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Swing trading virtual portfolio – Optrader

New post-May 11th. +275% in 2 months.

 





Swing trading virtual portfolio – Optrader

New post-May 11th. +275% in 2 months.

 





(Lessons From) A Trader’s Diary

Dear Diary,

Last week’s Market Commentary to members concluded:

"Technical analysts will cite bullish breakouts and push retail traders into bullish trades now.  We spoke in recent weeks of the potential for the stock market to remain bullish through early May, which would lull investors into complacency, believing that "Sell in May and Stay Away" would not materialize.  Everything is going according to plan in that regard.  The markets remained bullish through last week and optimism is high again that 13,500 will be just around the corner…..we are highly skeptical of any meaningfull bullish follow-through.  By week’s end we will be very surprised if the strength has been maintained and, as a result, are entering bearish positions"

As it turned out, the Dow Jones Industrial Average ended 3 of last week’s 5 trading days lower and ended the week substantially lower. 

On April 14th we wrote in our Monday blog that we expected "strength over the next couple of weeks in the markets assuming the 1325 level can hold…we’re looking for anything above that key threshold level to signal high likelihood of a bullish follow through to the end of the month."

 

As expected, the bullish follow through materialized once the critical 1,325 level held firm.

One of the factors we consider heavily when trading is general sentiment in the market.  In early May, optimism was high.  The Volatility Index, for example, had not been quite as low since the December and October peaks in the market.  Had all the pessimism of recent months really been eroded?  Had we forgotten so quickly the problems of the past?  We didn’t think so. 

 

While many were optimistic about the Dow crossing 13,000, we exercised extreme caution and refused to abandon discipline, preferring to stay safe than risk a big correction.  And the correction from approximately 13,100 to 12,745 soon followed. 

Although the correction so far has been just under 3%, it is still almost 3% in 1 week!  If all you could do was improve your virtual portfolio performance by 3% at the end of the year, the effect on compounded gains would be substantial over time. 

For example, $100,000 compounded at 10% over 20 years amounts to just over $670,000 (assuming a qualifed account) while $100,000 compounded at 13% over 20 years amounts to over $1,150,000, almost twice the amount! 

When making big money in the market, the devil is in the details and saving…
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Weekend Reading – Always in Progress!

Interesting report from Factset titled: "An Oil Bubble to Rival the Internet Boom."

It’s got lots of stats and charts, very nice and the author concludes: "Technically speaking, the energy sector could outperform further in the months ahead, but the correction could be brutal, as is the case with cyclicals. We recommend neutrality on the sector, and sales in line with bad news on the economy."  These are guys who provide top-level reports for hedge funds but it came out last weekend and it seems everyone ignored it

I was saying in comments on Friday that the price of oil is much like the Terminator robot in the first movie – no matter what bearish fundamentals turn up to stop it, it just keeps coming and coming and it grinds and crawls and claws ever higher…  Here’s the clip.

===========================================================

I was looking at copper (because of my BHP puts) last week and it went down hard on Friday, touching 370 again and it looks primed for a nice fall.  Far be it for me to bring up fundamentals but there was a 10% increase in stockpiles this month, the most since Aug 2005.  Apparently the Chinese have reached their limit as to what they will pay and have just stopped ordering and a strike that was supporting prices at record levels in Chile just ended (from 4/16).  Here’s an interesting comparison of Copper, Gold and Oil.  Note oil has decoupled from everything – If oil is trading up on international tensions, why not gold?

Again, my premise is that Food, Metals and Oil are currently using ALL of the spare money in the world and for any of them to go up, other things must come down or WAGE inflation must start to really kick in to help us pay for this stuff.  China’s PPI jumped 8.1% and their currency is UP 10% over the past year, which should have kept it down a bit.  They release CPI on May 12th, possibly close to the record 8.7% increase.  “The falling U.S. dollar exchange rate and interest rates and excessive global liquidity’‘ require China to take extra steps to safeguard financial stability, Vice Premier Wang said. “If we don’t handle financial risks well, this could cause turbulence in the overall economy and undermine social and political stability.”  The PBOC’s…
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Weekly Wrap-Up

That was a rough week.

I said in last week’s wrap up: "Hopefully we won’t regret not selling in May and getting out of here" as we expected a consolidation back to 12,750 and, with oil topping $125, we are so far lucky that’s all we have.  It shouldn’t come as a surprise that there is an inverse relationship between Dow performance and energy prices – what’s surprising is how the MSM seems to be surprised to see it in action.

