Raytheon (RTN) has been beaten very hard recently. From a high of $67 to current $57.5 levels. To me, it offers a short term buying opportunity for a bounce that may happen as soon as it touches the $56 area. There are many ways to play this bounce ranging from straight calls to bull put spreads. I am looking for a bullish call debit spread that is currently selling for $0.90/spread (Jul 57.5/60 calls) or play via 60/62.5 Jul/Aug call diagonal spread. The downside of diagonal spread upto $61 is “0″ and the trade will make the most money if RTN is at $60 at Jul expiration i.e. nearly 30%. The vertical debit spread will make money if the RTN is above $58.5 by July expiration and if it’s above $60 the returns are going to be nearly 155 for each 95 investment.

Almost similar opportunity will exist in CocaCola (KO) if Coke falls to $53.5. Currently it trading at $54.18. Similar strategy can be created for Coca Cola as well.

I just closed GLD speculative direction trade for +68%. I first mentioned this on the forum on June speculative trade alert (part of OPNewsletter Bonus trades)

Gold is approaching it’s solid 200 day moving average. There are several “right” reasons for gold to fall;) but I am personally long term bullish on Gold. It may offer a short term buying opportunity. If you play, play it safe i.e. via spreads for instance 84/86 bull call debit spread, or 84/82 bull put spread or 88/90 bull call diagonal spread.

Whatever strategy you use, be careful as gold is known to be harsh for short term traders.

These are speculative directional strategies and therefore if you do decide to play these, pls make sure you are allocating capital appropriately and ensure that you are willing to lose all or have your exit very well defined. I generally like to invest only 1-2% of the capital.

These are not recommendation. Pls do your due diligence before making any investment decision.

Profitable trading, OP

An excellent month for OPNewsletter with double digit gains. OPNewsletter’s June 2008 was closed for +11.1%. This is nearly double of my own target of 5-7% per month. These returns excludes the bonus speculative trades on JOYG (+40%), RIG (Multiple Profit Points), GLD and CME (Multiple Profit Points-Shared for free with OP Readers), With this June’s closing OPNewsletter is up nearly 60% in the past 5months, i.e. nearly 9.9% compounded monthly that is nicely above even my own internal target of 5-7%. We usually assume US$10,000 as minimum investment and these can easily be scaled to $50, 000 or above. Considering market actions in the past 5months, this is a good and satisfactory returns.

This month’s strategies included Iron Condor, Debit Spreads, Calendar spreads, Straight calls, Diagonal Spreads and credit spreads.

I have opened two OPN Mini-portfolios for July expiration cycle and shall be opening 2-3more next week. If you want to sign-up for the newsletter, Pls read more about OPNewsletter here. If you would like to read customer testimonials pls read those here (Part-1, Part-2, Part-3, Part-4)

A few more things about the Newsletter-

1. OPN uses its Member’s fills for tracking (Not the newsletter suggested one)
2. OPN uses maximum investment for calculating returns for the month, even though it was for 1day (For example- 10K portfolio, we used 6K for the month, but we used 1K more for one day, the whole portfolio returns are calculated using 7k as base)
3. Starting May’08, OPN now factors commission in it performance tracking.

Next week is going to be interesting week with Goldman Sachs (GS) and Morgan Stanley (MS) reporting earnings and setting tone for the financial sector. I may play these two and share my thoughts with OPNewsletter subscribers.

Profitable trading, OP

Amongst all the bearishness in the market you might think there is none except one obvious answer OIL. There are many areas that are just moving up with their own share of correction along the up way.

I have been mentioning my “Fantastic Four” for quite sometime. Even since my last post, in just less than two weeks POT is up >+10%, MOS is up >+20%, CF is also up >+10%, and MON >+5% after touching 52wk high. In fact, Intrepid Potash (IPI) touched 52wks high today (My post here). But keeping them is not easy and requires guts, well more than guts it is how well one hedges against any sharp corrections on the way up. A very simple and popular way will be buy puts and fund the cost by selling calls. For instance POT is currently $223, so you buy 220 puts and sell OOM calls to offset the cost of puts. I shall cover this in more details some other day.

