The week of options expiration is upon us
October 15, 2007
Options expiration is upon us and as it stands all of our strategies, including our new SPY Diagonal LEAPS strategy, should finish up the cycle doing quite well.
We still need to roll our October SPY short positions to November and will most likely do that over the next day or two. As I have stated numerous times over the past few weeks this is probably the most important aspect of the strategy so stay tuned to see how we negotiate the rollover. Theta has really kicked in as it is up to $44 a day. So far the strategy has made $1,194 or 6.0% over the last four weeks. We are very encouraged by the prospects of this strategy and how it allows us just another way to diversify our stock options strategies.
Tomorrow brings “tech Tuesday”. If Wall Street takes the earnings as bearish then we could see a push lower and a move into oversold territory. This would be the first oversold reading in two months and quite possibly the first signal in our ETF Extremes strategy.
As for our SPX Iron Condor strategy, barring a major move, the strategy should be profitable for the second straight month. A few more months like this and we are back in the positive.
Overbought/Oversold for October 15, 2007
S&P (SPY) - 47.8 (neutral)
Russell 2000 (IWM) - 45.7 (neutral)
Dow (DIA) - 46.5 (neutral)
Nasdaq 100 (QQQQ) - 57.8 (neutral)
We work hard to bring you our latest views, opinions and research on a daily basis. If you are a loyal reader and find our thoughts useful please show us your support by joining our newsletter service. We currently follow 3 stock options strategies in our investment newsletter, the ETF Extremes, SPX Short Iron Condor and SPY Diagonal LEAP.
If you want to an in-depth, step-by-step look at how we trade our strategies purchase our acclaimed E-Book! With your purchase you will receive Two Free Months of our investment newsletter plus unlimited access to our Insider’s page enabling you to follow our strategies as you learn. What do you have to lose? Join today!
Andrew Crowder, Chief Investment Strategist, www.crowderinvestments.com
Time to roll, exhaustion gap and much more….
October 12, 2007
The sharp decline off the overbought levels on Thursday was followed by a decent bounce today. However, technically speaking it looks as though the “damage is done”. Yesterday’s open looks like a typical exhaustion gap. An exhaustion gap usually comes at the tail end of a series of gaps during a rapid rise in the underlying, in this case the major benchmarks.
The gap led to a new high in the S&P (SPY), but only for a few hours. Towards the end of the trading day SPY declined sharply to close the gap and close near the lows from the prior two trading sessions.Normally, this would not be much of an eye opener, but the force at which it came is alarming and must not be ignored.
The sharp decline led to short-term oversold readings in the major benchmarks so the bounce today was not surprising. However, next week should be more interesting as it should give us a clue as to where the market is headed over the next few weeks.
Next week brings options expiration. Typically, the week of options expiration is bullish, particularly over the past year with 10 out of the last 12 weeks finishing on the plus side.
As we have mentioned repeatedly over the past few days next week we will need to roll over our short October positions into November. Theta is dwindling in the overall strategy so there is not much more we can gain by holding on to the October positions. Monday or Tuesday will most likely be the day in which we roll the positions so please be sure to check back as we will reveal our strategy for making this important adjustment.
Have a great weekend!
Overbought/Oversold for October 12, 2007
S&P (SPY) - 67.0 (neutral)
Russell 2000 (IWM) - 61.8 (neutral)
Dow (DIA) - 63.2 (neutral)
Nasdaq 100 (QQQQ) - 69.3 (neutral)
Subscribers please check the Insiders’ page of the website if you wish to check the overbought/oversold levels of the following 22 ETF’s: OIH, XLF, XLE, XLY, XLK, XLV, XLB, XLI, XLP, TTH, XLU, GLD, FXI, ILF, EZU, EWA, INP, UNG, DBA, DBB, DBE, and DBP on a daily basis. (not published the week of Oct. 8-12)
We work hard to bring you our latest views, opinions and research on a daily basis. If you are a loyal reader and find our thoughts useful please show us your support by joining our newsletter service. We currently follow 3 stock options strategies in our investment newsletter, the ETF Extremes, SPX Short Iron Condor and SPY Diagonal LEAP.
If you want to an in-depth, step-by-step look at how we trade our strategies purchase our acclaimed E-Book! With your purchase you will receive Two Free Months of our investment newsletter plus unlimited access to our Insider’s page enabling you to follow our strategies as you learn. What do you have to lose? Join today!