Thank goodness we called the top last Friday when the Dow topped out at 13,150 or things could have been pretty ugly, even as it was we pretty much treaded water for the week riding as many callers as we can into expiration but by Friday we were getting a little worried that our current covers would not be enough and we went into this weekend with a fairly bearish plaza.  Although we closed just 49 positions this week, very few of the ones we have left are the most covered we have been all year to the point where a rally next week will be somewhat annoying.

Our smaller virtual portfolios suffered most this week as they are, by nature, bullish since it’s hard to make progress when you don’t commit to a direction with limited capital:

  • Our $10,000 Virtual Portfolio fell 8% to $16,199 as we head into our final week.  We are right on target for our Applefly and that will give us a great finish if Apple holds close to $180 and the rest of our positions are, if anything, over-covered.  All of our $10KP positions are in the $25KP so we will start with a fresh $10,000 after this week’s expirations.
  • The $25,000 Virtual Portfolio has no luck and fell 8% for the week as well.  We also have a nice pickup ahead if Apple holds $180 this week and there’s nothing to do here but roll our callers and grind this one out next month as most of our positions have moved to longer spreads.
  • The Short-Term Virtual Portfolio is very flexible and gained 11%, much of it thanks to although, out of 35 positions there are just 6 naked calls remaining which are dwarfed by the value of our 5 naked puts  – by far our most bearish posture of the year!
  • We made a lot of good calls this week but


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Today’s tickers: NKE, BJ, FCX, IVN, CSCO, CROX, JAH, ENER, PSUN

www.interactivebrokers.com

NKE- “Swoosh” went the sound of short volatility this afternoon as option traders took advantage of a momentary blip higher in implied volatility of athletic shoe giant Nike. Shares pulled back 2.5% to $65.10 on no apparent news catalyst today as implied volatility ticked in at 26% – slightly above the 22.8% historic reading. An increase in option trading volume to 8 times the normal level showed traders keen to write the January 65 straddle for a combined premium of $12.10 – fully 18% of the current share price – exceeding existing open interest at the January line. The short straddle strategy is a popular one among traders anticipating minimal share price movement within a given timeline – the trader in this case wagers that Nike shares will remain at current levels heading into the New Year, leaving both positions unexercised.

 

 

BJ- This morning’s better-than-expected April sales figures from the likes of Wal-Mart and Costco affirmed the notion that cash-strapped American shoppers are on the hunt for bargains. While the news was good for shares in some big-box retailers, the gains weren’t wholesale. BJ’s Wholesale Club, the East Coast discount and remainders chain, is an instructive case in point. With shares down 2% to $38.15, option volume soared to nearly 9 times the normal level as traders took a defensive stance by positioning in June 40 puts. These puts, which convey the right to sell BJ’s Wholesale Club shares for $40 next month, are nominally in-the-money, but the $3.45 premium requires another $1.60 drop from current levels just to break even. Consider the volatility setup, where the 44% implied volatility reading indicates more than 25% more price risk to the company’s shares than have been proven historically.

 

 

FCX- Freeport McMoRan Copper – Shares in the world’s largest publicly traded copper company rebounded 3% to $117.85 after declines earlier in the week on labor issues and concerns of a slowdown in Chinese demand owing to prohibitively high copper prices. The 10,000 lot position in the January contract that we observed earlier today appears to have involved the sale of 110 puts for $15.43 and the purchase of 130 calls for $13.60. This suggests a short collar strategy employed by a trader with a short position in the underlying stock who wants to protect the position against an unexpected move higher. The purchase of the out-of-the-money call…
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Friday Thump?

Well, we’re getting our $125 oil pre-market.

It’s funny how we’re getting it as the Wall Street Journal runs a cover of good old fashioned yellow journalism, with Karl Rove-style attacks on Hugo Chavez as they headline: "A cache of controversial computer files closely tying Venezuela’s President Hugo Chávez to communist rebels seeking to topple Colombia’s government appear to be authentic, U.S. intelligence officials say."  Well, when have US Intelligence officials ever steered us wrong before?  This is, by the way, something that has been going on since March, it’s only news today as they need a reason to take oil over $125 but this may be the Journal’s last chance to wave this flag as Interpol (at Columbia’s request) will release an independent analysis next week.

Mr. Chávez has repeatedly said the files were faked by Colombia. "We don’t recognize the validity of any of these documents," Bernardo Álvarez, Venezuela’s ambassador to the U.S., said in a Wednesday interview. "They are false, and an attempt to discredit the Venezuelan government."  FARC itself has suggested the files are fake. A FARC statement published on the Web site of Venezuela’s Information Ministry ridiculed Colombia’s claims about the computer files, saying computers couldn’t have survived the Colombian army attack "even if they had been bullet-proof."

Perhaps the documents are true, perhaps they are not, but are we going to be marched headlong into another war (even if it’s only a trade war, with sanctions) rather than sit down and try to work out our differences with Chavez, who has been a Bush attack target since he took office (kind of like Saddam)?  Either way, any escalation of hostility with Venezuela will be a jackpot for traders who bought $150 July oil options yesterday and death for the US and perhaps global economy.  I know we’re all trained to go blindly nationalistic at the first mention of terrorists but there are tremendous costs to our actions and the possibility that the administration may be "wagging the dog" to distract the public is very scary at this point.

Note the WSJ headling is very definitive: "Chavez Aided Columbia Rebels, Captured Computer Files Show."  This is very much like the "proof" they had that Saddam had WMD’s but it’s been a whole 5 years since then so I guess we’ve all forgotten how well that turned out.

Of course Chavez…
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WTF Headline

Sorry, I think we’re still getting email alerts for these articles.   So, for now, after this note, let’s return to the backup site for more reading.  Thanks!  – Ilene

We all know about this already, but here’s Barry’s Ritholtz’s comment on the oil forecast. 

WTF Headline of the Day? GS Says Oil ‘Likely’ to Reach $150-$200

Excerpt:  "Today’s WTF headline isn’t a criticism of the financial media so much as a disturbing forecast:

Goldman’s Murti Says Oil `Likely’ to Reach $150-$200
Crude oil may rise to between $150 and $200 a barrel within two years as growth in supply fails to keep pace with increased demand from developing nations, Goldman Sachs Group Inc. analysts led by Arjun N. Murti said in a report.

New York-based Murti first wrote of a "super spike” in March 2005, when he said oil prices could range between $50 and $105 a barrel through 2009. The price of crude traded in New York averaged $56.71 in 2005, $66.23 in 2006 and $72.36 in 2007. Oil rose to an intraday record $120.93 today on speculation demand will rise during the peak U.S. summer driving season.

Before you blow the guy off as an energy extremist, his $105 target 3 years ago was widely derided ("another Henry Blodget wannabe")…."


And an excerpt from Paul Kedrosky’s article on the Infectious Greed blog:

The Oil Bubble, Self-Organized Criticality, etc.

"My earlier post about the possible oil bubble seems to have touched a nerve, so here is more. The good people at Factset have out a fascinating new report on the same subject — how energy markets are becoming awfully bubblish — and it’s worth a read in its entirety.

Here is one quick figure from the report showing how profits are growing so quickly that oil companies can’t keep up by raising prices. It creates an interesting box for energy companies and is one sign of a crack in the market."

pe-rations

"To be clear,  I see no reason why oil prices tumble materially tomorrow. Matter of fact, I’m usually two years too early on these calls…"


Another perspective on GS’s call on oil prices, courtesy of Trader Mark.

Goldman Sachs: Gasoline Not Driving Oil Price – Oil Going to $150-$200


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Thursday Wrap-Up

I’m way behind so I’ll keep this short and not-so-sweet.

Today’s "rally" was stupid, I said so all day.  Even though we closed a full 16 points above my morning target of 12,850, I got very bearish during the day as oil looked poised to test $125 with CNBC running a day-long pump-fest, trotting out every oil bull on the planet to tell us how $200 oil would somehow be great for investors.

Are these guys on crack?  I’m not sure, but I will say it again and again:  There is not enough money on the planet earth to pay for $200 oil without taking that extra $3Tn OUT of the revenues of other industries.  If you couple that with a conservative $2Tn worth of food inflation (caused by oil), then you are talking about a global depression where the only companies that survive are the oil companies. 

Of course that’s ridiculous as one would thing that wiping out every disposable penny on the planet would hurt the demand for oil and drive down prices – but that’s not what energy traders believe!  They are buying July $150 futures contracts in bulk!!!  Forget the fact that we need a war with Iran to justify $150 crude (word is Bush is working very hard on this as we speak) – I am telling you the market cannot handle $125.

I see no justification for this rally and I said to members yesterday as CNBC had a discussion that $120 oil was a good thing for the economy: "Yet another BS justification.  Come on guys – the last time we got this much "good news" about an investment from the media was housing…  Oil $124.33 and a Rebel Attack in the morning should punch us through $125."

I was bearish much earlier than that though, at 11:16 I said, regarding whether it was a good time to enter Apple: "I don’t think anything is ready for an entry right now."  We decided to roll our oil puts up (to higher strikes) and out (to longer months) and sell front-month puts against them as it was obvious crude was going nowhere but up, despite a good build in natural gas at 10:30.  At 11:25 I warned: "Don’t forget that until we bounce more than 50% of yesterday’s drop this "rally" is nothing so we need 12,900 at least ."

