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Posts Tagged ‘Options Education’

Friday Failure – 1,880 is a Bust!

Did you see the frightened ones? 
Did you hear the falling bombs? 
Did you ever wonder 
Why we had to run for shelter 
When the promise of a brave new world 
Unfurled beneath a clear blue sky?
 - Pink Floyd

What were we excited about? 

With 204 of the S&P 500 now reporting 68% (139) have beat earnings estimates BUT only 44% (90) have beaten on revenues.  It's yet another year of cost-cutting and share buy-backs to boost earnings per share with no actual growth in real earnings yet the market, overall, is up 35% from where it was last year on a 2.9% overall growth in EPS.  - THAT'S FRIGGIN' CRAZY!  

If we back out BAC, who had the crap fined out of them this Q, then the S&P earnigs are up a more respectable 4.9% but, on the other hand, that includes superstars like AAPL, who dropped $13Bn on the S&P by themselves, and it's very unlikely the rest of the S&P will bring up the curve.  In fact, Zacks is now estimating that overall earnings will be DOWN 0.9% for the quarter compared to last year and DOWN 4.6% from last quarter.  

SPY 5 MINUTENo wonder we are seeing the continued exodus of "smart money," who sell in volume into every rally we have.  What's getting scary (and keeping us bearish) is that now we aren't even making gains on weak volume.  Yesterday's move up was 100% due to AAPL, which gained over 8% on the day.  

Since AAPL is 15%+ of the Nasdaq, that 8% gain should have popped the Nasdaq 1.2% and the rally in AAPL suppliers should have lifted the index even more.  But it didn't.  The Nasdaq was only up 0.8%, so it would have been down 0.5% without AAPL's contribution and even further without the rally in suppliers and the sectors that support them.  

As I said to our Members yesterday ahead of the bell, Apple's gains are Samsung and others' lossses, NOT…
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Thrilling Thursday – Tweeting our Way to Oil Profits!

Isn't oil trading fun?

Just this morning I was able to tweet out a trade idea from early morning Member Chat at 4:47 to remind our followers that oil Futures (/CL) were a nice short idea at the $93 mark.  Less than two hours later, at 7:26, we decided to take the money and run at $92.15 – which was good for an $850 per contract gain – enough to buy about 300 Egg McMuffins!  

We were long on oil Tuesday Morning at $92 and our target for shorting was $93 but, as I said in the morning post: "hopefully, they'll go a little higher than that and we can add short positions using SCO or USO in Member Chat as things can turn very ugly next week as the thieves try to wriggle out of the contracts they signed today."  We got a $1,000 upside trade followed by the $1,000 per contract drop from $93.47 (right on schedule, after inventories) back to just below $92.50 and then we got a run back to $93 again on Wednesday ($500 per contract profit), where I again laid out our reasons for shorting them again at $93, which was good for another $1,000 per contract gain and then this morning's $850, which was good for $4,350 PER CONTRACT's worth of gains in just two days.  

Now, I'm not telling you this to point out how great I am at calling Futures trades – I'm telling you this to point out what a MASSIVE SCAM energy trading is and how something should be done to stop this farce, which is ROBBING the World's citizens of over $850Bn a year! 

I often say to our Members: "We don't care IF a market is fixed as long as we can understand HOW it is fixed and place our bets accordingly," but that's not really true with oil trading, as this criminal enterprise (which I have written about for years) is more harmful to our everyday life than every hurricane, earthquake or terrorist act that has ever been committed on this planet – and they do it to us EVERY DAY OF EVERY YEAR!  

I'm not able to go 5 for 5 on oil calls in two days because it's "fair" (and it's not a fluke, we do this all the time), I can do this because it's very, very UNFAIR…
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Vacation-Proofing Your Virtual Portfolio

Option Sage Submits: 

When driving a car and some object appears on the road ahead do you usually run right over it or do your best to avoid it?  

Don’t we all take action in real-life based on the new information we receive that changes the old paradigm?  Take the first two guys in this video:  Who would you rather be, the first or the second guy?  While the second gentleman reacts and looks ridiculous in so doing, he’s the guy that is more likely to survive when real disaster hits because he’s reacting to new information.  In fact he doesn’t even know what’s making everyone else react, he just knows that when 99% are moving one way in panic, it’s best not to fight the crowd or he will be trampled.  It’s no different in the market.  Pride, ego and old theses have no place when new information directly contradicts an existing trade.

