December 21, 2014

One Anomaly After Another

It’s been a while since my last post. In fact, it’s been exactly one month. During that time I received the following email from a long-standing subscriber: I'm sure that you don't need reinforcement for your strategies, but the following summary of SPY by Tom Sosnoff pretty much echoes your take on the current situation. Since October expiration, yesterday’s rally in the SPY marked 12 out of 16 days it’s gone up. Assuming that there’s a 50/50 chance that the SPY will go up or down on a given day, there’s about a 2.78% probability of having only 4 down days out of 16. And it’s unlikely even if you don’t believe that the probability is exactly 50/50. If that weren’t unlikely enough, the SPY is up over 8% since … [Read more...]

Trade Alert: 10-14-2014

First of all, I hope several of you held on to our old DIA puts position. While we made a nice gain on the trade, had we held the gains would have been tremendous. As most of you know, I’m a probability hound so I rarely buy options. But, the opportunity for a quick scalp looked too good to pass up. So, I decided to buy the Nov. 173 puts for $3.50 and a few days later we sold them for $4.50. The 28.6% gain was nice, but the puts are now worth $9.80. We currently have three open positions and all are in profitable territory. October expiration is Friday and our Apple 108.57/106.43 bear call spread and DIA 176/175 bear call spread are both essentially worthless. Some of you might prefer to hold both of the spreads through … [Read more...]

Trade Alert: 10-3-2014

SPY has popped off it's recent oversold state and now the RSI (2) is back in an overbought state. I would prefer to see the RSI (5) in an overbought state as well, but given current IV I want to get a trade off before it dips again. MY intent is to turn this one into an iron condor. Stay tuned! Here is the next trade… SPY The underlying ETF is in an overbought state… which means I’m very comfortable selling a bear call spread with a high-probability of success here. Here is the next trade (please pay attention to the options code or opra.) Simultaneously: Sell to open the SPY November 2014 205 calls (SPY141122C205) Buy to open the SPY November 2014 207 calls (SPY141122C207) for roughly $0.32 Do not accept less … [Read more...]

Volatility is Back…So Are We…

9-30-14 VIX

We're back. Or better said, it's back. That's right...our old friend Mr. Volatility has once again made an appearance. Just look at the chart below.   For those of you who have no idea what I'm talking about the VIX, or implied volatility is back above historic lows. After much research, we know when the VIX reaches 13 or below selling options in the major indices is typically a bad idea. Basically, the VIX below 13 is an options sellers kryptonite...that is if you are selling options on SPY, SPX and a few other highly-liquid underlyings. But the VIX is once again back above a tradeable level so let the selling begin. Over the course of the next week I plan on selling options on SPY and SPX using credit spreads and … [Read more...]

Trade Alert: 9-23-14 (close)

Late last week I did something a bit unusual. I typically don’t buy options, but I did late last week due to the overbought state in DIA. I’m hoping all of you were able to participate. I’ve decided to lock in the 28.5% profits today. Some of you might prefer to hold on a bit longer, I just want to take my profits and move on to the next trade. As a result I will be doing the following: Sell to Close DIA November Puts (DIA141122P173) for roughly $4.50 Enjoy the profits!!! Andy … [Read more...]