Andrew Crowder, Chief Investment Strategist, www.crowderinvestments.com
Mr. Probability
October 11, 2007
Once again Mr. Probability was on our side. As expected the market took a bit of a breather today. The market gapped up today and then traded in a tight, sideways manner before investors locked in gains at record highs and consequently pushed the market lower.
The gap up on 10/4 came close to filling today, but the S&P (SPY) managed to hold off the late day decline and bounce higher into the close.
I am still on the sidelines (at least in my short-term trading) looking for a good risk/reward trade. As I have reported numerous times that while shorting “overbought”, preferably “very overbought” measures are often difficult to gage because markets can remain in an overbought state for days and sometimes weeks.
I did a study, available on the Insider’s page of the website and in the White Paper, regarding fading extremes in the market and the rate of success with overbought versus oversold measures.
Oversold measures had a much higher rate of success. We have not seen an oversold reading in the S&P (SPY) since 8/15 which was the last time we tried to establish a trade in the ETF Extremes strategy. Unfortunately, we were unable to get a fill at that time which sometimes happens in the fast-moving world of options trading. But as I always say opportunities are made up easier than losses. Believe me, I would love to see a move into oversold territory.
As for our other strategies, the SPY Diagonal LEAPS strategy continues to make strides. I am not sure when the last time we witnessed a loss on a daily basis. It is often not advised to fret over this strategy on a day-to-day basis. Only when we see sharp moves like today do we want to make sure we are paying close attention to our positions and how they are reacting to the price action. Theta continues to work in our favor. Even with the underlying SPY losing $.75, the strategy gained $31.50 for a total of $1,066.50 or 5.3%. So far we have accomplished our goal of making 3% to 5% a month.
Theta has officially kicked in. The strategy had an overall theta reading (adding together theta of all positions in the strategy) of $16 yesterday and at today’s close the overall theta was $32.54.
As I have reported over the last few days, we will need to roll our October short positions into November over the next few days. This is probably the most important guideline to the strategy so stay tuned. I will give you all the details.
Our Iron Condor position looks very good for the October expiration cycle. With a range of 200 points we are safely within our range. The underlying SPX would have to move 4.9% to the upside and 8.0% to the downside before we are in jeopardy of taking a loss.
We still have alot of ground to make up since our two losses but we are in it for the long haul so, as always patience is key. We have altered our guidelines to minimize losses and we think our approach of choosing large ranges, allowing us to make around 7-10% during an expiration cycle (4 to 5 weeks) as long as the VIX remains above 15 should prove to be successful. Of course, only time will tell. When we took our first bg loss back in April we had a range of 100 points. Now our chosen range is double that. The downside is that we are bringing in less premium, but we will take that anyday knowing that the probability of success is in our favor.
Overbought/Oversold for October 11, 2007
S&P (SPY) - 58.4 (neutral)
Russell 2000 (IWM) - 52.8 (neutral)
Dow (DIA) - 51.7 (neutral)
Nasdaq 100 (QQQQ) - 53.7 (neutral)
Subscribers please check the Insiders’ page of the website if you wish to check the overbought/oversold levels of the following 22 ETF’s: OIH, XLF, XLE, XLY, XLK, XLV, XLB, XLI, XLP, TTH, XLU, GLD, FXI, ILF, EZU, EWA, INP, UNG, DBA, DBB, DBE, and DBP on a daily basis. (not published the week of Oct. 8-12)
We work hard to bring you our latest views, opinions and research on a daily basis. If you are a loyal reader and find our thoughts useful please show us your support by joining our newsletter service. We currently follow 3 stock options strategies in our investment newsletter, the ETF Extremes, SPX Short Iron Condor and SPY Diagonal LEAP.
If you want to an in-depth, step-by-step look at how we trade our strategies purchase our acclaimed E-Book! With your purchase you will receive Two Free Months of our investment newsletter plus unlimited access to our Insider’s page enabling you to follow our strategies as you learn. What do you have to lose? Join today!
Andrew Crowder, Chief Investment Strategist, www.crowderinvestments.com
Market remains overbought
October 10, 2007
Not much has changed. The major benchmarks that we follow remain in an overbought situation and a short-term pullback is still anticipated. The next two days are quite bullish on a seasonal basis according to the Stock Trader’s Almanac.
That being said, I am more comfortable, at least over the short-term, with the short side of the market. The market, more specifially the S&P (SPY) has vacillated in a fairly tight range over the last four days and typically when we see range-bound trading a sharp move is right around the corner. With the market overbought, an unclosed gap lingering, and the curse of the October 7’s in play (discuss tomorrow)…well…I think you see where I am going.