This week, we used DIA and QQQ puts and calls to "react" to quick changes in the market while we waited for better information before making more permanent changes in our positions.  This gave us the benefit of the


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Improve Your Market Timing: Channeling Stocks

 Courtesy of MarketTamer.com

- Stocks will typically channel 65-70% of the time.

- There are essentially three types of channels; Ascending, Descending and Sideways.

- The channel is comprised of two parallel trend lines which define support and resistance.

- The trading opportunity is as a result of buying the bounce off the lower trend line and selling the resistance.

- Channeling stocks as a continuation pattern occur as the stock trends and then consolidates for a period of time, only to eventually break out to resume the prior trend.

- Ascending Channels are usually embedded in a broader downtrend and act as a respite to the primary downtrend.

- Accordingly, Descending Channels are a respite in a broader uptrend and will more often than not resume the initial bullish trend after channeling.

- Sideways Channels are considered consolidations before resuming the original trend.

- The investment community recognizes that stocks neither go directly up nor down without pause.

- A majority of trading activity resides in channels as supply and demand play “tug of war”.

- Eventually traders will push the stock out of the range.

- The quality of the breakout/breakdown move should be measured by the investor participation as evidenced by increased volume.

- The opportunity to make money with channeling stocks are as a result of two approaches: 1) buy on the bounce off of the lower trend line and sell at the top of the channel at resistance and 2) Play the breakout/breakdown out of the channel.

 


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Are clouds looming on the horizon?

Courtesy of Market Tamer

S&P 500

 

Hanging Man on the NASDAQ

 

Improve Your Market Timing: The Symmetrical Triangle Chart Pattern

 

 

 

  • The Symmetrical Triangle is a continuation pattern that is comprised of two symmetrically converging trend lines.  The continuation will normally be in the direction of the prior trend, although at times the pattern can reverse the trend.
  • The breakout usually occurs prior to the triangle reaching its apex and is strongest if that is the case.
  • The target is the trend line breakout/breakdown plus the length of the widest part of the triangle.
  • After the stock has moved either up or down relatively quickly and with increased volume, the stock then begins a period of pause as the stock moves sideways or with a slight retrace against the trend.
  • The initial trading in the period of pause consists of a wider amplitude and narrows as the upper and lower trend lines converge symmetrically.
  • The investment community is telling us that it is indecisive as to the continuing direction of the stock as the trading range narrows and finally breaks out to resume the trend

 


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NASDAQ Video Analysis

 

Improve Your Market Timing: The Double Top

  • The buyers at the top of the first peak were victims of buying from the “smart money” as they sold to the “not so smart money” at the top of the trading range.
  • These unfortunate buyers will usually hold, refusing to take a loss and waiting for the opportunity to unload the stock at a break even.
  • When that opportunity presents itself, at the second top, selling pressure increases and drives the stock lower.
  • Other knowledgeable traders who know that the “Double Top” will present an opportunity to short, will do so thereby increasing the velocity downward move.

 

 


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Weekly Charts + The Reverse Cup & Handle Chart Pattern

Courtesy of Market Tamer

Weekly Charts

Dow Jones


S&P 500


NASDAQ


 

The Reverse Cup & Handle Chart Pattern

- The inverse of a Cup & Handle Chart Pattern.

 

-The stock bounces off of a support level and moves higher on unremarkable volume.

 

- A “Rounded Top” forms and then subsequently moves lower on increasing volume producing “The Cup”.

 

- The pattern is completed when a Bear Flag forms producing the handle.

 

- The breakdown occurs when the stock breaks the low of the handle on increasing volume.

