From YourSITE.com
Creating An Option Watch List
By Rick Rouse
Feb 26, 2007 - 7:25:00 PM
I often get asked stock and option questions when someone finds out I follow the market. One of the most common question is "What's a hot stock right now?". Most of the time I mention three or four companies and give a quick summary of why I am following them and before you know it, they ask "How do you know this stuff?". The way I get my trading ideas is by creating a stock/ option watch list.
Many market traders create a watch list which is simply a list of stocks they track for daily stock movement or alerts. Lots of financial websites provide this service for free. How you compose your own watch list will depend on your own trading ideas and philosophies.
Watch lists will help you keep track of stocks that may be undervalued or overvalued or show extreme volatility. They can even help you generate charts to show a general trend so that you can predict when may be the best time to purchase or sell an option.
If you are just starting a watch list it is usually pretty tough to keep track of too many stocks so keep it simple at first. Maybe start with five companies and gradually work your way up to 10 and 20 once you get better at digesting the information faster and thoroughly. If you have active positions and watching a few others it becomes pretty easy with the help of a few simple software tools and utilities.
Most of the articles I have written since coming on board have come from stocks on my watch list: Harrah's, Altria, Apple, MasterCard, and most recently Halliburton which had a tremendous day and only got better after the market closed! As you can see, my list has a wide range of stocks based on fundamentals, volatility, price, and news.
For adding stocks to your watch list based on fundamentals you could start with earnings, sales, price/ earnings growth (PEG) and volume. For technical analysis you could start with 50, 100 and 200-day moving averages or a one year daily or weekly chart. Look at charts for support and resistance lines and stocks making new 52-week highs.
All of this is just a start to establishing your own watch list that will help you to determine how long you will be in a position and what your exit points are. It will also help your awareness of option time frames and when they expire. The lesson here is that by creating a watch list you will get a better feel for what options could be poised to get you better returns for your portfolio.
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