Phil's Stock World, Stock Options Trading & Information

Don’t expect to get rich quick here, but you can get easy 30 - 50 % per year, just by buying good stocks at discount (as we often discuss), selling monthly premiums of calls and puts.

- Tchayipov, Nov 25, 2009

Phil - Moved today to send kudos. You're in my top 5 to see/read daily. I do not trade... but as former econ-finance adjunct faculty near Stanford U. I give you lots of attaboys.... and provide your links to many to spread some understanding of the mess we are in. Best to you and yours,

- HJ Kobbeman, Sep 4, 2009

Phil/Everyone here/Thank you - What everyone here with their insightful comments (including yourself) has helped me with is that I’m greatly increasing my ability to trade more psychologically neutral, although I’ve got a ways to go. Two years ago I’d wake up early and my heart would race if futures weren’t pointing exactly how I wanted… I’ve noticed an exponential leap in my discipline skills especially over this past two weeks. The old me would have ran with that trade for profits without even asking. Now I know that there are ALWAYS more trades and that I have PLENTY of options to turn a bad trade even. Also, it’s more logical and less emotionally draining which lets me focus my faculties on my wife, college, my job, and studying for the ol’ Series 7. Would it be safe to say that one of the most important skills to develop is the ability to adjust? I’d love to get to the point where I can look at a bracket and know, for example, what I need to sell for cover in what month in order to get my desired results. Both COF and my past DMM venture have been excellent learning experiences. Thanks, everyone. I look forward to further lessons.

- Skasiah, Aug 25, 2009

AMZN ... thanks Phil; boy did they run a squeeze on everyone there ... made me sweat ... scaling helped! I think AMZN has an 85 handle tomorrow ... maybe lower.

- Cap, Jul 29, 2009

Against all prognostics (bears) Phil pointed in the morning the correct direction, and in middle of day he pointed the possible move to 2.5% Incredible… I’m starting to serious believe on the program trading and the human nature behind the programing those \"trade-bots\".

- Spider, Jul 14, 2009

I have followed along with your commentary and alerts and have been flabbergasted at your quick analytical skills and your journalistic skills to explain it clearly. In a little over three weeks I have cleared almost 1000.00 dollars and got an intensive education at the same time. I would like to immediately upgrade my membership.

- TokyoLife, Apr 23, 2009

Great calls this week!

- SNS1, Feb 6, 2009

Peter D: great write-up for Short Strangles, Part 1, looking forward to Part 2, particularly the adjustment part.

- RMM, Jan 16, 2009

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?

- Matt1966, Jan 16, 2009

Praising PSW for enlightenment is a bit akin to praising the Pope for being holy. I've been reading PSW for about two months now and have learned more about investing technique and the world in general than I've learned from the books and seminars I've paid for. Thanks for the enlightenment, the education, the guidance and the truth, which is not a commodity these days, but a virtue in short supply.

- Andy Morris, Jan 15, 2009

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Posts Tagged ‘high frequency program trading’

More on the Massive Trading Volumes in Troubled Financial Stocks

by ilene - August 30th, 2009 1:55 pm

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Growing evidence, number trails and a culture of greed support a connection between high frequency program trading and market manipulation and, by all appearances, the pumping up of stocks of troubled financial companies… - Ilene

More on the Massive Trading Volumes in Troubled Financial Stocks

By Brett Steenbarger at TraderFeed

This story began with simple reader inquiries concerning a stock market indicator called TRIN and their perceptions that TRIN was "broken". For the uninitiated, TRIN assesses the proportion of stock exchange volume that is going to advancing stocks to the volume attributable to declining issues. When TRIN is below 1.0, it means that volume is relatively concentrated in rising shares; above 1.0 means that volume is concentrated in declining stocks.

TRIN appeared to be broken because we were getting huge swings in its values from moment to moment in the market. It would swing wildly, sometimes going far above 1.0 and sometimes far below. I pointed out that, from a purely mathematical vantage point, this could only occur if a disproportionate share of NYSE volume was occurring in one or a handful of stocks.

Further inquiry revealed that this was, indeed, the case: I found that, not only were the trading volumes of such stocks as C, AIG, FNM, and FRE elevated, as noted the by Big Picture blog, but that their composite volumes (their volumes traded across all exchanges) exceeded that of all other NYSE stock trading! Indeed, I discovered that the 20-day TRIN was at its lowest level since 2000 because volume was highly concentrated in rising stocks. This was not just unusually heavy volume; it was unusually heavy to the buy side.

Since this volume was directional–all of these stocks had made spectacular percentage gains–and because the highly unusual activity was unique to troubled financial firms (not stable companies such as GS and JPM), I surmised that something might be afoot: a systematic attempt to bolster the shares of taxpayer supported companies that–for political reasons–could not return to the bailout well. Why such an attempt? Perhaps to reimburse the largest shareholder of the institutions and position these companies to raise capital on their own. They certainly weren’t going to raise their own capital as languishing two-dollar zombie stocks.

