One of the more intense trading strategies that I utilize is “Buying Blood”. Some refer to this as “Knife Catch”, the much milder “Dip Buy”, etc. No matter what the definition, it absolutely requires a well thought out plan of attack. You still need to know important trend lines, moving averages, prior support levels – on multiple timeframes.
I currently have such a trade on with $TPX. Here are some of the comments from my twitter stream regarding what I have been up to:
So how is the trade going? Here is a current screenshot of the levels for the July option chain, specifically noting the July 23 put:
As you can see above, the put is currently going for $3.10 so I am down $.70 on the trade. This is a trade that allows me time for a price recovery – whether it be a relief rally, normal short covering, etc. If the stock is put to me, I own it at $20.60. I can also choose to buy the put back at any time and take the loss if price does not recover any from these levels.
Update: I have purchased the June 21 put at $.60 today to turn this trade into a Diagonal Calendar Put Spread – this improves the Risk Management piece of my trade.