by Phil Davis - July 25th, 2014 7:55 am
If you read yesterday's post and took action on our trade idea to short Oil Futures (/CL) at the $103 line, then you were able to pocket $1,000 PER CONTRACT in just 3 hours. In the Morning post (delivered to our Members via Email at 8:35 am), the trade idea was:
"We're still shorting Oil (/CL) Futures at that $103 line and we hit it again this morning and, hopefully, we'll get a nice pullback around 10:30 – after the natural gas report shows a nice build."
That's about on par for our Futures trading as we demonstrated LIVE in Tuesday's Live Trading Webinar $300 of Futures profits in less than an hour (replay available here). We'll be doing more Futures Webinars for our Members aside from our usual Tuesday Live Trading Webcasts (sign up for your Membership here so you don't miss our trade ideas).
How to trade the Futures is one of the many things we learn at Philstockworld – another thing is PATIENCE! Patience has kept us from chasing this rally as we once again top out the market. On Tuesday we took a nice, speculative bullish trade (but did not officially add it to our Portfolios) - just in case we do have a breakout – but, otherwise, we've been working on our downside protection.
We are FUNDAMENTAL traders who just so happen to use Options and Futures for leverage and hedging – simply because they are convenient and profitable instruments when used correctly. What we teach is not all that complicated – but it isn't easy either. That's why not many people trade Options and Futures – it requires discipline and takes time and practice to master – not really the kind of thing our education system prepares our students for these days….
YOU, however, should not be intimidated away from making money. Our basic concepts are VERY SIMPLE and the concepts are explained in quick videos like "How To Buy a Stock for a 15-20% Discount" and "The Secret to Consistent 20-40% Annual Returns" – something we are demonstrating this year in the 5 Virtual Portfolios we track for our Members.
by Phil Davis - July 22nd, 2014 8:13 am
How would you like to make $10,000?
If the Russell can finish this option period (24 days) 2.5% higher, at 1,178 or higher, we can turn net $1,000 or less cash into $10,000 for you. After all, if the Fed is going to give away money – why shouldn't we get our share?
I'll preface this by saying that our Members are already long on Russell Futures at the 1,150 line, as we made that call in our live Member Chat Room (become a Member here) earlier this morning.
If the market is going to remain bullet-proof (and missile-proof too, it seems) then the RUT is now the lagging index and we can construct a play to take advantage of it breaking back up by making a play on TNA, the 3x Ultra-Long Russell ETF.
Very simply, if we buy the August $72.50 calls for $3.45 and we sell the Aug $76.50 calls for $1.70, we have a net cost of $1.75 on the $4 spread that's $4.64 out of the money (at goal) and that's 6.4% out of the money so, to be safe, we'll need a 2.5% gain on the Russell, from 1,150 to 1,178.75 to make the full $4. 25 contracts at $4 = $10,000 so we can work with that.
But what about the cost of the 25 contracts (at $1.70 x 2,500, that's $4,250)? Well, there's a couple of ways to offset that. One way is to sell 25 TNA Aug $65 puts for $1.70 to offset the cost. The danger there is, if the Russell goes down 2.5% (to 1,121) or lower, we'll be assigned 2,500 shares of TNA for $65 ($162,500) – that could be unpleasant.
Instead, we can commit to being long TNA at $45 in 2016 by selling just 5 2016 $45 puts for $8, and that raises $4,000 and commits us to owning "just" 500 shares of TNA at $45 per share ($22,500).
Now, if you don't want to be bullish on the Russell when TNA is down 37% (Russell 1,006), then why are you long on it at 1,150?
by Phil Davis - July 21st, 2014 8:31 am
We all go down for a piece of the moment
Watch another burn to the death to the core
And the roadshow thrills pack the freaks and the phonies
Sing: now is now, yeah! – Rob Zombie
There is just no way to win betting against this market!
Well, actually, there is one way and that's betting that each pop is nonsense and tends to have a subsequent pullback intra-day but, long-term, the cumulative effect of all that low-volume pumping has been a rousing success, to say the least.
As you can see from Andy Thrasher's S&P chart, there has been some amazing underlying deterioration since the July 4th weekend with the Advance/Decline line falling back to trend and stocks above their 200-Day Moving Average dropping 15% in 3 weeks. Stocks above the 200 DMA is a fantastic leading indicator for downside move – ignore it at your own risk.