Of late, we’ve seen articles in the mainstream media suggesting that the volatility in these troubled financial companies’ shares is attributable to short-covering. "When large numbers…

Tags: algorithmic trading, equity follow-ons, high frequency program trading, huge volumes, Market manipulation, price manipulation, TRIN, troubled financial firms, volume, Zero Hedge

Posted in Uncategorized | No Comments »

Rogue Algorithms And Other Mutually Assured Destruction Program Trading Alternatives

by ilene - July 10th, 2009 5:34 pm

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Rogue Algorithms And Other Mutually Assured Destruction Program Trading Alternatives

destruction, high frequency program trading Courtesy of Tyler at Zero Hedge

Why Institutional Investors Should Be Concerned About High Frequency Traders

By Sal L. Arnuk and Joseph Saluzzi of Themis Trading

A Themis Trading LLC Mini White Paper

It is now generally understood that high frequency traders (HFTs) are dominating the equity market, generating as much as 70% of the volume.

HFTs are computerized trading programs that make money two ways, in general. They offer bids in such a way so as to make tiny amounts of money from per share liquidity rebates provided by the exchanges. Or they make tiny per share long or short profits. While this might sound like small change, HFTs collectively execute billions of shares a day, making it an extremely profitable business.

Why should institutional or retail investors care? After all, aren’t HFTs adding liquidity? That’s what they and the exchanges, who court their business, say.

There’s a lot to worry about.

1. HFTs provide low quality liquidity.

In the old days, when NYSE specialists or NASDAQ market makers added liquidity, they were required to maintain a fair and orderly market, and to post a quote that was part of the National Best Bid and Offer a minimum percentage of time. HFTs have no such requirements. They have no minimum shares to provide nor do they have a minimum quote time. And they could turn off their liquidity at any time. When an HFT computer spots a real order, the HFT is not likely to go against it and take the other side. The institution is then faced with a very tough stock to trade.

2. HFT volume can generate false trading signals.

This can cause other investors to buy at a higher price, or sell at a lower price, than they would otherwise. A spike in HFT volume can cause an institutional algorithm order based on a percentage of volume to be too aggressive. A spike can attract momentum investors, further exaggerating price moves. Seeing such a spike, options traders can start to build positions, which, in turn, can attract risk arbitrage traders who believe there’s potential news that could affect the stock.

3. HFT computer servers are faster than other trading systems.

Because most HFT servers are co-located at exchanges, they can beat out institutional or retail orders, causing them to pay more or sell for less than they should…

Tags: high frequency program trading, trading algorithm

Posted in Uncategorized | No Comments »

“Principal Program Trading Is A Way To Get The Market Go In Your Direction”

by ilene - July 1st, 2009 8:38 pm

Courtesy of Zero Hedge, earlier today. The evidence of manipulation with program trading keeps growing, like green shoots.

Themis Trading: "Principal Program Trading Is A Way To Get The Market Go In Your Direction"

Joe Saluzzi of Themis Trading on Bloomberg TV, discussing several critical topics previously covered extensively on Zero Hedge: the real state of the economy, high frequency program trading and outright market manipulation.

To quote Joe:

"I have a feeling one day the door is gonna close, everyone is going to be running for the exits, there is going to be a major move in the market and everyone is going to wonder "what happened?"

There is problem structurally in the equity markets that nobody wants to talk about. There is intervention, there is manipulation going on. No one has exact proof of what is going on but it’s out there, and the real liquidity has been gone for a while. People don’t understand, the liquidity is not coming back."

Must Watch.

Tags: equity markets, high frequency program trading, Market manipulation

Posted in Uncategorized | No Comments »

Phil's Favorites

BLS Seasonal Adjustments Gone Haywire; 11% Unemployment Coming by May?

February 8th, 2010 10:50 pm

BLS Seasonal Adjustments Gone Haywire; 11% Unemployment Coming by May?

Courtesy of Mish

Over the weekend I received an email from Irishscot2, a poster on MarketWatch, regarding seasonal adjustments to the unemployment rate. Hi Mish

I believe the seasonal adjustment is no longer valid given that anticipated job creation down the road has not and will not be happening. I expect late spring to reverse the January effect heading into the elections. If so, a perfect political storm brewing because of their models!

Irishscot2

Irishscot2 compared the unadjusted numbers to the seasonally adjusted numbers on a percentage basis. I could not tell much from the raw data he sent, so I asked for his spreadsheet and he gracious...

