April 28, 2017

Archives for October 2013

Ignore the Noise…Focus

“What do you think about the latest government fiasco?” That’s a question I often receive. My typical response, I don’t care. Okay, that may be a bit harsh, but it is true. For the most part I really don’t care about the daily news that flows in and out of the market. I am an options trader. I trade strategies based off probabilities. I create statistical advantages based on my current market assumptions. We must realize that knowing what is going on in the news and knowing how to make money consistently are two separate things. For successful options investors it’s about your strategy, your logic, your process, it doesn’t matter what you think the market the latest economic report is going to say. I realize it’s a difficult concept … [Read more...]

Inching Higher and Higher

I'm keeping it short tonight. The market pushed ever higher today, but I'm not so sure the bulls can call it a victory just yet. Yes, we are watching lifetime highs in the IWM, but we are also hitting short-term overbought readings with an enormous unclosed gap underneath...a recipe for bearish success. I still think we close the gap which would take us back down to the $165 level on SPY. But, I'm not stepping out in front of this train just yet. I have several positions well on their way to expiring worthless which means a max profit is coming our way. But again, until the debacle passes I really am hesitant to add a risk-defined position even though everything tells me we are in the latter stages of this short-term … [Read more...]

Learn your signs!

I came across this interesting infographic the other day. The age of floor trading is well past its peak, but at least the next time you see the floor traders throwing up their hands, you might be able to pick-up what they are actually trying to say. Futures and Options Education - CME Group If you are a believer in a statistical approach towards investing please do not hesitate to try my options strategies. I use simple mean-reversion coupled with probabilities for each and every trade. Give it a try, it’s free for 30 days. If you haven’t, join my Twitter feed or Facebook. Kindest, Andy … [Read more...]

It’s All About the VIX…

We experienced what is known as volatility crush today. The investors fear gauge, otherwise known as the VIX lost close to 16%. As an options seller who takes advantage of heightened levels of volatility, today was great...but more importantly, I expect more opportunities ahead. Why? Simply stated, uncertainty. The government shutdown, debt ceiling woes, etc. have finally pushed implied volatility off of historic lows. My hope is that the volatility index can stay above 13, preferably 15. Because we know that a push below 13 makes it very difficult to sell meaningful premium while simultaneously creating a decent margin for error. The higher the VIX, the more premium we can bring in on each and every trade, plus we have the … [Read more...]

High-Probability, Mean-Reversion Indicator

I'm adding a new ETF to the mix...Homebuilders (XHB). This one looks ripe for the picking. Highly-Liquid. Implied volatility (IV) has spiked and the ETF is in a "very oversold" state on a short-term basis. Bull put spread? Straight call? Both? Subscribers stay tuned! If you are a believer in a statistical approach towards investing please do not hesitate to try my options strategies. I use simple mean-reversion coupled with probabilities for each and every trade. Give it a try, it’s free for 30 days. If you haven’t, join my Twitter feed or Facebook. Kindest, Andy … [Read more...]

Just One More Reason to Use Credit Spreads

The VIX closed above 20, just shy of the year-to-date high. Not even three weeks ago the volatility, known by some as the "fear index", was trading around 12.50...roughly 60% lower. Indeed, fear is back in the markets. How long will it last? Who knows, but while the stalemate in D.C. continues we, as options sellers, are rejoicing. As most investors begin to squirm options sellers become wide-eyed with glee. Because, as volatility increases options prices increase. But I want to keep things simple today, so I'm not going into a full blown post on one of the main components of the options pricing model...implied volatility. Until then I want to go over how I am approaching this market in very simple term. I will have a few … [Read more...]

Is this the Beginning?

Today began like most others during this five year bull phenomenon...bad news equals gap lower open only to be immediately pushed higher by the bulls. But the ending this time was far different than most of the other trading days we've been privy to recently. We saw a nasty sell-off into the close. Yes, the bears reign supreme for at least a few blips on the screen. And strangely enough things feel different this time around. The market feels top heavy and so it should...just look at the performance of the S&P 500 (SPY) market over the past five years. Will the bears continue the charge lower? I'm inclined to say, YES! But, I think we've all been inclined to say yes on numerous occasions only to be fooled by the fed-fueled rally … [Read more...]

Selling Junk to Speculators

I, along with many of you, am in the business of selling out-of-the-money credit spreads with a high-probability of success. Essentially, I sell junk to speculators. Take the following iron condor in Apple. An iron condor strategy is a non-directional options strategy that profits when the option on the underlying stock or ETF of your choice expires within your chosen range at expiration. The basic premise of the strategy is easier to understand in the chart below. But the key part, and the real advantage of this trade… You choose the price range of the trade. Increasing the range will decrease your potential profits, but will increase your likelihood of success. Recently, due to the increase in implied volatility in … [Read more...]

Just the Indicator Tonight

If you are a believer in a statistical approach towards investing please do not hesitate to try my options strategies. I use simple mean-reversion coupled with probabilities for each and every trade. Give it a try, it’s free for 30 days. If you haven’t, join my Twitter feed or Facebook. Kindest, Andy … [Read more...]

How I’m Playing the Surge in High Beta Stocks

Over the past several weeks we have seen the S&P 500 (SPY) and Dow (DIA) push lower while the higher beta indexes Nasdaq 100 (QQQ) and Russell 2000 (IWM). As you can see in the table below both ETFs are now in a short-term overbought state. There are a few ways I might play the overbought readings in IWM and QQQ. First, I could buy a put. This would, of course, be a fairly risky trade as it would be very directional with duration working against the position. I would prefer to see a reading above 85 before I truly pursued buying a put. Moreover, due to the directional nature of the trade I would keep my size smaller than a normal spread position. Furthermore, along with an overbought reading above 85, I would prefer to see my … [Read more...]