 


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How to Make Profits in Your Spare Time

The Only Three Questions That Count: Investing by Knowing What Others Don't

Option Sage submits:

I saw an infomercial from Fisher Investments where Ken Fisher mentioned 3 attributes that he believes are keys to successful investing which can be crudely summarized as follows:

[1]  Focus on long-term investing

[2]  Expect surprises

[3]  Stay ahead of the crowd by knowing what others don’t

The first point is certainly critical and weeds out the greedy ‘get-rich-quick’ traders from the patient traders.  Our policy here is that of ‘play-to-win’.  We like to be aggressive in seeking profits with short-term plays but we also recognize that if those trades don’t work out that we can still rely on longer term plays to end up profitable in the end. 

The second point regarding expecting surprises asks the trader the question “Are you managing risk well and do you have contingency plans in mind each time you enter a trade?”  While the second part of the sentence is important, the first is paramount!  No matter what you do, never violate risk management rules which we have discussed here in the past.

The third point is a luxury in my view.  Of course, it would be nice to know what others don’t but it’s not critical.  By definition only a small number can have information that the rest of the crowd does not have so if you are not trading full-time you have to find another way of making money without relying on staying ahead of the crowd.

As I was scanning for trades over the weekend, I came across one trade which might in fact fall into the category of offering relatively attractive profits by relying on options rather than additional information.  In fact, I know many of our members find it hard to focus on the daily trades and would like to construct virtual portfolios with the longer-term in mind.  As Phil mentioned in his classic "James Bond Investing" article, playing short-term positions requires constant vigilance and you need to ready to turn on a dime with small windows of opportunity and this kind of trading is not for everyone.  Even Phil has a rule of thumb that 75% of a virtual…
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Peter D – Confessions of the PSW Strangler

Peter D has a long-running and very successful system of selling premiums on a regular basis that’s well worth learning.

Investors selling a short strangle are expecting the underlying stock to not move much in either direction. The strategy is accomplished by selling a call option at a higher price than the current stock or ETF price and by selling a put option at a lower price than the current stock or ETF price. Both of the options will have the same expiration month. The investor in a short strangle benefits from the underlying moving within the spread between the call strike and the put strike.

There are two reasons we like this strategy a lot at PSW:

1) It’s boring!  Unless the market is MUCH more volatile than normal, taking sensible, NON-GREEDY, out-of-the-money short option positions is a fairly market-neutral way to place our bets.  While the risk/reward ratio may seem inverted, statistically it’s a winning play over time.

2)  It’s perfect for our "be the house, not the sucker" philosophy of trading.  We are always looking to SELL volatility. The idea behind this trade is that front-month volatility is relatively expensive compared to historical long-term volatility and we take advantage of selling a very high cumulative volatility over the course of the year.  

We recently ran a collection of comments following through on some trades over time and quite a while ago Sage wrote an article relating about using short strangles on longer-term stock plays, which provides some additional ideas on how to apply this strategy.  Peter has been kind enough to provide us with a definitive guide to help set you on the road to a successful career as a strangler.  The following is a collection of posts (make sure you use the links) on Short Strangles and the Crazy plays on the indices (SPX, RUT, NDX, etc.):
 
1- The Crazy play consists of a Short Strangle and a protective long put vertical. These plays are mainly for Virtual Portfolio Margin accounts, with balance greater than $125,000, preferably over $200k as the margin can swing wildly.  

2- Very rough comparison among Short Strangle, Iron Condor, Buy/Write and straight stock purchase. Note the rolling tips in the second to last paragraph.
 
3- VIX, the effects of.
 
4- Possible adjustments of the Crazy Play.
  
Additional discussion on doubling down.
   …
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Market Snapshot + Bear Flag Chart Pattern

Courtesy of Market Tamer 

Market Snapshot

ECONOMIC REPORTS

MONDAY 2/1 Personal Income, Personal Spending, Construction Spending, ISM Index

TUESDAY 2/2 Pending Home Sales, Auto Sales, Truck Sales

WEDNESDAY 2/3 Challenger Job Cuts, ADP Employment Change, ISM Services, Crude Inventories 

THURSDAY 2/4 Initial Claims, Continuing Claims, Productivity-Prel, Unit Labor Costs-Preliminary, Factory orders 

FRIDAY 2/5 Nonfarm Payrolls, Unemployment Rate, Average Workweek, Hourly Earnings, Consumer Credit

