July 21, 2017

Archives for April 2010

One “Option” to Trade the Summer Doldrums

Spring is here in Vermont, well, almost. The recent two feet that resides outside my window is Old Man Winter's last attempt at redemption after a poor showing this past winter. The market has essentially rallied for two straight months, but May is upon us. and we have all heard the old adage "sell in May and go away'. Here are just a few stats that tend to back-up the phrase spoken frequently among traders and Wall Street over the past few weeks. May is historically one of the weaker performing months. It is something to consider over the intermediate-term in this already overextended market. I looked at the historical average return of the S&P on a monthly basis over the last 60 years to see if actually backed up typical … [Read more...]

Don’t try to be a hero when trading options!

Money management, capital preservation, stop-losses, and position-sizing are (in my opinion) the keys to options trading success. Trying to be a hero when a position moves uncomfortably away from you can (and often) leads to disaster. All traders at some point have experienced this at some point. Almost every trading text out there decribes, in great detail, the authors great epiphany after a disastrous, account depleting journey in trading. These one or two failing experiences seem to create that “ahhhh” moment where, as a trader, you ”get it”.  The reason I mention this is that so many times in a market like we have experienced over the past week traders that are long, continue to be long, in the face of a sharply declining market. Why? … [Read more...]

$5,000 to Infinity

The $5,000 to Infinity options portfolio will officially begin next week so stay tuned for upcoming trading guidelines to some of the options strategies I will employ. It should be an educational and enlightening journey and hopefully in the end, a prosperous one. I look forward to moving through this with a community of like-minded options investors/traders. As for today, well, the market finally moved lower after sitting in a 'very overbought' state for what seemed like an eternity. Greece was to blame for the decline, but I think we all knew that this type of day was right around the corner. We have had similar news on Greece, yet the reaction of the market was notably different. It was a technical sell-off pure and simple. I will … [Read more...]

April Continues to Shine for the Bulls

As I have stated before April is historically the fourth best performing month with an average return of 1.25%. The historical performance of May and June are substantially lower at 0.16% and 0.17%, respectively. After a nice run for the bulls in the first quarter could we possibly see the old Wall Street adage “sell in May and go away”? If April happens to live up to its historical billing of being bullish, I think the old adage has a wonderful chance of ringing true this year.  I just can’t see the market continuing to advance at its current pace.  I will be back with more this afternoon. Moreover, stay tuned for the intro to the $5,000 to Infinity options portfolio. The new portfolio which will define how I trade and view the market … [Read more...]

Historic Extremes in Several Options Indicators

Yes, I am still sticking with a short to intermediate-term move to the downside over the next few weeks to months. I will not repeat my  post from yesterday (Click Here), but I will say that the decline, if and when it happens, should move back down to the gap from 3/5. The probability of the move has increased further given the recent historic extreme in the ISE Equity Put-Call Ratio. The reading has pushed to 276 at yesterday's close which makes it only the fourth such reading to move above the notable 275 mark. This means that traders purchased nearly three times more call options than put options. It has been a month and a half since the S&P has lost more than 1% so it makes since that call buyers have become more and more … [Read more...]

Market Continues to Muddle in Overbought Territory

Nineteen out of the last twenty-one years have seen a rise in the S&P 500 during the first fur trading days in April. What does that mean? Well, that means that tomorrow should be the last of the short-term bullish sentiment (at least over the short-term). Moreover, the fact that the major indices have once again pushed into a short-term 'overbought' state means that the probability of a decline increases even further. My feeling is that the S&P 500 has maxed out its gains over the short to intermediate-term and should push back, at least to the gap from 3/5. More specifically, a move to the $112.34 in the S&P 500 (SPY) or $45.76 in the NASDAQ 100 (QQQQ). I hope all of you have a wonderful night. Enjoy the … [Read more...]

March Blues for the ETF Extremes

Our current ETF Extremes position has endured a rough March. I still expect the market to get whacked over the next few weeks due to all of the bearish extremes that have been built into the market during the March rally. My expectation is to see a move that brings the QQQQ back down to the gap from 3/5. As I stated before there are quite a few bearish technical extremes that have been reached over the past few weeks with the most recent being the Equity Put/Call ratio. It has moved to the third most extreme since the bull market began one year ago. Two out of the three occasions have led to a short-term reprieve. Another bearish sign is the lack of small options traders to willingly buy protective puts. This is one of the best … [Read more...]