SPY Diagonal LEAPS Strategy
Our new stock options strategy, SPY Diagonal LEAPS contiues to make gains. Another $78 today thanks to time decay (theta) for a total gain of $1,035 or a 5.2% gain. The underlying SPY has only advanced 2.5% over the same time frame.
Our overall delta position is currently 69 and the gamma is -20. Theta declined slightly today which is a signal that it could be time to consider rolling into the next months options. Most likely we will do so over the next 1-3 days so stay tuned. This will be an important discussion as it is the most important aspect of trading the strategy.
Overbought/Oversold for October 10, 2007
S&P (SPY) - 71.5 (overbought)
Russell 2000 (IWM) - 72.4 (overbought)
Dow (DIA) - 60.3 (overbought)
Nasdaq 100 (QQQQ) - 89.3 (very overbought)
Subscribers please check the Insiders’ page of the website if you wish to check the overbought/oversold levels of the following 22 ETF’s: OIH, XLF, XLE, XLY, XLK, XLV, XLB, XLI, XLP, TTH, XLU, GLD, FXI, ILF, EZU, EWA, INP, UNG, DBA, DBB, DBE, and DBP.
We work hard to bring you our latest views, opinions and research on a daily basis. If you are a loyal reader and find our thoughts useful please show us your support by joining our newsletter service. We currently follow 3 stock options strategies in our investment newsletter, the ETF Extremes, SPX Short Iron Condor and SPY Diagonal LEAP.
If you want to an in-depth, step-by-step look at how we trade our strategies purchase our acclaimed E-Book! With your purchase you will receive Two Free Months of our investment newsletter plus unlimited access to our Insider’s page enabling you to follow our strategies as you learn. What do you have to lose? Join today!
Andrew Crowder, Chief Investment Strategist, www.crowderinvestments.com
Market in an overbought state once again….where to now?
October 9, 2007
Daily Commentary
The market traded sideways until the much anticipated Fed Minutes were released at 2:00 EST. Once the minutes were released the market surged higher and never looked back.
Now the major market benchmarks are back into an overbought to very overbought state. The Nasdaq 100 continues the push higher, but is near an extreme. This is exactly the set-up that we mentioned in our newsletter (paid subscribers only) this past weekend.
Typically, when an indice reaches this type of extreme we see a short-term pullback. I admit, the recent surge has been frustrating for my trading. I am not a momentum trader so the recent surge has tested my patience. While frustrating, I remain patient because I know over the long haul I should come out ahead as is evident in my ETF Extremes strategy.
Moreover, the VIX has moved into an oversold state which typically means that a short-term move lower looks likely. Remember, trading extremes is not an exact science. There are no guarantees in trading. However, if you choose to forfeit trading every day allowing commissions and most likely emotions to eat away at your profits by sticking with at least one extreme strategy you will allow probability to work for you. Again, look to our ETF Extremes options strategy as an example. No this is not a ploy to get you to join the strategy, this is a real-life example and one that should be considered. Talk to any experienced trader and they will tell you that most often the less you trade the more successful you will be. It is all about picking your spots and picking them wisely. This takes an overwhelming amount of patience, but it works. The lack of signals have led several of our subscribers to leave the service which means that we have spots that are once again available. We expect this and I think it says alot for our service quite frankly. The fact that we refuse to trade just to place a trade, knowing that we could potentially lose subscribers as a result means that we are here for the long haul. That being said, we want to thank those of you that understand our philosophy and what we are trying to do with our newsletter. Get rick quick is not our goal. Substantially outperforming the market over the long-term is name of the game, at least our game.
This is also why we are beginning to offer other stock options strategies. Much like a diversified basket of stocks, we hope to eventually offer a wide array of stock options strategies that take advantage of various market conditions.
New SPY Diagonal LEAPS strategy
The strategy contniues to chug along with another gain today. Now the strategy is up $957.00 or 4.8% since 9/24/07. Over the same period the S&P (SPY) is up only 2.1%. As I stated yesterday, we will ahve to start looking at rolling our short positions into next month so stay tuned. There is a specific way to do know when the appropriate time to roll is and we will be talking about that in the coming days so check back daily.