People are panicking into bonds, dropping the 10-Year Yield 20%, from 3.1% to 2.45% this year but it doesn't matter because Central Banksters are pumping SO MUCH MONEY into the Global Markets that there's enough to buy all asset classes simultaneously – something that is unprecedented in Financial History – what could go wrong?
Well, one thing that could go wrong is you putting your money into Mutual Funds. As it turns out, in an S&P study of actively managed Mutual Funds, only 2 (two) out of 2,862 actually beat the S&P over ANY of the fund's lifetimes (limited to 12 months or longer).
That's even worse than the average performace of hedge funds, which only averaged a 0.59% annual loss when compared to just putting your money directly into the S&P.
This dovetails with a conversation we were having this weekend in our Member Chat Room, where I identified 4 trade ideas for a $50,000 Portfolio that only used 1/4 of the buying power to generate $365,512 in projected profits over the next 15 years using CONSERVATIVE options strategies designed to MATCH the S&P, not beat it.…
by Phil Davis - July 18th, 2014 8:15 am
Can we possibly be this jaded?
Even on Wall Street, where ruining the lives of the middle class is a sporting event, you would think that the tragic death of 298 people being shot down in an airplane would AT LEAST cause the markets to pause for more than a few hours. That's not what the Futures would have you believe – they are moving up this morning (7:30) as if shooting planes out of the sky isn't a reason not to trade stocks at their all-time highs.
While our long trade ideas from yesterday's morning post worked out fantastically, we were very fortunately NOT GREEDY at 10:03, when I said to our Members:
Philly Fed up huge (like NY), 23.9 vs 10 expected though 17.8 last month means they were just being too pessimistic. That should give us a nice pop but I'd take those Futures profits off this run!
As you can see from Dave Fry's SPY chart, our timing was near perfect as things turned sour very quickly. That then worked out well for our oil shorts, which went from the $103 conviction target I laid out in the morning post (subscribe here to get them pre-market every day) back below $102, where I said to our Members at 11:34:
There goes $102 on oil! Congrats to the players! That's the new stop line, of course.
That was a very quick $1,000 PER CONTRACT profit on /CL and, right after that, we got the plane crash news so we increased our hedges in our Short-Term Portfolio and we added BA July $128 puts at $1.25 (because it was a BA plane involved in the incident) and they finished the day at $2.18 (up 74%) as well as DAL Aug $37 puts at $1.50, which were already $1.92 by the day's end (up 28%). I don't like to take advantage of tragedies like that – but it was the fastest way to add good protection to our portfolios.
by Phil Davis - July 10th, 2014 8:31 am
That's how much money yesterday's Alert to Members made as of this morning as the Russell Futures crossed our goal line at 1,150. The alert went out at 9:52 am and we had all day to enter as the Russell drifted along that line until, finally, we got our big drop this morning.
My call in the morning was:
I still like the /TF play below the 1,170 line – that's got $2,000 written all over it (down to 1,150).
We actually oveshot that mark with the bottom coming at 1,140, which is our -5% line on the Big Chart, which uses our 5% Rule™ to make these amazingly profitable predictions. Those extra 10 points were ANOTHER $1,000 per contract for those who hung on past our goaaaaalllllll!!!
Even if you are a free reader, you got your money's worth – as we gave away, FOR FREE, our TZA Aug $14 calls at .91 on Tuesday's post. Sure it was 50% after our Members got the trade at .66 on July 3rd, but beggers can't be choosers, right? Still, even if you only began following our hedge at .91, those calls are now $1.50 in the money, so up another 50% this morning for a $1,180 profit on the 20 we suggested in just two days!
That's just one of the many ways we teach our Members to make money by hedging at PSW (you can subcribe here) we expected this sell-off (see last two week's worth of posts) and positioned for it with trades like:
- DXD Aug $25/27 bull call spread (6/27 in main post) at net 0.60, now $1.15 – up 91%
- TZA Aug $15s calls (6/27 at 11:26) at .70, selling Jan $12 puts for $1 for net .30 credit, now 0.45 – up .75 (250%)
- 40 SQQQ Aug $40/44 bull call spreads (1/3 at 11:29) at $1.15 ($4,600), now $2.15 – up $4,000 (86%)
- 20 QQQ July $97 puts (1/7 at 9:35) at $1.59 ($3,180), now $3 ($6,000) – up $2,820 (88%)
by Phil Davis - May 30th, 2014 8:21 am
I hurt myself today
To see if I still feel
I focus on the pain
The only thing that's real – Nine Inch Nails
Were we wrong to cash out?
It's hard to feel bad about taking a 19% profit off the table after just 6 months (in our $500,000 Long-Term Portfolio) but we had another low-volume pump-job yesterday that sent some of the positions we closed up sharply and left us regretting our timing – just a little.
Still, the time to sell your positions is when other people are buying, not while everyone is panicking. We got great exit prices and, on the whole, it was fairly stress-free. S&P 1,920 was our predicted top and we pulled the trigger to take the money and run at 1,910 because, as experience has taught us – it doesn't pay to be greedy!
Last week and this week, I laid out my case for why the economy is not as good as it seems and certainly not good enough to be paying all-time highs for stocks. As you can see from the chart on the left – I'm certainly not the only one who thinks so as the "smart money" has flown out of the market this year, taking advantage of each record high to sell, Sell, SELL!!!
We were a little more patient, we moved our Conservative Income Portfolio ($500,000) to cash at the end of March and avoided the April sell-off and have since been buying bargain stocks in that portfolio. We had left our more aggressive Long-Term Portfolio ($500,000) on the table but this last leg of the rally left it up a ridiculous 19% for the year – and that's halfway to our best-case goal so it's a good time to take a break, step back, and see how the market handles early June.
It's not like we can't find anything to do with our cash. In additions to our usual Futures trading, we still have our Short-Term ($100,000), Butterfly ($100,000) and $25,000 Portfolios to play with and, since Wednesday…
by Phil Davis - May 30th, 2012 7:57 am
If it wasn't for bad news, Europe would have no news at all.
The funniest thing about watching Europe implode in a sea of incompetence is that we're actually no different over here – it's just not our time yet. That doesn't stop the punditocracy from pontificating on all the ills of the European Union, as if America will be immune to California as their economy ($361Bn in debt) slips into the ocean.
Actually Greece is not the disaster du jour in Europe this morning – it's Spain (who were downgraded yesterday), whose junk-rated 10-year notes are now costing them 6.65% – back to pre-LTRO levels already, after just 90 days of being "cured." Italy is right behind them, only able to sell 90% of the bonds they auctioned off and even those went for 5.66% on the 5-year notes and 6.03% on the 10-years.
Meanwhile, German yields hit record lows at 1.318% so how, exactly, does it benefit Germany to "fix" this situation when the fix would be for Germany to go back to paying 3% while Spain and Italy go back to paying 4%? It's not like Spain or Italy will ever be able to pay back the money anyway so all we're really doing is costing Germany money to PRETEND things are fixed – again. When will this madness end?
Extending and pretending is exactly what is being planned as the European Commission is prepared to as European Union finance ministers to give Spain an additional year to meet the budget deficit target of 3%, according to a report in the online edition of El Pais this morning. The newspaper said it had obtained a rough draft of the copy of the economic strategy for the euro zone set to be delivered by the Commission on Wednesday. Media reports said it will issue specific recommendations for each of the 27 countries. El Pais said the EC wants to give Spain until 2014 to reach the budget deficit target of 3%, in light of its economic problems, but will also include draft recommendations on pensions, the financial system, taxes and labor reforms.
Thank goodness – that will fix everything, I'm sure!
Meanwhile, on the US side, we're getting worry fatigue and we're ready to rally – as was made clear by yesterday's bullish action which took us over our…
by Phil Davis - April 6th, 2012 8:45 am
NOW things are getting interesting!
Who wants a market that goes up and up and up – where's the sport? Even the Nasdaq finally blew it's 15-week winning streak and that helped us decide to stay pretty bearish going into yesterday's close. This morning we went over the news and the week's data to position ourselves for the Futures and my conclusion to Members in our special 4:03 am Alert was:
Next week we get the BBook, PPI and CPI but the focus will be on earnings and AA is not likely to get us off to a good start so I simply don't see anything in particular to be bullish about at the moment.
The point I had been making (with many charts and graphs) was that it didn't matter if we added even 250,000 jobs – it still isn't enough to begin to fill in the hole in any meaningful way and, even more important, the QUALITY of jobs we have been adding is TERRIBLE!
It doesn't matter if you give everyone a job if they are only minimum wage jobs. We need our consumers to have an income to spend and aside from inflation (real inflation, not the Fed's BS numbers) eating into their buying power, when someone loses a $50,000 job and replaces it with a $35,000 job – that's NOT an improving economy – not for the long run, anyway.