EARNINGS OF NOTE

MONDAY 2/1 ACV, APC, GCI, HUM, MNKD, PCL, SOHU, TUP

TUESDAY 2/2 AFL, ADM, CTRP, CMI, DHI, FISV, JDSU, MTW, MAN, MRO, MEE, MET, MYGN, NETL, PBG, SU, DOW, HSY, UPS, UNM, GRA, WHR

WEDNESDAY 2/3  AKAM, AMP, BDK, BRCM, CBG, CSCO, CMCSA, EFX, HMC, INSP, IP, MWW, NOV, NVLS, PFE, RL, BCO, TWX, V, WLT, YUM

THURSDAY 2/4  BEBE, BKC, CME, CI, DB, DO, GSK, HIT, K, MA, MCO, NOC, PENN, PBI, SLE, SNE, HOT, SUN, TM, UIS

FRIDAY 2/5 AET, AON, BZH, PC, TSN, WY


Stock Market Insights: The Cash Flow Statement

 

Cash is king!  Liquidity in the form of cash tells us that the company can meet its obligations.  The Cash Flow Statement is the third and last statement that we will touch upon.  The statement is filed quarterly and year over year in concert with the Profit and Loss and Balance Sheet.  The Cash Flow Statement is a measure of incoming and outgoing cash from its business operations for a specific point in time.  The statement further defines the cash flow of the company that is indicated on the Balance Sheet.  There are two methods of accounting that are used 1) accrual and 2) cash.  Most companies use the accrual method which accounts for goods delivered as sales regardless of whether they have been paid for or not.  The outstanding balance is shown on the Profit and Loss Statement under accounts receivable.

 

The Cash Flow statement typically divides the accounting for cash into
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Help One Of Our Own PSW Members

"Hello PSW Members –

This is a non-trading topic, but I wanted to post it during trading hours so as many eyes can see it as possible.  Feel free to contact me directly at jennifersurovy@yahoo.com with any questions.

Last fall there was some discussion on the PSW board regarding setting up a YouCaring donation page for a PSW member, Shadowfax. Since then, we have been looking into ways to help get him additional medical services and to pay down his medical debts.  After following those leads, we are ready to move ahead with the YouCaring site. (Link is posted below.)  Any help you can give will be greatly appreciated; not only to help aid in his medical bill debt, but to also show what a great community this group is.

http://www.youcaring.com/medical-fundraiser/help-get-shadowfax-out-from-the-darkness-of-medical-bills-/126743"

Thank you for you time!

 
 

Phil's Favorites

Ukraine Caught in Third Major Lie? Magic Number 312

Courtesy of Mish.

I have strong evidence from Ukrainian citizen Anatoly Shary that Kiev is caught in a third major lie regarding Buk deployment.

It takes a while to go over the evidence, condensed below, all having to do with the number 312 painted on a missile launcher.

Follow the Number

On March 8, Censor.Net, a Ukrainian Nationalist cite, says "Ukraine Defends Donetsk From Russian Incursion: 'Buk' Air Defense Rocket Systems Are Taking Up Positions. PHOTO + VIDEO"

The sub-headline reads: "A resident of Gorlovka, driving to work in Soledar, came across an entire convoy of military equipment. ...My coworkers and I counted 11 missile launchers ..."
...



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Insider Scoop

Relaxed Regulations Highlight Nuclear ETFs

Courtesy of Benzinga.

The Environmental Protection Agency is considering a review of its 1977 rule that limits the amount of whole-body radiation that any member of the public can be exposed to as a result of the uranium fuel cycle.

While they have not made any immediate determination to change the current level of 0.25 millisieverts per year of allowable radiation, they are reviewing the scientific data to decide if changes need to be made.

Items under review include water resource protection, spent fuel storage facilities and alternative technologie...



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Zero Hedge

The Stealing Of America By The Cops, The Courts, The Corporations And Congress

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

Submitted by John Whitehead via The Rutherford Institute,

“What the government is good at is collecting taxes, taking away your freedoms and killing people. It’s not good at much else.” —Author Tom Clancy

Call it what you will—taxes, penalties, fees, fines, regulations, tariffs, tickets, permits, surcharges, tolls, asset forfeitures, foreclosures, etc.—but the only word that truly describes the constant bilking of the American taxpayer by the government and its corporate partners is th...



