT.
• Put a check mark next to PRICE.

• Click Save the Above Data.
• Click RETURN TO Edit My Option Trade.

• Scroll down to the section "Back Test My Trades"
• Click the Single day analysis button.

As you can see in the first column on 10-14-99, if TXN ranges from 75 to 85, the option price ranges from 2 5/8 to 8. The price we are interested in is 80. At this price the option is 4 7/8.

We put in our LIMIT ORDER to the broker to Buy the TXN Nov 80 Call at 4 7/8. (We didn't want to miss the trade and 80 should be the low.) The order filled on Oct 19. Now let's go back to the graphical analyzer and change the price of the option! (We want accurate charts for the real trade.)

• Click BACK.
• Scroll up and click My Risk Graph next to the #1 trade.
• Scroll to the middle to the Update Option Trade button, and change the Purchase Price of the option from 8.375 to 4.875.
• Click the Update Option Trade button.
• Scroll down to the bottom and click Save Option Trade.

• Scroll down to the section "Back Test or Forward Test Your Reports!"
• Change the start date to 10-19-99 and the end date to 11-12-99.
• Click the MULTIPLE DAY ANALYSIS Button.

You should see this:

In the quote column you can see that the option closed at 4 3/4 the day we put the trade on. We were at a loss of 14. TXN did turn around and head higher.

We exited the trade on 11-02-99.

We'll leave this as an exercise for the student. Our exit price for the option was 10 1/2, which is what the option is worth when TXN is 90.

We had to build ANOTHER matrix to determine what the limit price should be to SELL the option. We typically try to exit the trade 3 or so points UNDER the 52 week high.