This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

NDAQ: Trading a Range

NASDAQ OMX Group (NDAQ) is on pace to report a 2011 fiscal year earnings growth rate of 25% over that of 2010! Not too many stocks can match that performance, no matter what sector they represent. Management is moving company in the right direction, as the bottom line is always the final arbiter of that question.

Technically, I have NDAQ once again becoming coiled as it did at the end of July. I do not give this round of coiling that much credence as coiling works far better on stocks that coil the first time in a 52-week cycle. Even though 2011 has been the year to set records by doing what it almost or never does, I do not think that higher volatility is in store for NDAQ over the next several months. However, that does not imply that I do not like the stock to trade higher into 2012! In fact, I do think NDAQ has an excellent chance to trade up to its previous 52-week high of almost $30 as we move into the New Year.

Let's review the T3/OP video with Jill and Scott and look at short-term levels on the charts.



For most stocks, lower volatility occurs when they move up and higher volatility occurs when they decline. Thus when I see volatility begin to recede, I think up for most stocks.

At this time for the overall market as well as for NDAQ, I prefer time spreading call options on most stocks. This strategy allows for time to work in the favor of the spreader as the shorter term call sold short could possibly expire worthless. Doing so reduces the cost of the longer term long call side of the time spread. Should the stock rise above the shorted short term call, then the position must be adjusted to account for that event. However, only if that upside move is rather large in percent does the time spread become a losing set up.

This time spread in NDAQ is medium in risk because the spread requires to the stock to stay basically range bound during the time that the shorted call side of the spread is in play. It is medium-to-high in reward potential, either outcome determined from the time of expiry of the shorted side of the spread. Thus, be alert for adjustments as the spread moves toward expiration of the shorted side.

Trades: Sell to open 3 NDAQ December 26 calls at $1.00 and buy to open 3 NDAQ January 26 calls for $1.50.

The total risk for the spread is $0.50, or a half point per spread. As always I will monitor the trade on this site in the comments section below. As a "thank you" for our loyal readers, we're happy to announce an exclusive free event -- "Meet the Real Money Pros: Market Strategies for 2012." The panel, moderated by Action Alerts PLUS co-portfolio manager Stephanie Link and featuring a keynote address by Doug Kass, will be held Thursday at the Nasdaq in Manhattan. Full details here: http://realmoney.thestreet.com/content/nasdaq-event-register-now. For free registration, call 1-866-861-5696.

OptionsProfits can be followed on Twitter at twitter.com/OptionsProfits

Scott and T3Live can be followed on Twitter at twitter.com/_T3Live_

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,912.11 -70.48 -0.42%
S&P 500 1,969.95 -8.96 -0.45%
NASDAQ 4,442.6980 -2.2110 -0.05%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters