I've recently done exactly what Phil described. I upgraded my ability to trade the IRA acct. by transferring acct. from TDA to TOS. TDA would not allow spreads; TOS does. Neither will allow naked options. With spreads I am able to buy calls or puts several months out then sell front month calls or puts over and over. This allows me to collect premium, which is, of course, the goal. This wasn't an original idea. Phil put me onto it. Since the transfer I've substantially increased my performance in the IRA!
The best play I made this year was PSW. Will renew my membership tonight. Looking for the same trading profit percentages next year, but will have an advantage from the compounding, and much better skills acquired from you and the many skilled PSW co-pilots. Thanks!
A truly great website with a lot of information for investors. Whether you are a novice, seasoned, or a professional there is a lot to be gained about stock options and options trading from this very informative website.
Phil…..You have absolutely NAILED IT! This is not a bull market, nor is it a bear market. It is a Rangeish market, and it's going to stay that way for a long time (the latter is my prediction. I love the word. What I love more is the fact that I've found someone with some investing intelligence greater than mine who can assist me in playing this type of market. Your description today of how it's playing out is right on. I predict some media ‘guru' will steal your word and your description within the next few days and we'll all get to read about what ‘they' discovered about this market. Thanks Phil!
Boring trading – Phil/ Thanks to PSW, my yearly covered-writes are on pace for 15%. Add the long puts and well over 20%… and I look at it once a day and never lose sleep over it. Actually doing better than my trading account at this point (Thanks, summer 2013)
Anyway, the point is that anyone with enough money would be wise to do the 20% – 40% stuff and do trading as a hobby…
This is my first month here. Today was a money train with futures. I gained 7500 USD with KC, RB, CL, NG.
I took RB almost every direction up and down. And I only used 1 contract or maximum 2.
Thank you. I think it was a good investment to subscribe…
Phil, I just wanted to say thanks for being there. The world needs more of you. Your site continues to positively change my life daily.
Thanks for all the work you put into this site. I have looked at a few other option advisory or "mentoring" services this year, but no one offers even a fraction of the content or the level of services you provide at PSW!
Phil Thank you very much, I appreciate your help and wisdom.
Phil thanks. You never cease to amaze me with your thoughtful perspective on a myriad of different issues and challenges. It's kind of an embarrassment of riches since I joined this board a few years back. The ride from Dow 9,000 or was it 8,000? up to Dow 15,000 seems hard to believe. I wish I could have it all over again, except with the capital I have now.
Thank you Nantucket. It is hard to be a complete beginner in the market with this complicated, fast moving, and very advanced group. Phil is the Great One, but the membership is absolutely amazing! Had I known this ahead I would probably log in as "awe struck" everyday.
I have been very fortunate over the years as an investor. Last year was on of my best in terms of percentage gains. I have to attribute much of this success to my membership in PSW which gave me the best education available anywhere when it comes to the understanding of option trading , discipline and general trading strategies. I will be forever grateful to Phil and the many "highly skilled" traders that have offered their advice.
WOW!!!!!!!!!!!! How will I ever do anything else in my life that will compare to the wild ride you get trading an ultra etf in the most volatile sector in the stock market the day before option expiration?
Thank you so much for the good daily news in review Phil. I love your commentary! It is such a breath of fresh air in the smog cluttered news networks.
Phil has some great insight into the market. He's given me a different perspective on the market and I know I'm a better trader/investor because of it.
I've been trading options since the late 80's and Phil is right. Unless you know what is going to happen (how can you, unless you have insider information), then do what the smart money does - be the house. Remember guys, we're allowed to sell options. If you're afraid to be short, then do a spread to limit your liability. When I think about the money I've made and lost on options, a good approximation is that I win 30% of the time when I do a straight buy; I win about 70% of the time when I do a spread; I win nearly 90% of the time when I sell naked.
I am an investor, not a trader. The information at Phil's World is top-notch and always relevant. It is great to see your website thriving.
It is amazing how much confidence you engender, Phil………..I knew the 1% a day trades and repeated often were possible as I had done in stretches, and I knew kill zone trades were also possible and 5% to 10% returns per month were very possible with practice, experience and smart risk management all without having to take a lot of risk, but I guess I was talking to the disbelievers and since I have dropped them into my 'why bother to try to explain it' file and come over to the dark side at PSW I feel soooo much more content not only with the returns, but with the company and a comments and the obvious opportunity to learn and learn and learn some more.