Overbought/Oversold for October 9, 2007
S&P (SPY) - 76.2 (overbought)
Russell 2000 (IWM) - 74.0 (overbought)
Dow (DIA) - 76.8 (overbought)
Nasdaq 100 (QQQQ) - 88.3 (very overbought)
Subscribers please check the Insiders’ page of the website if you wish to check the overbought/oversold levels of the following 22 ETF’s: OIH, XLF, XLE, XLY, XLK, XLV, XLB, XLI, XLP, TTH, XLU, GLD, FXI, ILF, EZU, EWA, INP, UNG, DBA, DBB, DBE, and DBP.
We work hard to bring you our latest views, opinions and research on a daily basis. If you are a loyal reader and find our thoughts useful please show us your support by joining our newsletter service. We currently follow 3 stock options strategies in our investment newsletter, the ETF Extremes, SPX Short Iron Condor and SPY Diagonal LEAP.
If you want to an in-depth, step-by-step look at how we trade our strategies purchase our acclaimed E-Book! With your purchase you will receive Two Free Months of our investment newsletter plus unlimited access to our Insider’s page enabling you to follow our strategies as you learn. What do you have to lose? Join today!
Andrew Crowder, Chief Investment Strategist, www.crowderinvestments.com
Divergence in the major benchmarks
October 8, 2007
The broad market index (S&P) gapped lower today today and never looked back. The push lower moved the major indices we follow back in a neutral state. Interestingly enough, the tech heavy Nasdaq 100 (QQQQ) surged higher creating a short-term divergence that will most likely settle out over the coming days.
The move lower was to be expected given the reasons I stated in the blog Friday. Tomorrow and Wednesday bring bearish seasonal days and then the market ends the week with two historically bullish days. This is one of the few weeks of the year, according to the Stock Trader’s Almanac, that the market experiences four days with historically significant bullish/bearish seasonal tendencies. As I always say, I never use seasonal tendencies to base a trade, but I always consider which way the seasonal winds are blowing, particularly if they wholeheartedly agree with my current short-term direction. This often increses the probability of my trade.
Stock Options Strategy – SPY Diagonal LEAPS
I discussed the strategy in great detail in the newsletter that I sent out Sunday. Subscribers, please take a look at this if you have not had a chance. It is archived on the Insider’s page of the website.
With the underlying SPY down $.83 today the portfolio still made gains. As it stands as long as SPY stays above $150.50 the strategy should experience a wonderful month. Since its inception three weeks ago, the conservative options strategy (by most option strategies standards), is up $902 in our test account. Based on the $20,000 that we started with (even though $2,500 is sitting in cash) the strategy is up 4.5%. Over the same period SPY is only up 1.7%. Our goal is to beat the market on an annual basis and this is certainly a great beginning.
Stock Options Strategy – SPX Short Iron Condor
The S&P (SPX) remains safely within our 200 point range. Hopefully the VIX will stay above 15, preferably 20, so that we can continue to choose huge ranges while still making 7%-10% from expiration to expiration. OF course, we realize that high-probability trades come with risk if the underlying moves sharply in one direction, but since our last loss we have added a few guidelines to hopefully minimize the losses when they occur.
I have heard from many traders/brokers out there that Iron Condors are currently out of favor. The huge swings back in late July/early August created some drawdowns among many iron condor strategists, ourselves included. But, with proper money management (only allocating a small percentage to any one option strategy) those who felt the short-term pain lived to trade another day. We remain patient with the strategy, knowing it will take its lumps now and then. One thing before I sign off, always know the risk/reward of every strategy that you consider trading. After that trade it on paper for a few months, learn the ins and outs. Knowing what the max loss is going to be and feeling comfortable with it will make you a better trader. Why? Because it will force you to pay attention to risk management and more specifically, how position sizing will effect your overall portfolio.
Overbought/Oversold for October 8, 2007
S&P (SPY) - 66.1 (neutral)
Russell 2000 (IWM) - 68.5 (neutral)
Dow (DIA) - 64.7 (neutral)
Nasdaq 100 (QQQQ) - 86.7 (very overbought)
Subscribers please check the Insiders’ page of the website if you wish to check the overbought/oversold levels of the following 22 ETF’s: OIH, XLF, XLE, XLY, XLK, XLV, XLB, XLI, XLP, TTH, XLU, GLD, FXI, ILF, EZU, EWA, INP, UNG, DBA, DBB, DBE, and DBP.
We work hard to bring you our latest views, opinions and research on a daily basis. If you are a loyal reader and find our thoughts useful please show us your support by joining our newsletter service. We currently follow 3 stock options strategies in our investment newsletter, the ETF Extremes, SPX Short Iron Condor and SPY Diagonal LEAP.
