July 28, 2017

Archives for December 2012

The Market is at a Short-term Pivotal Point

A Few Quick Thoughts I am keeping it short tonight because I want to get a jump on my trades. It's been tough to be a bear as of late. Over the last fourteen trading days the major benchmarks have managed to surge significantly higher.  DIA, SPY, IWM and QQQ have rallied 4.8%, 5.2%, 6.5% and 7.4%. But when you take a look closer it only took the major benchmarks 8 trading days to make those gains. The last six days have consisted of nothing buy sideways trading. And given the recent build up, I expect the jobs report tomorrow will produce a few fireworks. I am still positioned for a bearish move as most of my trades recently have all been bear call spreads. But, I am far enough away from the at-the-money strike (current price) that I … [Read more...]

Some Investors Will Never Understand…and That’s Okay

I recently went back and forth with a gentleman who claimed that there are no statistical advantages in investing. I asked him if he had ever used credit spreads or was familiar with the term probability of success. I wondered if he was familiar with the Black-Scholes model or binomial models in general. Did he have a sound grasp of mean-reversion or standard deviation. No, he just wanted me to read a chapter from a book. As if in that one chapter, the author was able to defy mathematical science, more specifically probabilities. Believe me, I get it. I understand that self-directed investors are accustomed to listening to fundamentally and technically-based information. I understand that curve-fitting is what gives a false edge to … [Read more...]

More Sideways Trading Equals More Opportunity to Sell Credit Spreads

Today's price action was much like the last three trading days...a few intraday swings, but ultimately all of the major benchmark ETFs finished the each trading session flat. The 200-day moving average seems to be the area of support for the market and once we see a breach I think we could move decisively lower over the coming weeks. There are still two unclosed gaps in the Russell 2000 (IWM) so I would not be surprised to see both of them close soon. If the second gap closes we could see IWM push as low as $77.58. And with IWM still in a short-term overbought state I remain focused on selling out-of-the-money credit spreads, more specifically bear call spreads with a high-probability of success. If we see a swift move lower over the … [Read more...]

Get Ready to Sell Some Options (IWM) for the January Expiration Cycle

Last week, with all of the major benchmark ETFs in a short term overbought state I stated that we would most likely see a short-term reprieve early in the week...well, we witnessed that today. I still expect further declines as the higher-beta Russell 2000 and Nasdaq 100 are still in a short-term overbought state. The VIX spiked roughly 5% today to 16.64, so tomorrow could offer another good opportunity to add some bear call spreads, particularly in IWM. With December positions established, I want to add a few January expiration positions to the mix. There is still plenty of time left in the January expiration cycle to collect decent premium while still creating a decent margin for error. And don't forget, we want to keep our probability … [Read more...]

The Pot Odds Side with the Bears

The last two trading days were for naught. After the rally Wednesday, the bulls and bears played an old fashioned game of tug-o-war...and a winner remains to be seen. But given the fact that three out of the four major benchmark ETFs have pushed into an overbought state the odds point to a short-term reversion to the mean. As I have stated over the past few days, out-of-the-money bear call spreads with a high probability of success are the way to go. I am keeping it short tonight, because I will be back this Sunday with my free weekly options newsletter Vertically-Inclined. Until then make sure you follow me on Twitter and join my Facebook page. … [Read more...]