Wheeeee – this is fun!
Yesterday morning, right in the morning post (that you can get every day for $3 by subscribing here) we decided to go long on oil above $47.50 and even after the open, it was still around $47.70 and, I said (at 7:49): "…we expect at least a $1 bounce to $48.50 and that WILL PAY $1,000 per contract. So this is me, telling you how to make $1,000 per contract trading oil – not bad for a $1,000/year newsletter, right?" Remember – I can only tell you what the market is going to do and how to make money playing it – the rest is up to you!
There's something very satisfying about being able to tell 1M people how to make $1,000 in a day on a trade – it fulfills my Robin Hood tendencies – especially when we are sticking it to the manipulators – like we do on these oil trades!
Those of you who were motivated enough to join us for this week's Live Weekly Webinar (which was free yesterday as well) caught a nice $5 profit trading the Dow Futures but the reason we got out of that so quickly was that the Russell Futures made a much better short at 1,151.20 after we went over the Fed statement and decided it was, on the whole, bearish.
Now that we've had a nice little sell-off, we like seeing the Dollar rejected at 95 and we've flipped long for a bounce off these levels. I sent out a News Alert early this morning (6:12) and again, it was tweeted FOR FREE with our long levels as I concluded in the Alert:
So good opportunities to bounce into the weekend and we can take a bullish stab at 17,500 on /YM, 2,060 on /ES, 4,390 on /NQ, 1,140 on /TF and even 15,550 on /NKD, since that happens to be the -2.5% line, so it should be bouncy and you know the rules – when 3 cross over we go long on the 4th or 5th when they cross and if ANY of them fall back under – we stop out quickly. Simple rule that prevents you from losing much money and, once in a while, we catch a good one!
Probably have to wait for the Dollar to be done rallying – it should stop before 95.
I won't go into the why's here – you can read all about it in the Alert and much, much more if you have one of our Live Member Chat subscriptions, where we talk about these trade ideas all day.
I do want to note, however, that MOST of our trades are sensible, long-term trades that are well-hedged in Blue Chip type stocks but we never get to talk about those as they are BORING! They should be boring – that's where we put our retirement money. This short-term stuff is just a fun thing to do while we wait for our dividend checks.
For instance, one of our Institutional Trade Ideas on Apple (AAPL) is very playable today as the stock goes back to testing $96. At the moment, the chart is very ugly and the news cycle is against them and the analysts are having an anti-AAPL party and maybe they will go lower but we don't care because we see VALUE here at $95(ish) and, if it falls to $85, we see more value and we're happy to build on the trade but the basic plan is as follows:
- Buy 500 AAPL 2018 $85 calls for $19.25 ($962,500)
- Sell 500 AAPL 2018 $110 calls for $7.60 ($380,000)
- Sell 500 AAPL 2018 $80 puts for $7 ($350,000)
That's a net outlay of $232,500 and your obligation ends up being that, if AAPL is below $80 between now and 2018, you can be assigned 50,000 shares of the stock at $80, which would be $4M + the $232,500 cash outlay would net you into AAPL for $84.65, which is a 12.5% discount to the current price.
On the plus side, all AAPL has to do is get to $110 (up 12.5%) by Jan, 2018 and you will get back $1.25M for a $1,017,500 return on cash (437%). Obviously, institutional traders aren't worried about the margin ($400,000 in an ordinary margin account) and, even if they were – it's a very margin-efficient trade. You don't have to trade 500 contracts, you can trade 50 or 5 or 1 – the returns are the same percentage either way!
Now, that trade is very similar to the AAPL trade we've had in our Long-Term Portfolio since the May dip and no, we don't discuss it much – why would we? That's the problem with having a well-hedged, long-term trading strategy – it's kind of dull. Not only do we have pretty much nothing to do on this trade in order to make $1M in 18 months but our margin of safety is such (-12.5% to break-even) that we can't even get worked up about a market correction. Another "problem" with our system is we use very little cash to make these trades – so we end up with tons of cash sitting in our portfolios that we tend to feel we should do SOMETHING with.
THAT is why we talk so much about short-term trades – it gives us something to do while waiting for our long-term trades to pan out but, never forget, those long-term trades are the VAST MAJORITY of our portfolios (see "Smart Portfolio Management: Part 1, Part 2 and Part 3" as well as "Using Stock Options to Pay Yourself 5% Monthly Dividends").
If I weren't running Philstockworld, I would just have the long-term trades and check in once a week or so from my boat, but I already retired at 40 for a couple of years and found it mind-numbingly dull, so here I am – watching the markets during the day and looking for some fun trades to make.
So let's keep our short-term trading in it's proper context. Even our Options Opportunity Portfolio, which began on Aug 8th last year with $100,000, has moved to mostly long-term trades now that we've made a bit of money and established a base. Short-term trading is GAMBLING and gambling is fun as long as you keep it under control but I see too many people looking for quick wins in choppy markets – that's a very bad combination!
That's why we like to do the Futures trades – we get in, we get out and we're back to cash and waiting for the next opportunity. If we can make $1,000 per contract in the morning and $1,000 per contract in the afternoon – what more do we need to be happy? Of course, we can't do that every day and we shouldn't try but that's what our long-term, sensible dividend trades are for – a nice, steady income! Short-term trading should be for fun money only.