If you want to an in-depth, step-by-step look at how we trade our strategies purchase our acclaimed E-Book! With your purchase you will receive Two Free Months of our investment newsletter plus unlimited access to our Insider’s page enabling you to follow our strategies as you learn. What do you have to lose? Join today!
Andrew Crowder, Chief Investment Strategist, www.crowderinvestments.com
SPY Diagonal LEAPS strategy off to a great start! Short-term pullback in sight? ETF Extremes watch…
October 5, 2007
The market rallied mightily today with nary a pause. Typically, the market will fade a bit, if only to fill the upside gap, but not today. The market moved steadily higher throughout the afternoon and then pulled back a tad at the close, but that was most likely a result of traders taking some money off the table ahead of the weekend.
Now all of the major market benchmarks that we follow are back in an overbought to very overbought state and the shorter-term measures that we follow have reached an extreme state.
Typically, when the market reaches this type of an extreme we see a short-term (1-5 days) fade in the indices. Furthermore, sharp moves after payroll reports tend to fade back a bit in the coming days.
In addition to the bearish tendencies above the Stock Trader’s Almanac, reports that Tuesday and Wednesday of next are historically quite bearish with the S&P only finishing higher 28.6% and 38.1%, respectively.
As you can guess all of the extreme readings that I have mentioned above have put our ETF Extremes strategy very close to its first signal in quite some time. We have had some close calls recently, but this time around looks very likely. With a win ratio near 90% we are confident in all of our signals. Of course there are no guarantees in trading, only probabilities.
Iron Condor Strategy
Even with today’s sharp move, the S&P (SPX) is still well within our 200 point range. SPX would have to rally over 4% in the next two weeks before our short call position is in jeopardy. If the S&P (SPX) falls within our chosen range we stand to make over 8% for the expiration period.
NEW!!! Spy Diagonal LEAPS Strategy
We started this strategy in our test account Sept. 24th and plan to follow the strategy in the blog. Our paid subscribers will receive a more detatiled account in the newsletters and on the Insider’s page of the website. So far there hasn’t been much to report about, which is often a sign that the strategy is going well. Typically the first two to three weeks (depending on the length of the expiration period) after expiration, when short positions are established, there is no need to touch the strategy. As long as the underlying, in our case, SPY vacillates in a reasonable range there is no need. It is only suring the last couple of weeks that you have to pay close attention and this only requires watching a few key steps, mostly watching time decay on the options you hold and deciding when to them over into the following month. Be patient we will discuss this when the time arrives. We don’t wat to get ahead of ourselves. Once the month is over we will compile the necessary ingredients to the strategy and discuss them in a report. Stay tuned!
As of today, two weeks into the strategy, we are up $892, or 4.5%. The fact that we leave one position unhedged, or long allows us to take advantage of extended upside moves. Currently the delta is close to neutral so we are sitting pretty. Now we sit and wait for theta to kick in.
We will have an extended report in the newsletter this weekend.
Overbought/Oversold for October 5, 2007
S&P (SPY) - 81.9 (very overbought)
Russell 2000 (IWM) - 81.2 (very overbought)
Dow (DIA) - 74.6 (overbought)
Nasdaq 100 (QQQQ) - 84.0 (very overbought)
Subscribers please check the Insiders’ page of the website if you wish to check the overbought/oversold levels of the following 22 ETF’s: OIH, XLF, XLE, XLY, XLK, XLV, XLB, XLI, XLP, TTH, XLU, GLD, FXI, ILF, EZU, EWA, INP, UNG, DBA, DBB, DBE, and DBP.
We work hard to bring you our latest views, opinions and research on a daily basis. If you are a loyal reader and find our thoughts useful please show us your support by joining our newsletter service. We currently follow 3 stock options strategies in our investment newsletter, the ETF Extremes, SPX Short Iron Condor and SPY Diagonal LEAP.
If you want to an in-depth, step-by-step look at how we trade our strategies purchase our acclaimed E-Book! With your purchase you will receive Two Free Months of our investment newsletter plus unlimited access to our Insider’s page enabling you to follow our strategies as you learn. What do you have to lose? Join today!
Andrew Crowder, Chief Investment Strategist, www.crowderinvestments.com
Tight-range typically precedes a sharp move
October 2, 2007
Daily Commentary
The S&P (SPY) traded in a fairly tight range today. Typically when we see this type of tight range-bound trading we often get a sharp move once the market decides which direction to take it.
