April expiration has finally passed. And it was a good one for our options strategies. All three strategies reaped profits. Again, the goal is to produce as much income as possible each and every expiration cycle. But, keeping risk-defined is the key to any successful long-term approach, so expectations should always be reasonable. No speculation...just high-probability strategies that hit lots of singles and doubles. The occasional home run happens, but it's an anomaly. Anyway...the expiration cycle witnessed a wide-range of short-term sentiment. Mid-way through the cycle most of the major indices were hitting all-time highs. But, as we have all witnessed over the past several week the bulls reign is over. Now all of the major … [Read more...]
Back in Action…Market Opportunities
The one aspect of trading that most investors don't understand....patience. The newsletter business and its patrons insist that we provide ideas, trades, investments on a regularly scheduled basis. You know, every Tuesday we will provide a trade alert. Or the third Friday of every month we will send you our monthly update with our current stock pick. It's ludicrous. And if you think the market provides opportunities on a regularly scheduled basis, well, you probably should put your money elsewhere because you don't understand the market. Cash is a position. It's one of the hardest aspects for new traders/investors to learn. But once learned, it can be one of the most valuable lessons the market has to offer. As Warren Buffett … [Read more...]
One Sign the Rally Has Matured
The market rally over the last five months has been, well, fierce to say the least. During the first quarter alone the major market indices rallied over 10%. The advance marked the 13th time since 1928 that the S&P 500 made it above the 10% threshold in three months. But how did the market fare after such a nice run? The wonderful folks over at Bespoke Investment Group published the following chart today that gives us some insight into what we should expect going forward. As you can see, by most accounts the gains for the rest of the year were limited. Of course, there were a few outliers, but for those of us using strategies based … [Read more...]
Sideways Trading Persists…But for How Long?
Today marked the 14th straight day of range-bound trading. For those that favor directional trading it's been exhausting. For those of us who sell options and favor time decay over direction, well, it's been wonderful. After roughly two and a half months of relentless rallying the market has finally settled down and looks to normalize. The recent price action shouldn't be too much of a surprise. The past three years have allowed the bulls to celebrate early and often, but unfortunately the party typically ends shortly after the first quarter ends. An intermediate-term reprieve kicks in and the bears finally are allowed their time to shine. And while the party might not last long, the decline is usually short and somewhat … [Read more...]
Options Income Strategies for Monthly Cash Flow
Sell in May is upon us. And if history repeats itself we could be in for a rough summer, especially given the current overbought nature of the market. As I discussed in my last post the phenomenon is real. The average gain over the next four months is a paltry 0.35%. So the question is, how can we as self-directed investors can we increase our wealth or more importantly, receive steady income during the "summer doldrums"? Besides the archaic and capital intensive way of purchasing dividend-based stocks, selling options is the only other alternative, at least as far as I'm concerned. Options selling strategies, allow us the ability to take money out of the market on a steady and consistent basis, but the best part is that we have … [Read more...]