Zero Hedge

Early Napkin And Other Thoughts From Art Cashin

February 9th, 2010 8:53 am

Courtesy of Tyler Durden

Dollar Dallies But Stocks Stumble Anyway – For much of Monday’s trading, the dollar rally stalled amid swirling rumors of possible rescue meetings to try to solve the emerging Greek crisis. For a while that allowed oil and gold to rally a bit. It also allowed stocks to churn sideways.

Then in early afternoon, stocks began to sell off. The selling began to accelerate in the final hour. Traders began to rush about trying to find the trigger for the accelerated selling.

They found that the dollar had begun to firm up a bit, but the lack of reaction in the after-markets for gold and oil cast doubt on the dollar as the trigger. There was some buzz that they were reacting to some unspecified comment from Bernanke. A quick search of the newswires could not locate a comment.

In the end, the selling was chalked up to internals and technicals. ...

Chart School

THE MARKET IS FOLLOWING A SCRIPT YOU CAN PROFIT FROM

February 8th, 2010 10:12 pm

THE MARKET IS FOLLOWING A SCRIPT YOU CAN PROFIT FROM

Courtesy of David Grandey

All About Trends

Is The Market Following A Script? If you ask Elliott it is. From Our Recent Blog: "There is also a good possibility that the whole move down off the January highs traces out ABCDE (5 Waves down before all said and done). But we'll take it a step at a time." The S&P 500 chart below has more of a 3 waves (abc) look to it just like we talked about in advance to be on the lookout for. The only problem was it's prime entry took place in the form of a gap and within minutes traced out the bulk of Thursday's move. But still it's all about trends and it's locked in a downtrend channel. One look at last week's action in the OTC Composite below (remember this area of the...

Trading Goddess

Pivotfarm Support and Resistance Levels 9th February 2009

February 8th, 2010 9:13pm

After dropping from the 1063.75-1064.25 PowerZone just before stocks opened on Monday, the ES was sold on the open and fell to the 1056.25-1055.50 PowerZone.
As stated last night: "if a pullback can hold the
initial support, the up-trends will remain intact and
the market should head back up."
That was reversed and after getting over the 1063.50-1064.00 area the move continued to a 1068.50 high. After a small dip, a 123 top set up from 1068.00 and the ES dropped to the new support at 1064.00-1063.50 zone. A bounce failed at 1067.00 and that was it for the upside. The market rolled over and all of the bounces failed as the ES went trend-down to 1053.00 at the 4pm close for stocks.
The early rally off of a good support area was sold on Monday, and for the second half of the day it was all down hill. After the Friday run-up, that was not impressive for a follow-up. The market is back into oversold status, but for now it looks lik...

more from Goddess

Oxen Group Trades

The Oxen Report: Three, Three, Three: A Trade of the Day, An Overnight Trade of the Day, and a Long Play Too

February 9th, 2010 9:22 am

Hello readers,

I apologize for missing the last few days. I have been really busy with some other projects. So, to make it up to you, I have three picks for today. ...

The Options Report

By Andrew Wilkinson

Bank of America Bears Buy Puts

February 8th, 2010 4:14 pm

Today’s tickers: BAC, PBR, F, FXI, NXY, KFT, DELL & HPQ

BAC – Bank of America Corp. – Bearish option traders purchased put options on Bank of America today with shares of the firm trading 3% lower to $14.52. The number of put options purchased at the March $14 strike price surpassed existing open interest at that strike, suggesting many investors are bracing for continued near-term share price erosion. Approximately 33,000 puts were purchased for an average premium of $0.59 apiece at the March $14 strike. Investors picking up the put options perhaps anticipate B of A’s share price could slip beneath the effective breakeven point on the trade at $13.41 ahead of March expiration. The 12% increase in the reading of options implied volatility on Bank of America to 43.74% today points to increased fluctuation in the...

Insider Zone

INSIDER BUYING & SELLING REMAINS BEARISH

February 8th, 2010 7:45 pm

INSIDER BUYING & SELLING REMAINS BEARISH

Courtesy of The Pragmatic Capitalist

After a brief respite last week, insider buying and selling trends returned to their regularly scheduled bearishness. The recent market dip has not attracted many buyers to the market as total insider buying for the latest week totaled just $10.2MM. Total selling surged to $490MM from last week’s reading of $250.1MM.

The insider selling and buying trends continue to reflect the low level of confidence that insiders have in the future performance of their own shares. This has been best reflected in the continuing weak trends in the labor markets and the...

http://www.insidercow.com/ more from Insider

OpTrader

Swing trading portfolio - week of February 8th, 2010

February 7th, 2010 11:43 pm

This post is for live trades and daily comments.

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

- Optrader

...

more from OpTrader

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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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Ilene is editor and affiliate program coordinator for PSW. She manages the Favorites backup site (blogroll, archives, more). Contact Ilene to learn about our affiliate and content sharing programs.

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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 Philstockworld, LLC (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 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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