Seasonally, the market is moving into a sohrt-term (1-3 days) bearish phase and this is approaching at a time when the market is in an overbought state. Going forward, at least over the next few days I have to side with the bears. While, I always say that seasonal conditions are never a sole reason to place a trade, when coupled with other technical factors they often sway the probability of a set-up. In this case that would be a move lower. As I stated yesterday, nothing is guaranteed in trading, particularly over the very near-term, but as traders all we have is the probability of any given set-up.
SPY Diagonal LEAPS strategy
The SPY October calls that we sold at the onset of this expiration period (151, 152, 154) are finally feeling the effects of time decay if only slightly. Moreover, the decision to stay long by one contract has allowed the strategy to benefit from the upward move over the last week and a half. As a result, the strategy is now up 2.8% over the last seven trading days. Once theta starts to really kick in we should realy see a drastic move in the strategy’s value. Remember, this is a slow-moving portfolio, but one that should consistently increase in value as long the underlying index, in our case SPY does not vacillate to wildly. Furthermore, because we are one contract long in the strategy SPY can run wildly to the upside and we are protected. We can’t wait until Friday so we can present some numbers to you guys on how the strategy has reacted so far. Time decay is a wonderful tool and we hope once you get the drift of the strategy you will understand just how powerful when used properly.
Question of the day
We have had quite a few questions on the new SPY Diagonal LEAPS strategy recently so we have decided to address the notable questions that you have sent us.
SPY Diagonal LEAPS Strategy, what if you are exercised on one of the Oct.07 calls you sold? Wouldn’t you be forced to sell one of the Dec09 calls you bought.
No. Unlike covered call, where you have sold calls against your stock thereby losing the stock. In almost all cases, options-savvy brokers will never use your LEAPS for payment. Rather, the appropriate number of shares will be sold short in your account and on Monday you will be asked to buy them back, or cover them if you will. Basically, your LEAPS will be safe unless there is nothing in your account for the broker to sell. That being said, this question should be posed to your broker for clarification. Each broker is handles these situations differently. Give them a call, they will gladly answer any questions that you have regarding this topic.
Overbought/Oversold for October 2, 2007
S&P (SPY) - 72.4 (overbought)
Russell 2000 (IWM) - 72.3 (overbought)
Dow (DIA) - 75.1 (overbought)
Nasdaq 100 (QQQQ) - 85.6 (very overbought)
Subscribers please check the Insider’s page of the website if you wish to check the overbought/oversold levels of the following 22 ETF’s: OIH, XLF, XLE, XLY, XLK, XLV, XLB, XLI, XLP, TTH, XLU, GLD, FXI, ILF, EZU, EWA, INP, UNG, DBA, DBB, DBE, and DBP.
We work hard to bring you our latest views, opinions and research on a daily basis. If you are a loyal reader and find our thoughts useful please show us your support by joining our newsletter service. We currently follow 3 stock options strategies in our investment newsletter, the ETF Extremes, SPX Short Iron Condor and SPY Diagonal LEAP.
If you want to an in-depth, step-by-step look at how we trade our strategies purchase our acclaimed E-Book! With your purchase you will receive Two Free Months of our investment newsletter plus unlimited access to our Insider’s page enabling you to follow our strategies as you learn. What do you have to lose? Join today!
Andrew Crowder, Chief Investment Strategist, www.crowderinvestments.com
Overbought/Oversold and Strategy Discussion
September 29, 2007
Daily Commentary
Two weeks ago I began following the overbought/oversold levels of 21 new ETFs. As reported at months end I would move all them besides the major market indices (SPY, QQQQ, IWM, and DIA) into the insider’s page page for paid subscribers only. Paid subscribers will now have daily access to these numbers, so check the insider’s page daily for the overbought/oversold numbers.
We will also post how we use these numbers in our trading and this will be archived in the Insider’s page for easy reference.
SPX Iron Condor Strategy
The SPX Iron Condor strategy made 9.3% during the September expiration period and if all goes well we should make around 7.5% during the October expiration period.
The recent market volatility has led to a few losing trades, but with a few adjustments (wider range, mandatory rolling guidelines) we are certain that the strategy will once again be back in the positive. If anything, now is a great time to learn the strategy. Market volatility has declined a bit and the VIX remains above 15. As long as the VIX stays above 15 we should have the opportunity to have an extremely wide range (roughly 200 or more points) which allows for a 6.5% swing up/down over a four week period. As long as the indice finishes/settles the four week period within our wide range we should make anywhere from 5% to 10% a month. The win ratio in the strategy so far is 70% and if all goes well we should be able to increase that percentage to 75% by years end. The downfall so far this year have been the drawdowns. We have worked diligently to hopefully alleviate the magnitude of the drawdowns. Losses are inevitable, but appropriate risk management techniques should help to ease the drawdowns. Of course in trading nothing is guaranteed, but a move to widen our range to accomodate largeer swings coupled with new rolling guidelines should ceratinly help going forward. Only time will tell. Stay tuned.
