February Ended Well - March 1st Trade

February ended well for the ETF Extremes with a 22.4% gain for the month. You can check it out at the following link: http://etfextremes.collective2.com

As for March, well, I placed another trade today that can also be seen at the former link. The NASDAQ 100 (QQQQ) had pushed into a short-term ‘very overbought’ state so, per my trading guidelines for the ETF Extremes strategy, I placed a trade.

The market pushed higher today and into strong overhead resistance and when coupled with a push into ‘very overbought’ territory the probability of a short-term push lower  increased dramatically. Of course, as we all know, just because the probability leans towards a bearish move there are no certainties.

RSI (5) as a useful Technical Indicator

Vaughn Okumura, founder of the now defunct vtoreport, outlined the RSI Wilder (5) on his site and stated that it was one of his favorite short-term strategies. He kept a record on the site, and his gains from 2/21/97 through 2/03/06 were in excess of 384%. He achieved these remarkable gains by only trading the underlying QQQQ.

The Relative Strength Index (RSI), developed by J. Welles Wilder, Jr. is an overbought/oversold oscillator that compares an entity’s performance to itself over a period of time. It should not be confused with the term “relative strength” which is the comparison of one entity’s performance to another.

I intend on carrying on with his mission of educating the public on how to use this wonderful technical indicator by posting the status of DIA, QQQQ, and SPY. Occasionally, when other ETF’s reach extreme overbought/oversold territory I will mention them as well. I hope this helps those that are interested.

His trading guidelines were as follows:

Buy when the 5-day RSI closes below 30.0

Sell when the 5-day RSI closes above 50.0.

I have archived the RSI (5) overbought/oversold parameters to help you better understand when a given index is in overbought/oversold territory.

Overbought-Oversold levels for March 1, 2010

ETF Extremes Options Trading Strategy

* S&P 500 (SPY) - 74.1 (overbought)
* Dow Jones (DIA) - 67.2 (oversold)
* Russell 2000 (IWM) - 78.7 (overbought)
* NASDAQ 100 (QQQQ) - 73.3 (overbought)

Sector ETF Extremes Options Strategy

* Biotech (IBB) - 82.9 (very overbought)
* Consumer Discretionary (XLY) - 88.3 (very overbought)
* Health Care (XLV) - 72.7 (overbought)
* Financial (XLF) - 70.5 (overbought)
* Energy (XLE) - 61.9 (neutral)
* Industrial (XLI) - 76.7 (overbought)
* Materials (XLB) - 65.1 (neutral)
* Real Estate (IYR) - 79.1 (overbought)
* Retail (RTH) - 83.3 (very overbought)
* Utilities (XLU) - 60.2 (neutral)

Ultra Extremes

* Ultra Long (SSO) - 74.2 (overbought)
* Ultra Short (SDS) - 25.1 (neutral)

February Strategy Review

Here are the results from the month of February. As you can see the ETF Extremes strategy has had a wonderful 2010 so far, up roughly 20% YTD. I decided to move over to Collective2.com for the results aspect and show that the performance does speak for itself.

There are many options strategy newsletters that tout outlandish gains and are unable back it up. I want to show through Collective2 that indeed my proprietary strategy does outperform the market. Why would I want to present a strategy that does not present you a complementary strategy to your diversified portfolio. Again, I want to let the performance speak for itself and please if you have any questions please do not hesitate to email me.

You can also check out the analytics of the strategy including the Sharpe ratio, Sortino, etc at the following link: http://etfextremes.collective2.com

Another Trade Down - ETF Extremes Options Strategy Up Almost 20% YTD

Check out the latest trade in the ETF Extremes options strategy at the following link: http://etfextremes.collective2.com

The ETF Extremes Strategy is now up 19.5% YTD on just four trades. The strategy as not had a losing trade all year. Of course, this is not expected to continue as losses will occur. Losing is just part of the game, it is how you lose (appropriate risk management) that is important. By remaining diligent in my risk management of the strategy the ETF Extremes should continue its winning ways. The performance over the past three years speaks for itself.

The latest trade made 7.1% in just over 7 trading days. As you can see from the statistics on the Collective2 site the annual (compounded) rate of return is now up over 224% and the Sharpe ratio remains over 1.

Overbought-Oversold levels for February 25, 2010

ETF Extremes Options Trading Strategy

* S&P 500 (SPY) - 59.5 (neutral)
* Dow Jones (DIA) - 67.8 (neutral)
* Russell 2000 (IWM) - 55.7 (neutral)
* NASDAQ 100 (QQQQ) - 59.5 (neutral)

Sector ETF Extremes Options Strategy

* Biotech (IBB) - 59.2 (neutral)
* Consumer Discretionary (XLY) - 78.1 (overbought)
* Health Care (XLV) - 56.3 (neutral)
* Financial (XLF) - 63.8 (neutral)
* Energy (XLE) - 46.1 (neutral)
* Industrial (XLI) - 61.9 (neutral)
* Materials (XLB) - 44.0 (neutral)
* Real Estate (IYR) - 76.7 (overbought)
* Retail (RTH) - 87.9 (very overbought)
* Utilities (XLU) - 49.6 (neutral)

Ultra Extremes

* Ultra Long (SSO) - 59.6 (neutral)
* Ultra Short (SDS) - 38.7 (neutral)

Next Page »