It all helps the mental and emotional discipline of the trading too. So thanks again.
Kudos on the POT puts! I studied the charts last night and you couldn't have hit the inflection points more perfectly. Since there are often many head fakes in the charts, that was very well done. I know they can't all work this well, but that was an extra unexpected bonus yesterday.
I've been trading/investing since the early 80's (my dad started me out young). I've had seven figure accounts (in the past) and I've done lots of trading, so I can say that I'm a well seasoned investor. Phil is the real deal. His trades make sense and his strategy is sound. He sees things that others miss and he's one of the best at finding price anomalies. When he makes a mistake, he has an exit strategy already planned. He hedges very well and he has an instict which tells him to go to cash or to be all in.
BTW Phil, I wanted to relate a conversation I had with my business partner yesterday. I told him that I have been much more relaxed about my investments ever since I joined your site. It's funny how a 15-20% cushion does to your nerves. My returns have increased dramatically and my risk diminished. Many thanks for the guidance and patience. Good thing I am doing better financially as you might have increased my life expectancy as well!
Phil, thanks for the call on the SKF puts earlier, I'm riding that horsie downhill right now, giddyup!
Phil – Great calls yesterday, you were in top form. As I was reading your postings, I had hindsight of what the day brought. The calls were uncanny!
Tesla et. al. – I've spent many months getting hammered shorting overvalued Momos, until, finally, I internalized Phil's message. Play small; give yourself plenty of room to double/move up the [lack of value] chain in terms of price. Play short; take [Musk's, eg.] latest bleep and sell the spike for a short time frame, because his tweets always come to naught. I've been coining money doing it, I just watch that premium melt away with scarcely veiled amusement. Swinging for the fences is for suckers [me, for a long time]. Those little gains really add up — $2k per week of evaporated premium and you could actually buy a Tesla by the end of the year!!
I have been a "silent" member for the past year, and am 1,000 hours into the 10K hours of training (The last week is worth at least 500 hours!). Made lots of mistakes and misunderstood quite a few of Phil's calls, … some actually made money when reversed. The chat (Including the politics) is very engaging (Many great minds with international coverage), and a great companion, while nursing a trade gone wrong, through the night. The webinars (despite technical difficulties) are extremely useful. Thanks for your coaching … it has made me a consistently profitable trader, with a better understanding of what I do not know.
Phil, I wanted to thank you for all of your teaching, advice, and guidance. Because of you I don't chase, don't worry about missed chances, and play things much more selectively. Yesterday's /ES and /TF and today /CL are my first futures plays of the month. Thanks Phil. (Out of /TF and /ES yesterday with a nice gain)
Phil, you are the man. My positions in ABX and CLF are up massively this year, and doing very nicely with USO and UNG. TSR is another winner. Just waiting for the TSLA short now!
Rookie IRA Investor
New members – a word of advice: you should check out the track record of Phil's last few trades of the year, and what the return would be if you just rolled all the gains into the next years trade of the year. Remember – trade of the year is one he's virtually sure of, and he rarely misses on those
Fed days are fun! Just for grins I decided to see how much money I could make in two clicks. I bought DIA calls right when the surge started and then sold them the minute they hit my account. Net gain of 20% in 20 seconds. Can't do that very often…
Phil – Not that you dont usually, but you have DEFINITELY earned your money this week. THe recommendations have been PERFECT. Selling into the initial excitement (MULTIPLE TIMES), hedges, everything. Im reading this when I get home from work and want to cry b/c I cant trade at work! I might have to start getting up at 3 AM though to catch those trades bc youre killing it then too! May you and yours have a blessed weekend!
GOOG, NFLX and AAPL all bought last hour Friday. Sold into the excitement the first hour today for an average of 15% on the options. And lots of them. Thanks again Phil for teaching me so well.
Delta calls active as spread play indicates further bullish move
By Andrew Wilkinson
Overall option volume on Delta Air Lines Inc. (Ticker: DAL) by 11:45am ET on Monday of 50,000 contracts is already in line with the typical 10-day average reading. The stock is trading higher at $46.63 (+1.00%) and stands in the middle of a $10.00 range tracked during the past three months. Implied volatility on its options is about 2.5% higher at 31.4%. Much of today’s option activity results from a call spread involving 10,000 contracts at the 48.0 strike expiring in September, while the opposing leg involved the same-size sale at the 55.0 strike. At the individual strike prices it appears that implied volatility is slightly higher on the nearby strike and lower at the higher strike. The 7-point wide call spread appears to have taken place shortly after the market opened and at a net premium of $2.07. From the Strategy Performance Graph below we can see the turning points associated with the transaction. The breakeven for the trade expiring in 130-days is $50.07 while the maximum profit would occur should Delta’s share price reach $55.00, at which point the investor stands to max out the gain of $4.93 per contract.