ETF Extremes Strategy
I know to many of you I am beginning to sound like a broken record, but this strategy is all about patience. With only two losses in almost a two year period (win ratio – 86%) how can you not be patient. As I stated ealier this week and in the expiration report I expect to see signals pick up as we move into the fourth quarter, the busiest time of the year. Last year the strategy made over 30% during the last three months and we are hoping to do the same again this year. Again, nothing is guaranteed in trading, so all we can do is go with the probabilities and in the ETF Extremes stratetgy probabilities are always on our side. We patiently wait for a high-probability set-up and pounce. Yes, this leads to less frequent trading, but you must remember each strategy is like a stock, they can and should be diversified to take advantage of different market scenarios.
New SPY Diagonal LEAPS Strategy
We initiated our positions in the strategy on Monday, the beginning of the October expiration period. Our hope is that after we educate you on how this strategy works we can make the strategy live in a month or so. We wanted to try something new on the blog. Introducing a new strategy for the public to learn and follow made sense. Hopefully, we can educate you on the advantages/disadvantages of the strategy over the next month or so.
The following trades were placed on our test account on Monday September 24th..
Sell to open 2 SPY Oct07 152 calls
Buy to open 2 SPY Dec09 125 calls for $35.70 or $7,140.00
Sell to open 1 SPY Oct07 154 calls
Buy to open 1 SPY Dec09 125 calls for $36.88 or $3,688.00
Sell to open 1 SPY Oct07 151 calls
Buy to open 1 SPY Dec09 130 calls for $31.55 or $3,155.00
Buy to open 1 SPY Dec09 130 calls for $35.35 or $3,535.00
For a total capital outlay of $17,518.00 + $26.55 (commissions) = $17,544.55
Not much to talk about this week. SPY ended the week a few cents higher so the strategies value reamined flat. Typically during the first week of an expiration period, time decay (theta) does not factor in the equation. If SPY continues to remain fairly flat, you will begin to see how time decay (theta) starts to benefit the strategy. Next week, theta should take hold and as we move closer towards October expiration you will see the phenomenon of time decay play out. This is what you want to concentrate on the next four weeks, learning how time decay works and reacts in this strategy. It is the dominate factor and what makes the strategy tick. I will be back with a lengthier discussion next week once we start to see the Greeks, particularly delta, gamma and theta unfold.
Overbought/Oversold for September 28, 2007
S&P (SPY) - 63.3 (neutral)
Russell 2000 (IWM) - 48.2 (neutral)
Dow (DIA) - 76.3 (overbought)
Nasdaq 100 (QQQQ) - 78.3 (very overbought)
Oil Services (OIH) - 53.7 (neutral)
Newly added ETF’s – Will only be available to paid subscribers starting 10/1. Subscribers please check the Insider’s page if you wish to check the numbers on a daily basis.
Core Sector List
Financials (XLF) - 52.8 (neutral)
Energy (XLE) - 54.3 (neutral)
Cons. Cyclicals (XLY) - 50.7 (neutral)
Technology (XLK) - 70.5 (overbought)
Health Care (XLV) - 52.6 (neutral)
Materials (XLB) - 68.7 (neutral)
Industrials (XLI) - 75.1 (overbought)
Cons. Staples (XLP) - 79.9 (overbought)
Telecom (TTH) - 78.9 (overbought)
Utilities (XLU) - 59.7 (neutral)
Gold (GLD) - 82.2 (very overbought)
International
FTSE/XINHUA China 25 (FXI) - 81.9 (very overbought)
Latin America (ILF) - 89.5 (very overbought)
MSCI EMU (EZU) - 84.5 (overbought)
Australia (EWA) - 91.0 (very overbought)
India (INP) - 80.1 (very overbought)
Commodities
Natural Gas (UNG) - 40.4 (neutral)
Agriculture (DBA) - 71.6 (overbought)
Base Metal (DBB) - 70.6 (overbought)
Energy (DBE) - 57.5 (neutral)
Prec Metal (DBP) - 86.3 (overbought)
Okay, the plan is to follow a total of at least 25 major ETF’s is complete. Again, in the near future this list will only be available to subscribers to the newsletter/strategies on the Insiders’ page.
