August 17, 2017

Some Interesting Probabilities Surrounding Payrolls

Will the beginning of the "anticipated" correction come tomorrow? The Nonfarm Payroll report is often a market mover and I expect to see much of the same tomorrow. The market is wound tight and typically when that occurs we are witness to a large directional move. I expect, regardless of how positive (or negative) the report is tomorrow, the market will push lower. As most of my loyal readers know (and thank you all for the amazing support by the way) there has not been a shortage of bearish indicators as of late. Over the past two weeks, with volatility drying up (VIX now in the low 18's) due to the tight trading range over the past two weeks, bearish indicators have piled up and have reached extreme proportions. I compare it … [Read more...]

How Long Can We Teeter on the Edge

January's rally was admirable. It's perseverance frustrated bears. The infrequent single day declines maxed out at -0.6%. And the last nine days of the month were more than mind-numbing for most traders as the market traded in a very tight range. There's no doubt the bears are ready. Almost every technical and sentiment measure I follow has pushed into a bearish state. Typically, I am ecstatic by the weight of the bearish measures, but it seems everyone is aware of the measures and have joined my camp. And when what seems like the herd is anticipating something it has a hard time coming to fruition. We must remember that January is one of the strongest month of the year for the market. February not so strong with a … [Read more...]

The Ongoing Frustrations of the Options Industry

*Just a short rant tonight. Hopefully, if time permits, I will be back later with some additional reading. Hacks, hacks and more hacks? I hate to say this about some of my fellow options traders, but I can't tell you how much I abhor those in the industry (you know who you are) that absolutely ruin the true benefits of options for the self-directed investor. Claims of outlandish 300%, 400%, 500% in just a few days. Encouraging the use of low-probability out-of-the-money puts as a predominant strategy without the mention of selling premium. It's frustrating. It's frustrating to see so many so-called gurus with no real-world experience act as options traders when their services fail time and time again. Again frustrating. Why … [Read more...]

All it Takes is One Bad Trade

I came across a great article on the one bad trade syndrome. Several months ago, Slopers (Tim Knight’s Band of Followers), were privy to a real-life blow-up in which a trader essentially risked all of his trading capital on essentially one trade(disregarded the importance of position-sizing). I want to make sure that I never make the same mistake. Currently, my positions are teetering on max pain (stop-loss). My outlook remains with the pullback scenario that I have mentioned repeatedly the past few weeks – short-term bearish. Check out the article - All it Takes is One Bad Trade For those of you who have not been reading my posts the past several weeks, I have been reminding my loyal readers of the following: For several weeks I … [Read more...]

The Rally That Never Stops

What is there to say that I haven't said already? If you were not privy to the stats that I  provided last week by the wonderful sentiment analyst Jason Goepfert of Sentimentrader.com here you go: Starting around the 2nd week in January, stocks have had a consistent tendency to weaken.  Or at least not show much strength.  Especially technology. I don’t want to hammer on this too much.  Seasonality is a tertiary indicator at best, and can easily be overwhelmed by fundamental developments, technical breakouts and changes in sentiment. The performance of various sectors since the day honoring Martin Luther King, Jr. became an exchange holiday in 1998.  The performance of QQQ was positive only 1 out of 11 years into the end of the … [Read more...]

On the Eve of Options Expiration…..

I am always amazed how large the opportunity to “make it big” factors into the great magnetism of the market. The belief that anyone, from any background can be successful and make tons of money has quite the allure. But, in all of this euphoria people neglect to think about all of those that failed before them. And believe me the failure rate is high. Yet, investors/traders continue to choose the most difficult of investments to trade – stocks. Stock-only traders are at a complete disadvantage because they have no way to trade the randomness of the market. They have a 50/50 chance of success for each and every trade. Bottom line – stock investors/traders are truly at a disadvantage. Again, stock investors only have two ways to make a … [Read more...]

Up, Up and Away? Not If History Has a Say.

The market rallied hard making it the 9 out of 11 tradings days with positive gains. SPY has made since 4.2% during that time, but over the past month SPY has made a staggering 8.7%. And as expected, now we are seeing sentiment change. But, I am not completely sold on the rally yet. Why? Well, other than the overbought to very overbought readings in most of the ETFs I follow and all of the reasons mentioned in my post yesterday, we are also entering into the weakest period of the month of January. Just look at the DIA chart below for percentage of times positive over the next five trading days. courtesy of Sentimentrader.com (click to enlarge) If you look at the ETFs I follow in the High-Probability, Mean-Reversion Indicator … [Read more...]

Ignore the Noise. Trade Strategies Based off Probabilities

"What do you think about the latest economic report, data coming out of Europe, etc?" 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 … [Read more...]

The Right and Wrong Way to Approach Options Trading Strategies

A while back I had the pleasure to speak with a gentleman from a prominent newsletter service. It was interesting to see just how he traded options and how his newsletter service and others that he was affiliated with used options in their services. As I suspected - he uses options irresponsibly in his service - as most people do. And I told him so. His response - "You sound like an idealist." An idealist? Why? Because I do not allow marketing efforts to control my options strategies? Because I do not gamble with options by attempting to guess which way an earnings call will go? Because I do not buy out-of-the-money options in hopes that an option will move towards my chosen strike price? I could go on and on. I was amazed … [Read more...]

Why a Short-Term Decline is Highly-Probable

We witnessed another upside gap today and in my opinion the bears were handed a gift, at least for the short-term. Most of the highly- liquid ETFs I follow here at Crowder Options have pushed into a short-term overbought extreme, with several actually reaching a very overbought extreme. Typically, when we see this type of price action, that is an upside gap into overbought to very overbought territory at strong overhead resistance, a short-term reprieve is to be expected. However, if you recall, I expected to see  a reprieve after last Tuesday's large upside gap, but the gap in the tech-heavy Nasdaq 100 (one of my positions at the moment) has yet to close. But, now that we have seen the all of the major ETFs, SPY, DIA, IWM and … [Read more...]