Chart – Strategy performance plot for September 48/55 call spread
Ralph Lauren Put Options In Play Ahead Of Earnings
By Caitlin Duffy
Ralph Lauren shares are on the rise ahead of the company’s fourth-quarter earnings report on Wednesday. RL is up roughly $0.60 or 0.45% Monday morning to trade at $135.00, but the stock has had a rough first half of 2015, with shares down nearly 30% since reaching a 52-week high of $187.49 back on December 31, 2014. A ratio put spread initiated on the stock this morning suggests one trader may be positioning for shares to dip following the quarterly report midweek. It looks like the trader purchased 1,000 of the May 130.0 strike puts at a premium of $2.15 each and sold 2,000 of the May 125.0 strike puts at a premium of $0.85 apiece. Net premium paid for the position amounts to $0.45 per contract. The spread makes money in the event that shares in Ralph Lauren…
Not surprisingly, Apple options are active ahead of the company’s second-quarter earnings report after the bell on Monday. Shares are in rally mode, up almost 1.1% on the day at $130.06 on Thursday afternoon. Volume as of the time of this writing (3:30 pm ET) is approaching 786,000 contracts, which is approximately 105% of the average daily options volume traded on AAPL of around 750,000 contracts. Much of the volume changing hands during today’s session is in the Apr24 ’15 expiry weekly calls, which expire ahead of the company’s earnings release. But, a review of open interest on Apple reveals interesting patterns. Open interest is largest by far in 130.0 strike call options across all available expiries. There are approximately 505,000 open call positions at the 130.0 strike on Apple at present. Much of that open interest, roughly 20% of it, is in the regular May expiry 130.0 calls.
Traders exchanged more than one million option contracts on Apple (Ticker: AAPL) today amid a 1.2% dip in the price its shares. The 1.04 million contracts traded so far in the session compares to an average daily options volume for Apple over the past 10 days of roughly 750,000 contracts. The below snapshot displays the day’s option volume split out into call and put options across active strike prices. The chart includes monthly expiration options, while excluding weeklys. The 125.0 strike April 17 ’15 expiry calls and puts are most active today, but cease trading as markets close out another week this afternoon.
Implied volatility on the S&P 500 Index (Ticker: SPX) popped Friday morning amid a more than 1.0% decline in the index to the lowest level since April 9. The roughly 12% move higher in the reading of IV on SPX is perhaps the motivation for sellers of iron condors in the April 24 expiry options contracts. The trades were of different sizes and at different striking prices. One of the trades was constructed through the sale of the Apr 24 ’15 1875/1975 put spread against the sale of the Apr 24 ’15 2140/2210 call spread at a net premium of $0.55 per contract. The 1,500-lot trade makes maximum potential gains of approximately $82,500 as long as the SPX trades above 1975 and below 2140 at expiration next week. The smaller of the two condors yields a net credit of $0.50 per contract and involved the sale of the 1885/1985 put spread against the sale of the 2150/2210 call spread. The seller of the 500-lot iron condor stands ready to bank maximum possible profits of around $25,000 in the event that the index trades above 1985 and below 2150 at expiration. The chart below displays a one-week chart of the VIX, which rallied roughly 14% this morning to 14.44.
Option activity on Smith & Wesson Holding Corp. suggests some traders may have pulled the trigger on bullish positions on the firearms maker today. SWHC shares are soaring, up nearly 15% at $14.93 as of the time of this writing, after the company updated guidance for the fourth quarter and full fiscal 2015 year (ending April 30, 2015), stating that orders through the fiscal fourth quarter were stronger than previously expected. The company upped its guidance for the quarter, pushing shares in the name to the highest level since June 2014 and sparking heavier than usual options activity. With little more than 60 minutes remaining in the trading session, traders have pushed options volume on SWHC to more than 5,600 contracts as compared to the stock’s average daily options volume of around 400 contracts. The bulk of the activity is in call options, notably the May 15.0 strike contracts. Roughly 2,500 of the 15.0 strike calls have changed hands against zero open interest. Most of the volume appears to have been purchased at a premium of $0.45 each. Buyers of these options stand ready to profit at May expiration in the event that SWHC shares continue to rally, specifically if the stock tops an average breakeven price of $15.45. Smith & Wesson fourth-quarter earnings are estimated for release in the back-half of June.
