ETF Extremes

August 23, 2006 · Print This Article

After the sharp rally last week our proprietary indicators signaled a buy alert on Monday. As a result, we bought 10 Oct06 131 puts (SFBVA) shortly after the open on Monday for $2.70. The overbought situation coupled with the gap up in the S&P last Wednesday (that has yet to close) increased the probability for success in the trade.

Today our indicators signaled a sell and as a result we sold the Oct06 131 puts (SFBVA) for $3.10 resulting in a 14.8% gain on the trade. The sample portfolio is currently worth $6,565 or 31.3% (including commissions) YTD. The win ratio in the strategy currently stands at 100%, 7 out of 7, (check out the Performance page on our site for further details).

Obviously we are pleased with the win ratio, but we are realists. We realize there is no holy grail in trading. One thing we do know for certain is that we have found a unique strategy that makes sense to us and we trade it to make serious money over the long-term. Furthermore, we realize that the less we trade, the better the strategy will do in the long run. And the long run is what matters. This is what makes our ETF Extremes strategy unique and so far, successful. Hopefully, we can continue our winning ways and extend the gains going forward.

Patience is the key ingredient to the success of this strategy and forcing a trade is, in most cases, detrimental to any strategy. Our exact words on the site are as follows: “This strategy requires patience coupled with a disciplined approach. The strategy will make approximately, on average 1 to 3 recommendations a month with holding periods of 1 to 15 days, however; there will be some months when no recommendations are made. The key to this strategy is patience. Waiting for the appropriate scenario to recommend trades with a high probability of success is what makes this strategy a success.”

Believe me, we would love to have potentially profitable signals on a daily basis, but that just isn’t reasonable with this strategy. We will never make any apologies for our system and why should we, with a win ratio of 100% YTD (7 out of 7) and gains of 31.3% YTD, we feel confident in the strategy and its ability to produce long-term returns.

As for the market, it has worked off its overbought situation; however, the gap from last Wednesday has yet to be closed. I am still looking for the gap to close over the next few days which should bring the S&P close to around 1280 level give or take a few points. This will most likely act as a level of support and could provide a decent trading opportunity. We shall see soon enough.

As always, please do not hesitate to email us with any questions or comments that you might have.

Andrew Crowder

Chief Options Strategist

www.crowderinvestments.com