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Chart School

S&P 500 Snapshot: An Intraday Record High

Courtesy of Doug Short.

The pre-open release of the Consumer Price Index showed core inflation in June to be a tad lighter than forecasts. The S&P 500 opened at its 0.10% intraday low and rallied to its 0.64% record intraday high about ninety minutes into the session. Strong existing home sales announced at 10 AM certainly helped. The index spent the rest of the day in a narrow trading range and closed with a 0.50% gain, a mere 0.10% off its record close of July 3rd.

The yield on the 10-year note ended the day at 2.48%, 1 bp below yesterday's close. It is now only 4 bps above its interim closing low of May 28th.

Here is a 15-minute chart of the past five sessions. The S&P 500 is up 7.31% year-to-date.

Volume on the SPY ETF, whi...



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Option Review

Sizable Call Spread Trades On Orexigen

A large call spread initiated on Orexigen Therapeutics, Inc. (Ticker: OREX) on Monday morning looks for shares in the name to rally approximately 30% by September expiration. The September expiration is noteworthy as the company awaits the results of the FDA’s review of its resubmitted New Drug Application (NDA) for NB32, an investigational medication being evaluated for weight loss, after the review was extended for three months back in June. The upcoming Prescription Drug User Fee Act (PDUFA) date is September 11, 2014, according to a press release issued by the company. Shares in Orexigen today are up roughly 0.40% at $5.34 as of 2:15 p.m. ET.

...

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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

Sector Detector: Bulls remain unfazed by borderline Black Swans

Courtesy of Sabrient Systems and Gradient Analytics

Despite a highly eventful week in the news, not much has changed from a stock market perspective. No doubt, investors have grown immune to the daily reports of geopolitical turmoil, including Ukraine vs. Russia for control of the eastern regions, Japan’s dispute with China over territorial waters, Sunni vs. Shiite for control of Iraq, Christians being driven out by Islamists, and other religious conflicts in places like Nigeria and Central African Republic. But last Thursday’s news of the Malaysian airliner tragically getting shot down over Ukraine, coupled with Israel’s ground incursion into Gaza, had the makings of a potential Black Swan event, which in my view is the only thing that could derail the relentless bull march higher in stocks.

Nevertheless, when it became clear that the airline...



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OpTrader

Swing trading portfolio - week of July 21st, 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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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's the latest Stock World Weekly. Please use your PSW user name and password to log in. (You may take a free trial here.)

#452331232 / gettyimages.com ...

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Market Shadows

Danger: Falling Prices

Danger: Falling Prices

By Dr. Paul Price of Market Shadows

 

We tried holding up stock prices but couldn’t get the job done. Market Shadows’ Virtual Value Portfolio dipped by 2% during the week but still holds on to a market-beating 8.45% gain YTD. There was no escaping the downdraft after a major Portuguese bank failed. Of all the triggers for a large selloff, I’d guess the Portuguese bank failure was pretty far down most people's list of "things to worry about." 

All three major indices gave up some ground with the Nasdaq composite taking the hardest hi...



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Digital Currencies

Bitcoin Vs Gold - The Infographic

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

While Marc Faber has said "I will never sell my gold," he also noted "I like the idea of Bitcoin," and the battle between the 'alternative currencies' continues. The following infographic provides a succinct illustration of the similarities and differences between gold and bitcoin.

Please include attribution to www.jmbullion.com with this graphic.

...

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Pharmboy

Biotechs & Bubbles

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

Well PSW Subscribers....I am still here, barely.  From my last post a few months ago to now, nothing has changed much, but there are a few bargins out there that as investors, should be put on the watch list (again) and if so desired....buy a small amount.

First, the media is on a tear against biotechs/pharma, ripping companies for their drug prices.  Gilead's HepC drug, Sovaldi, is priced at $84K for the 12-week treatment.  Pundits were screaming bloody murder that it was a total rip off, but when one investigates the other drugs out there, and the consequences of not taking Sovaldi vs. another drug combinations, then things become clearer.  For instance, Olysio (JNJ) is about $66,000 for a 12-week treatment, but is approved for fewer types of patients AND...



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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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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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