And then there was…..

How many options strategies have blown up recently. You know the strategies that are exposed to the market on a daily basis and that incorporate absolutely zero capital preservation (money management) techniques. Most of us have used options strategies, including myself, that do well for months on end only to see the market move sharply during an options expiration cycle.

Take for example the Iron Condor. Yes , most of us have used this strategy to much success only to go through a period of sharp directional price action that moves the underlying of choice outside of the chosen range and into negative territory. Just look at the various services that offer Iron Condors as part of their service and you will quickly see why these strategies are not sustainable over the long-term. Even with money management techniques a few substantial losses and you are back to break even or even worse left with nothing. Believe me I know from personal experience.

This is why I have chosen to use options strategies that allow for quick, short-term trades that take advantage of certain short-term extremes in the market. Once a position is in play I then use money management techniques to guide me through the rest of the trade. Unfortunately, the popularity and success of most newsletter services stem from a wealth of marketing power, but hey that is what makes my service intimate and successful from a long-term performance standpoint and for me that is what matters. I will have more on this topic as the week progresses.

Anyway, we almost had a Gap Fade signal today, but the underlying QQQQ moved dramatically higher as the opening bell approached. Once the bell sounded QQQQ was only a few pennies beneath the low of trading day Monday.

I am also still watching the Consumer Discretionary (XLY) sector along with the financials (XLY) and a few other sectors that have moved onto my radar recently.

Also, I almost came close to taking a position in QQQQ for the ETF Extremes as it moved very close to the $43.07 level that would have closed th gap from several months ago. Anyway, th tech-heavy NASDAQ 100 (QQQQ) didn’t quite reach the aforementioned level so I was left sitting on the sidelines which is fine be me. As I always say opportunities are made up easier than losses.

Overbought/Oversold levels for July 15, 2008

ETF Extremes Options Strategy

* S&P 500 (SPY) - 17.7 (very oversold)
* Dow Jones (DIA) - 20.4 (oversold)
* Russell 2000 (IWM) - 33.5 (neutral)
* NASDAQ 100 (QQQQ) - 33.7 (neutral)

Sector ETF Extremes Options Strategy

* Biotech (IBB) - 77.4 (neutral)
* Consumer Discretionary (XLY) - 19.2 (very oversold)
* Health Care (XLV) - 62.3 (neutral)
* Financial (XLF) - 14.5 (very oversold)
* Energy (XLE) - 24.9 (oversold)
* Industrial (XLI) - 29.5 (oversold)
* Materials (XLB) - 29.8 (oversold)
* Real Estate (IYR) - 29.2 (oversold)
* Retail (RTH) - 22.2 (oversold)
* Utilities (XLU) - 30.1 (neutral)

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