May 30, 2017

Major Indices Remain in a Short-term Overbought State

Random Thoughts Three of the top five most short-term overbought ETFs that I follow are major market ETFs. DIA, SPY and IWM (in that order) are currently "very overbought" on a short-term basis. The RSI (2) of SPY and DIA are roughly 96 and above and IWM is not far behind at 92. As I write this the futures are higher and if we open at these levels we will see another test of the recent overhead resistance that has plagued the bulls since last Wednesday's historical surge. As I stated yesterday with DIA and SPY in short-term extreme overbought states coming off huge gaps to the upside and battling with strong overhead resistance the probability for a short-term reprieve is high. However, as we all know, stranger things have … [Read more...]

Bullish – Bearish – Bullish – Bearish

On the Tuesday before Thanksgiving I turned into a short-term bull. The High-Probability, Mean-Reversion Indicator had pushed into a short-term oversold state with readings not seen in months and as a result, I bought a few, two-month out calls. I recently sold my calls after the huge advance last Wednesday in the HPMR strategy and now I find myself back in the bearish camp. Over the past several days the market has struggled with what seems to be an area of strong overhead resistance. The struggle follows the huge gap from last Wednesday. Couple the aforementioned with the short-term overbought extremes in the market and I expect to see another short-term pullback over the next few trading sessions. It is my hope that the market allows … [Read more...]

Options Trades in the High-Probability, Mean-Reversion Strategies

A trade in the High-Probability, Mean Reversion Strategy looks likely if IWM happens to open flat or open tomorrow. Of course, there are a few other thng is that need to line-up, but the first trade of a slow August seems likely. Subscribers stay tuned! Our latest Theta Driver Options trade looks very good. Last Monday, I placed our first trade for a credit of $0.25 and thanks to some help from the bears (although a flat to slightly higher market would have worked as well, just not so quickly) the credit spread is now worth less than $0.05. With only $0.05 and 25 days left until September expiration I will mostly likely lock in the gain for roughly a 9% gain (including commissions) and place another Theta Driver trade within the next few … [Read more...]

High-Probability, Mean-Reversion Indicator – Advantages of Diversified Options Strategies

Before I get started I want to discuss a lingering frustration of mine - the financial services arena. Yesterday, I posted a WSJ interview with Mark Cuban. Mark had a few very insightful ideas for the public including "buy and hold is a crock of s#$!" and "diversification is for idiots." I definitely agree with Mark's first statement - buy and hold is no longer a viable strategy. However, I think he needs to expand on his last statement. While I do agree that diversification in stocks is well, not useful when applied in the typical manner. Because most over-diversify. And quite honestly, I don't bother investing in stocks. It ties up way too much of my capital and I can create far better statistical advantages using options rather than … [Read more...]

Straight Call Option and a Credit Spread

The long awaited trade finally came to fruition today in the High-Probability, Mean-Reversion Options Strategy as well as my new High-Probability, Mean-Reversion Credit Spread Option Strategy. Subscribers were obviously privy to the former trade and if all goes well and the market ticks down tomorrow, we could see another nice gain in the options strategy. As for the new Credit Spread options strategy here is the trade that was placed: (click to enlarge) As you can see I sold a vertical call spread or a bear call spread, whichever name you prefer it doesn't matter to me. I was able to sell the spread for $.34 which will give me a 17 percent gain (excluding commissions) if the Russell 200 proxy ETF (IWM) closes below 86 at … [Read more...]

Triple Witching – Potential Credit Spread Tomorrow

Market Mumbo Jumbo It has been an interesting options expiration week. The S&P 500 (NYSE: SPY) has lost a total of $0.30 since the close last week - a paltry decline.  However, this did not stop Mr. Volatility from finally making an appearance. Options traders, particularly those of us who sell options premium, can finally rejoice. Options premium has finally moved back into this market. Now if the VIX could just hold 20 and move as high as 35 I would be one happy option trader. With that being said, I look to place a position at some point tomorrow in the my new credit spread strategy. Stay tuned! Options Indicator – Overbought – Oversold Every ETF that I follow basically stay within a short-term neutral state today so I … [Read more...]

Strategy Continues to Outperform – Up 28.0% Since Inception

A wonderful beginning indeed. The strategy had another successful trade marking the eighth straight winning trade since the strategy was initiated for a win ratio. The return - 28.2%. Check out the results (trades, returns, ratios, etc.) at the following link: High-Probability, Mean-Reversion Strategy Obviously I am pleased with the win ratio (100%) since I initiated the High_-Probability, Mean-Reversion strategy, but I am a realist. I realize there is no holy grail in trading. One thing I do know for certain is that I have a unique, and concrete, options trading strategy that makes the world of sense to me and I trade it to make money over the long-term. Furthermore, I realize that the less I trade, the better my strategy will … [Read more...]