At 2:32, into the NYMEX close I said: "Wow they
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Fannie Mae

One more from Mish, and yes, all’s working!

Fannie Mae Cumulative Defaults (and other disasters)

Inquiring minds are checking out the Fannie Mae 2008 Q1 10-Q Investor Summary. There are plenty of charts, graphs and other data to consider.

For example, please consider this graph on page 27.

Cumulative Default Rates Overall Originations from 2000 thru 2007

click on chart for sharper image

Minyan Peter, former treasurer at a major US bank had this to say:

From experience, vintage data doesn’t lie. A group of loans that starts out badly ends badly. And as the chart shows, the most recent vintages are deteriorating faster and to higher levels than older vintages. Further, all of the loss and delinquency data is for a pre-recessionary period.

Professor Kevin Depew was talking about Fannie Mae yesterday in points 1-4 of Tuesday’s Five Things. Let’s take a look at point number 1.

Fannie Mae Executives Only Ones Surprised by $2.19 Billion Quarterly Loss

Fannie Mae (FNM) this morning reported a wider loss than many analysts estimated, cut its dividend to 25 cents a share and said it will raise $6 billion in capital before it eventually burns to the ground while the Office of Federal Housing Enterprise Oversight plays a fiddle. We’re paraphrasing… but only slightly.

Even as Fannie Mae reported a wider-than-expected (for Fannie Mae executives at least, the rest of us seemed to know better) $2.19 billion first quarter loss, the Office of Federal Housing Enterprise Oversight (OFHEO), the regulator that oversees the government-sponsored mortgage giant actually lowered… yes, lowered… the amount of capital Fannie must hold.

The OFHEO said it will lower requirements for surplus capital to 15% from 20% once the $6 billion in capital is raised, and may reduce it even further to just 10% by September. The move by OFHEO to relax capital surplus requirements for Fannie Mae essentially enables the mortgage-finance company to buy more mortgages and take on even more risk.

"The lowering of the prudential cushion was appropriate in line with the company’s progress and with the need to maintain safe and sound operations," OFHEO Director James Lockhart said in a statement, presumably to guard against not being able to maintain a straight face. For if there is one thing we know with absolute certainty, it is this: Fannie Mae is the antithesis


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Phil's Favorites

Talk of Bloodless Coup in Donetsk; European Countries Resent US Tone; Low Hopes for Peace Talks; War, What Is It Good For?

Courtesy of Mish.

Another bloodless coup in Ukraine is underway. This time, it's in the Donetsk region.

Should it come to that ending, it would be the third Ukrainian coup in a matter of months (counting the ouster of former president Viktor Yanukovych followed by the coup in Crimea).

Talk of Bloodless, Passive Coup in Donetsk

Please consider Kiev’s Weak Grip on East Falters.
Moscow is only an hour ahead of Donetsk but the inflammatory descriptions emanating from Russia over events in eastern Ukraine on Wednesday were much further distanced from reality.

As President Vladimir Putin was talking of his neighbouring country as being “on the brink of a civil war”, in Slavya...



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Zero Hedge

ROFL NATO!

Courtesy of ZeroHedge. View original post here.

Submitted by williambanzai7.

...

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Chart School

S&P 500 Snapshot: Rally Day Three, Back in the Green for 2014

Courtesy of Doug Short.

When the US market opened, Japan's Nikkei had closed with a massive 3.01% gain and the EURO STOXX 50 was in rally mode, ultimately to log a 1.54% advance. The Federal Reserve had published better-than-forecast March Industrial Production data with a substantial upward revision to the February numbers. The S&P 500 popped at the open and rose in a couple of waves through the day to its 1.05% intraday high at the closing bell. This was the third day of gains and enough to put the index back in the green year-to-date but still 1.51% off its record closing high set ten sessions ago on April 2nd.

The yield on the 10-year note finished at 2.65%, up 1 bp from Friday's close and 5 bps off the 2014 low of 2.60%.

Here is a snapshot of the past five sessions.

Volume for today's advance was above slightly below its 50-day moving average. The c...



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Option Review

Short Term Bearish Options Trade On Las Vegas Sands

A roughly quarter of a million dollar play in the 17Apr’14 expiry $74 strike put options on Las Vegas Sands Corp (Ticker: LVS) caught our eye this morning, as just one full trading session remains in the life of these contracts in this holiday-shortened week. Shares in LVS are up more than 2.0% on the session at $74.90 just before 11:30 am ET and off an earlier session high of $75.44. Like many of the relative outperformers of 2014, shares in LVS have declined substantially since the beginning of March, down around 15% at its current level from a high of $88.28. Recent sessions have been volatile in this and other high-beta names, and perhaps this environment is just what the morning’s put trader is looking for ahead of expiration.