Chart – SWHC 15.0 strike options most active, specifically May expiry calls
Heavy trading volume in shares of industrial conglomerate General Electric (Ticker: GE) caused its price to surge by 9.1% to $28.08 on Friday on news of further divestiture and a stock buyback program. Gains have accelerated in the afternoon following heavy option positioning earlier in the session. Some 225mm shares had traded by 2pm ET in comparison to typical volume of around 30mm. The share price jumped straight through the June high of $27.53 after call buying in the June series hinted of further gains. Some 49,000 call options have changed hands on Friday at the 29.0 strike price at an average premium of about 40-cents. The breakeven price for buyers of $29.40 implies a further gain for its shares of 4.7%, where the company last traded in April 2008. More recently, the stock peaked in December 2013 at $28.13 before arresting its decline at $23.41 in January. Before trading on Friday, investors held less than 3,000 open positions at the 29.0 strike for June expiration.
Chart – June 29 strike calls were the most actively traded contract as General Electric gains 9.1%
Bullish trades abound in Cypress Semiconductor options today, most notably a massive bull call spread initiated in the July expiry contracts. One strategist appears to have purchased 30,000 of the Jul 16.0 strike calls at a premium of $0.89 each and sold the same number of Jul 19.0 strike calls at a premium of $0.22 apiece. Net premium paid to put on the spread amounts to $0.67 per contract, thus establishing a breakeven share price of $16.67 on the trade. Cypress shares reached a 52-week high of $16.25 back on Friday, March 13th, and would need to rally 4.6% over the current level to exceed the breakeven point of $16.25. The spread generates maximum potential profits of $2.33 per contract in the event that CY shares surge more than 20% in the next four months to reach $19.00 by July expiration. Shares in Cypress are down 1.0% at $15.54 as of the time of this writing.
Chart – Three-month chart of CY (magenta line: b/e point, blue line: max profit)
With stories and analysis pointing to fewer and fewer physical places to store crude oil coupled at the hip with an ever-strengthening dollar, it’s hard to get optimistic on the outlook for energy prices. The cost of a barrel of WTI for April delivery has fallen again ahead of the Fed’s March meeting by 3.4% to $43.33 helping drive down shares in the United States Oil Fund (Ticker: USO) to a fresh 52-week low.
Since the start of March the price of USO shares have fallen from above $19.00 to $16.18 (-15%). Option traders posturing for even lower oil prices appear to be riding the crest of a wave. The number of open positions in bearish strike prices from 16.0-19.0 in the USO has increased by 44% to 1.33 million in the past two weeks and compares to bullish open interest at the same strikes of 370,600 contracts. Bears have built positions of 300,000 at the 15.0, 16.0 and 17.0 strikes as the slide in crude oil prices has picked-up its pace. Since the rebound ran out of steam on March 4, implied volatility in the April series has jumped from 42% to 54% today. In the options market, that implies traders currently expect the USO to land within a price range of $14.90 and $18.10. By the same token, May expiration crude prices, where implied volatility is running at 57%, currently dictate a price range covered by $37.75 and $50.25 for the cost of a barrel of crude.
Chart – Bearish USO put option open interest has surged to 1.3 million at strikes from 15.0 to 19.0
Shares in Lumber Liquidators (Ticker: LL) continue to rebound and last traded higher by 11.2% at $36.40 following the company’s investor call on Thursday. Implied volatility on its options has fallen by 12.1% to 87.7% having reached 127% as a result of the recent scandal. Option volume of 61,000 contracts is evenly split between calls and puts as implied volatility at higher strikes continues to soften faster than at lower strikes. The following chart from the IB Volatility Lab compares implied volatility readings in the April 17 expiration across available strikes with the volatility structure of one week ago. Under normal conditions, the cost of a 10% out-of-the-money call should be around the same as a 10% out-of-the-money put. Last week, downside volatility of 99.2% was 3.2-points higher than upside volatility. As the entire volatility structure softens in response to a rising share price, option traders are softening the volatility level at higher strike prices, forcing the difference to widen to 4.2-points. As the chart shows, downside volatility remains elevated at increasingly lower strike prices.
