Sharing information is very important on our desk. This helps newer traders learn more quickly and keeps more experienced traders in the know of all the major moves different stocks are making. There are two types of information that are most important to share. What the stock has been doing and how you are going to play it. In earnings season a newer trader can get overwhelmed and they lose sight of the bigger picture. The big picture for them should be to learn and observe new plays and add them to their trading skill set. A problem I have noticed is that when information is shared, traders get too excited. They now are anxious to be in the play. After all of this work figuring out what the stock is trying to do, the big picture, they must capitalize on the stock’s next move. This is false.

As a trader you are seeing the same thing in the box as everyone else. Your job is to execute a trade. Over time the risk/reward and probability of the play will make you more money than you will lose. This means if you see something like bad guidance, a stock being sold heavily, or a down trend for the day, you are going to be looking to get short.

AOC on Friday is an example of a good lesson on how to share information and how to trade this stock with the bigger picture in mind.

Friday, my morning idea really did not pan out. So, since it is earnings season, I was looking for a possible new in-play stock. I heard another trader say .90 is buying. I type it up, down over ten percent, heavy volume, and a large amount of volume being done in a tight range. This is something I want to be in. Now, I am not as prepared for this stock as I was for my first idea, but it will yield good opportunities. So I have to watch it trade. What are my trades now?

If 90 holds the bid and does not drop it could have been oversold and put in a tradable bottom. Or, the higher probability trade would be when .90 drops, look for a spot to get short. This all sounds easy talking about it on paper. If you look at an intra-day chart there is much more noise. How do we trade against this and how can we incorporate information from other traders to help us succeed? It is a short, because of the trend and news. Wait till 3 cents can hold a bid or it is holding above 10 cents. Just because they lift the 5, does not mean it is a long. What it is, is that people that were short are now spraying the offer. Ask yourself, if you were selling millions of shares would you sell them at one price or would you, from time to time, lift and see where the stock goes ? When a stock continues to lift and no one can hold a bid, do not get long. It is a flat until the tape tells you to get long.

I did try to get long this AOC on the first squeeze above 37. After seeing it, I realized they were just squeezes. Once I noticed this, I was ready to sink my teeth in on the short. I had paid for this information. It cost me around 800 dollars to figure out. If someone were to ask me what I was doing with the stock I could give them a detailed plan of exactly what I was going to do. I was able to make money in this stock but there was a lot more to be made.

Hindsight is 20/20, so what future improvements can be made? It is a short until something significant changes. So trade it with the bias of the trend of the day. Take advantage of the 15 cent spread. It did this 15 – 20 times. I was trading with 2500 – 3600 shares. Making the spread with 500 would have covered my risk if it reversed, and then would have made it profitable no matter what. Wait to see your play develop to sink your teeth into it instead of forcing it. I am not saying that above 37 is not a long but we would have to see the same buying there as we saw in the .90’s to get us long. At the end of the day .90 came down and sold. This is the play that I should have had my largest position in because it was different. It, in turn, made a new low by 50 cents. I will use these ideas and all information shared on the desk for future profitability.

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