Of course the stock market will like it, at first – as lower wages paid for the same job = greater Corporate Profits but that only works as long as there are people outside your country who have money to buy your goods.
As we noted just yesterday with the Retail Reports, the high-end stores are doing very well as the top 10% is doing well but those serving the bottom 90% are struggling because, clearly, these people are running out of money. While the market has been content to "ignore and soar" during this gathering storm, now we begin to see the size of the wave that's coming in and it's starting to look scary indeed…
8:30 Update: An anemic 120,000 Jobs added in March! That's about 1/2 of what was expected by Economorons, who can't even get a handle on a major, critical number like Payrolls – how scary is that? So many of…
by Phil Davis - March 23rd, 2012 8:28 am
No one told us markets could go down? This is an outrage, I demand an investigation – TURN THOSE MACHINES BACK ON!!!
Has it already been a week since I said "Stop the Rally, We Want to Get Off"? As I noted in that post, we began our list of 12 Long Put Plays for Members on Thursday of last week (near the end of what I called "A Weak Week of Denial") and some have already doubled while others, like PCLN, have gotten even cheaper, which only makes us love them more…
I concluded that this rally was fake, Fake, FAKE and gave my reasons on Friday so no point in going over them again – now we're just watching and waiting to see what sticks as we haven't actually done a lot of technical damage (see Dave Fry's chart) – Yet!
Although we were TRYING to get bullish on Monday, we did so only after setting more aggressive targets in our Weekend Review of the 5% Rule (see post for details and levels) and by 10:09 on Monday, our first trade idea in chat was the very bearish TZA spread that I featured again in Tuesday's post, which was the April $17/18 bull call spread at .42, selling the April $17 puts for $1 for a .58 credit. TZA finished at $18.39 yesterday and the spread is now .54 but the short puts are down to .65 for a net gain of .47, which is 81% in 3 days and a good way to offset the 2.3% drop in the Russell – isn't leverage fun?
What was not fun is what happened to people who trusted Credit Suisse to run an honest game with their TVIX instrument. As noted by ETF Digest's David Gillie, an ETN is an unsecured, unsubordinated debt security with significant basis on the credit rating of the issuer. Although ETNs may be named to indicate tracking certain futures markets or indices, due to the fact that their holdings are credit notes rather than tangible assets, such as ETFs, their price becomes largely supply and demand based rather than based on underlying holdings. As Kid Dynamite points out – it does say right in the TVIX prospectus:
“The long term expected value of your ETNs is
by Phil Davis - December 5th, 2011 7:49 am
What a first month we had!
Oddly enough, when I was last on BNN (I’ll be on again this afternoon), we were just about to start our newest virtual portfolio after closing down this year’s virtual $25,000 Portfolio early as we were way past goal, over $130,000 on the 20th (up 420%). As that portfolio went so well, we decided to play a "White Christmas Portfolio" – as I explained on TV on Oct 24th, which aimed to practice making the same kind of small, aggressive trades, with the aim of turning $15,000 on October 24th into $25,000 by Christmas (66%).
In fact, I gave out our first trade idea, GNW, which was $6.30 during my BNN interview, now $6.47 (up 3%). We discussed the Jan $5/7.50 bull call spread for $1.10, which is now $1.40 and that’s up 27% but, more importantly, your gain playing the option INSTEAD of the stock is .30, vs .17 – that’s almost 100% better gain with NO MORE RISK than buying the stock while requiring less than 20% of the cash commitment (and no margin on just the bullish spread).
Of course, our actual WCP trade idea had another component deemed too confusing for TV – we also sold the short Dec $6 puts for .85 as an offset, which lowered the cash cost of the trade to .35 and those puts are now .20, up another .65 on their own and the net of the entire trade has gone from .35 to $1.20, which is a 242% gain on net. Of course, none of that matters – what matters is that you put a net of $350 into the trade (10 contracts) plus about $600 in margin on the short puts on October 24th and you can cash that trade out today (we elected to cover it on Friday) for $1,200 and that is clearly 242% more cash than you started with on October 24th – the margin requirement is gone, but the cash remains!
With that kind of success on our first trade, it’s not too surprising that the whole portfolio has been doing well. We left off last Wednesday with a balance of $35,540 – far better than we expected to do, obviously, in our first month (up 137%) so we decided it was prudent to get back to cash as we were "too bullish".…