...

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All About Trends

Mid-Day Update

Reminder: David is available to chat with Members, comments are found below each post.

Click here for the full report.




To learn more, sign up for David's free newsletter and receive the free report from All About Trends - "How To Outperform 90% Of Wall Street With Just $500 A Week." Tell David PSW sent you. - Ilene...

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Sabrient

What the Market Wants: Positive News and Stocks at Bargain Prices

Courtesy of David Brown, Sabrient Systems and Gradient Analytics

Last week’s market performance was nasty again, especially for the Small-cap Growth style/cap, down 4%.  Large-caps faired the best, losing only 2.7%.  That’s ugly and today’s market seemed likely to be uglier today with escalating tensions over the weekend in Ukraine. 

But once again, positive economic trumped the beating of the war drums. Retail Sales jumped up 1.1% over a projected 0.8% and last month’s tepid 0.3%, which was revised up to 0.7%.  While autos led, sales were up solidly overall.  Business inventories were about as expected with a positive tone.  Citigroup (C) handily beat estimates to add to the morning’s surprises.  As a result, the market was positive through most of the day, led by the DJI, up 0.91%, and the S&P 500, up 0.82%.  NASDAQ had a less...



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Digital Currencies

Facebook Takes Life Seriously and Moves To Create Its Own Virtual Currency, Increases UltraCoin Valuation Significantly

Courtesy of ZeroHedge. View original post here.

Submitted by Reggie Middleton.

The Financial Times reports:

[Facebook] The social network is only weeks away from obtaining regulatory approval in Ireland for a service that would allow its users to store money on Facebook and use it to pay and exchange money with others, according to several people involved in the process. 

The authorisation from Ireland’s central bank to become an “e-money” institution would allow ...



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OpTrader

Swing trading portfolio - week of April 14th 2014

Reminder: OpTrader is available to chat with Members, comments are found below each post.

This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here...



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Market Shadows

Winning: Defined as Losing Less

By Paul Price of Market Shadows

Market Shadows Excelled – With a 1.36% Weekly Decline

In the land of the blind, the one-eyed man is King. Our Virtual Value Porfolio took on that role this week as we lost a modest 1.36% of our value while the DJIA, S&P 500 and Nasdaq Composite dropped from 2.35% - 3.10%.

We remain bullish despite the shaky end of week sentiment. Our original $100,000 now totals $145,058 including our 2.8% cash reserve.

 ...



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Stock World Weekly

Stock World Weekly

Newsletter writers are available to chat with Members regarding topics presented in SWW, comments are found below each post.

Here is the new Stock World Weekly. Please sign in with your user name and password, or sign up for a free trial to Stock World Weekly. Click here. 

Chart by Paul Price.

...

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Promotions

See Live Demo Of This Google-Like Trade Algorithm

I just wanted to be sure you saw this.  There’s a ‘live’ training webinar this Thursday, March 27th at Noon or 9:00 pm ET.

If GOOGLE, the NSA, and Steve Jobs all got together in a room with the task of building a tremendously accurate trading algorithm… it wouldn’t just be any ordinary system… it’d be the greatest trading algorithm in the world.

Well, I hate to break it to you though… they never got around to building it, but my friends at Market Tamer did.

Follow this link to register for their training webinar where they’ll demonstrate the tested and proven Algorithm powered by the same technological principles that have made GOOGLE the #1 search engine on the planet!

And get this…had you done nothing b...



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Pharmboy

Here We Go Again - Pharma & Biotechs 2014

Reminder: Pharmboy is available to chat with Members, comments are found below each post.

Ladies and Gentlemen, hobos and tramps,
Cross-eyed mosquitoes, and Bow-legged ants,
I come before you, To stand behind you,
To tell you something, I know nothing about.

And so the circus begins in Union Square, San Francisco for this weeks JP Morgan Healthcare Conference.  Will the momentum from 2013, which carried the S&P Spider Biotech ETF to all time highs, carry on in 2014?  The Biotech ETF beat the S&P by better than 3 points.

As I noted in my previous post, Biotechs Galore - IPOs and More, biotechs were rushing to IPOs so that venture capitalists could unwind their holdings (funds are usually 5-7 years), as well as take advantage of the opportune moment...



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FeedTheBull - Top Stock market and Finance Sites



About Phil:

Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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About Ilene:

Ilene is editor and affiliate program coordinator for PSW. She manages the site market shadows, archives, more. Contact Ilene to learn about our affiliate and content sharing programs.

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