We work hard to bring you our latest views, opinions and research on a daily basis. If you are a loyal reader and find our thoughts useful please show us your support by joining our newsletter service. We currently follow 3 stock options strategies in our investment newsletter, the ETF Extremes, SPX Short Iron Condor and SPY Diagonal LEAP.
If you want to an in-depth, step-by-step look at how we trade our strategies purchase our acclaimed E-Book! With your purchase you will receive Two Free Months of our investment newsletter plus unlimited access to our Insider’s page enabling you to follow our strategies as you learn. What do you have to lose? Join today!
Andrew Crowder, Chief Investment Strategist, www.crowderinvestments.com
Diagonal LEAPS Strategy Begins
September 24, 2007
We added our intial positions in the SPY Diagonal LEAPS strategy today in our test account (paper trading). We plan on following this strategy for most likely several months until our subscribers and community blog participants can gain a better understanding of how the strategy works. We hope this will be as educational as it is profitable. We sent out to our subscribers the basic trading rules and how and why we chose our positions. For the most part, our guidelines can carry over for use with any ETF. Our official trading guidelines will only be privy to paid newsletter subscribers. All totals reflect commissions through the standard Thinkorswim commission schedule.
Sell to open 2 SPY Oct07 152 calls
Buy to open 2 SPY Dec09 125 calls for $35.70 or $7,140.00
Sell to open 1 SPY Oct07 154 calls
Buy to open 1 SPY Dec09 125 calls for $36.88 or $3,688.00
Sell to open 1 SPY Oct07 151 calls
Buy to open 1 SPY Dec09 130 calls for $31.55 or $3,155.00
Buy to open 1 SPY Dec09 130 calls for $35.35 or $3,535.00
For a total capital outlay of $17,518.00 + $26.55 (commissions) = $17,544.55
We will discuss the positions in great detail over the coming days. This includes the Greeks, risk profile, adjustments, etc.
Overbought/Oversold for September 24, 2007
S&P (SPY) - 61.7 (neutral)
Russell 2000 (IWM) - 57.5 (neutral)
Dow (DIA) - 70.5 (overbought)
Nasdaq 100 (QQQQ) - 78.3 (overbought)
Oil Services (OIH) - 71.4 (overbought)
Newly added ETF’s – We have decided to extend the following overbought/oversold reading on the community blog until next week. We will follow the readings in the Insiders’ page (subscriber’s only) starting 10/1.
Core Sector List
Financials (XLF) - 45.2 (neutral)
Energy (XLE) - 84.2 (very overbought)
Cons. Cyclicals (XLY) - 44.3 (neutral)
Technology (XLK) - 73.4 (overbought)
Health Care (XLV) - 70.3 (overbought)
Materials (XLB) - 80.9 (very overbought)
Industrials (XLI) - 54.9 (neutral)
Cons. Staples (XLP) - 63.1 (neutral)
Telecom (TTH) - 71.7 (overbought)
Utilities (XLU) - 61.0 (neutral)
Gold (GLD) - 74.4 (overbought)
International
FTSE/XINHUA China 25 (FXI) - 90.0 (very overbought)
Latin America (ILF) - 79.6 (overbought)
MSCI EMU (EZU) - 72.6 (overbought)
Australia (EWA) - 81.2 (very overbought)
India (INP) - 85.4 (very overbought)
Commodities
Natural Gas (UNG) - 62.3 (neutral)
Agriculture (DBA) - 90.9 (very overbought)
Base Metal (DBB) - 63.9 (neutral)
Energy (DBE) - 81.4 (very overbought)
Prec Metal (DBP) - 81.6 (very overbought)
Okay, the plan is to follow a total of at least 25 major ETF’s is complete. Again, in the near future this list will only be available to subscribers to the newsletter/strategies on the Insiders’ page.
We work hard to bring you our latest views, opinions and research on a daily basis. If you are a loyal reader and find our thoughts useful please show us your support by joining our newsletter service. We currently follow 3 stock options strategies in our investment newsletter, the ETF Extremes, SPX Short Iron Condor and SPY Diagonal LEAP.
If you want to an in-depth, step-by-step look at how we trade our strategies purchase our acclaimed E-Book! With your purchase you will receive Two Free Months of our investment newsletter plus unlimited access to our Insider’s page enabling you to follow our strategies as you learn. What do you have to lose? Join today!
Andrew Crowder, Chief Investment Strategist, www.crowderinvestments.com