Chart – Time lapse skew on Lumber Liquidators options
ADR shares in Brazil’s state-controlled oil and gas giant Petrobras (Ticker: PBR) continue to jump around following the recent announcement that investigations were underway connecting politicians with payouts from company officials. How that goes, nobody knows. The revelation is further bad news for investors who have seen PBR shares slump in the last six months from almost $21.00 to $5.28 on Wednesday. Around a month ago, when the shares stood at $6.45, investors plowed into bearish options in a big way, taking on a position of 107,000 puts expiring in July. At the time the positions were made, shares in Petrobras would have needed to fall by a further 22% to land at the 5.0 strike price. Option implied volatility that day at 67% has increased today to 72% as uncertainty grows. Meanwhile, the options have gained in value, boosted by rising volatility and stand today at 71-cents. We figure that without the volatility boost, the options would be worth 8-cents less. Still, that’s a healthy gain from the initial 42-cent premium paid back in February.
Chart – Despite a rebound, implied volatility continues to reflect uncertainty
The Swing Low continues to play out with small gains in lead markets. There is still resistance in play, but this supply is been consumed by the day. Trading volume was light too.
The S&P is at resistance from the March swing low, but today's gain did little to get past this. Stochastics are bullish, but other technicals are negative and the last two days of didn't change this. While bears may think there is an angle to work, the most likely outcome is for a gain which returns a challenge of 2,400.
The S&P 500, Banks, Small Caps and Transportation indices continue to climb higher, as the long-term trend remains up. The two charts below, look at performance over the past month and how each index is testing long-term breakout levels.
The chart below looks at how the above mentioned indices have performed over the past 30-days.
CLICK ON CHART TO ENLARGE
These key markets are a little soft the past 30-days. The Power of the Pattern below looks at where this softness is taking pl...
You are thinking about selling your home. A similar place nearby sells for more than you thought it would. You list your home. This is how the housing market is supposed to work. As a result, over time, pric...
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Having rebounded rapidly from the ETF-decision disappointment, Bitcoin suffered another major setback overnight as Chinese regulators are circulating new guidelines that, if enacted, would require exchanges to verify the identity of clients and adhere to banking regulations.
A New York startup called Chainalysis estimated that roughly $2 billion of bitcoin moved out of China in 2016.
As The Wall Street Journal reports, the move to regulate bitcoin exchanges brings assurance that Chinese authorities will tolerate some level of trading, after months of uncertainty. A draft of the guidelines also indicates th...
ISPs will soon be able to sell your most private data without your consent.
As expected, Republicans in Congress have begun the process of rolling back the FCC's broadband privacy rules which prevent excessive surveillance. Arizona Republican Jeff Flake introduced a resolution to scrub the rules, using Congress' powers to invalidate recently-approved federal regulations. Reuters reports that the move has broad support, with 34 other names throwing their weight behind the res...
Phil has a chapter in a newly-released eBook that we think you’ll enjoy.
In My Top Strategies for 2017, Phil's chapter is Secret Santa’s Inflation Hedges for 2017.
This chapter isn’t about risk or leverage. Phil present a few smart, practical ideas you can use as a hedge against inflation as well as hedging strategies designed to assist you in staying ahead of the markets.
Note: The material presented in this commentary is provided for
informational purposes only and is based upon information that is
considered to be reliable. However, neither PSW Investments, LLC d/b/a PhilStockWorld (PSW)
nor its affiliates
warrant its completeness, accuracy or adequacy and it should not be relied upon as such. Neither PSW nor its affiliates are responsible for any errors or omissions or for results obtained from the use of this information. Past performance, including the tracking of virtual trades and portfolios for educational purposes, is not necessarily indicative of future results. Neither Phil, Optrader, or anyone related to PSW is a registered financial adviser and they may hold positions in the stocks mentioned, which may change at any time without notice. Do not buy or sell based on anything that is written here, the risk of loss in trading is great.
This material is not intended as an offer or solicitation for the purchase or sale of any security or other financial instrument. Securities or other financial instruments mentioned in this material are not suitable for all investors. Any opinions expressed herein are given in good faith, are subject to change without notice, and are only intended at the moment of their issue as conditions quickly change. The information contained herein does not constitute advice on the tax consequences of making any particular investment decision. This material does not take into account your particular investment objectives, financial situations or needs and is not intended as a recommendation to you of any particular securities, financial instruments or strategies. Before investing, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.
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