Another sector on the roll is coal. Check out the PCX, ANR, BTU, FDG, and ACI. Oil has its impact of alternative energy fuels as well. As Oil prices are climbing higher, all other energy resources are becoming cheaper relative to oil. One may argue why Rails are falling apart, but there is more to rails than just oil’s rise. But still it’s not a beaten down sector if you look at short term horizon of say 3months.

Above are just two examples. You may find even more. However, as these are moving-up, the risk of their fall is also increasing. So be careful about your entry and exit points.

Last point, the bull is on the downside as well. It’s all a matter of perspective. Almost similar strategies can be created for the downward move. However, the risk is higher. Our human brain in general is “bullish” so at the first moment of upward move (assuming I am bearish), I am more “panicked” than if I would if I were bullish and if there was a reversal.

Have fun, Profitable trading, OP

Thank you dear subscribers for your encouraging feedback. I published earlier OPN testimonials here (Part-1, Part-2 and Part-3). Your feedback especially after past two challenging month is rather much more important than it was when it was rather smoother sailing for OPNewsletter.

Let starts with Wayne Hom from USA-

The best thing about OP is that he puts his money where his mouth is. You know the guy is in it with you so he’s not some “sideline” know-it all without the accountability of feeling the pain. He’s making the trades and adjustments with you. I have seen newsletters and services where they put out the initial entry, give you the criteria for loss/profit exit, and then call it a day. You have no idea what their real rate of return is because they enter and exit at some “theoretical” point similar to back-testing approaches. It doesn’t consider the real emotions of trading, and the real issues most of us face of having day jobs. OP keeps the “official” book on the adjustments and closes, but he extends his hands out to help those of us who have “missed” the adjustment or close by a day or several days due to the constraints of real life. That is invaluable.

I guess I would summarize by saying that OP is like a trading simulator simulating all the aspects of trading not just the identification of a trade and entry. You can follow along in real-time and ask questions and see what others are saying as the trades unfold. It doesn’t hurt that most of the times we make money in the process. And when those times occur when the trade goes against us, OP does his best to correct either this trade or offset in another trade so that we, including himself, come out ok. Most of the time, he pulls it off (though it still scares the heck out of me).

Wayne Hom
San Mateo, CA USA
5 years of study, but only about 1 year of real trading

Thanks Wayne. I am thankful for your feedback. Last two months were not easy. In fact one of the most difficult months during the life span of OPN and we managed to sail through it. Nice stress test for our strategies.

I have been a regular visitor and an early forum member but joined the OPN only in April.
I still consider myself an Options newbie as before joining OPN i was just using Straight Calls or Straight Puts based on my directional Analysis.

If i were to summarise my experience with OPN in 3 words i would say : Transparency , Community and Learning

Transparency : Complete openness about the Tracking. In fact the decision to take members fills accentuate the Transparency aspect and really appreciate you for that .Also, in many cases i can see OP assisting members who may be late for a fill as to what could be the best way/time to get the fills on different strikes.

Community : I enjoy the Community experience a lot. The discussion on Fills brings a sense of friendly competition, the sharing of sentiments when PBR,Visa were going all over the place..all makes one feel a part of Community.

Learning : These 2 months have made me read up a lot on Iron Condor, Calendar Spreads, Effect of Volatility..and i realize reading is one thing and trading and experiencing the things u read about is a totally different thing. I am glad that i used OPN as a first platform for Income Trading.It also makes me realize a few things about myself e.g, As a directional Trader why i made losses and how could i have avoided some of those losses…

All in all ,i know these are just my initial baby steps in the world of Options, I look upon OPN as a long term continuous learning source…as i have miles to go before i sleep………….:)

Name : Ajay Sunder
Country : Singapore
Investment Experience : Option newbie..less than one year Options Trading experience.Before joining OPN was limited to buying Straight Calls/Puts based on directional Analysis.

Thanks Ajay. Looking forward to long association and being successful together.

Nothing much has changed from my first thoughts. Few additional thing I learned since then are:

1. Negotiate on prices when putting the trades.
2. Better understanding on Pinning.
3. Different ways of adjusting a trade
4. Book recommended by you on Volatility was excellent.

Further, making us think on catastrophe in the world and Mother’s day.
Varun Balendra, USA

Thanks Varun. I strongly believe that no matter what we do, we should give some time/resources to the society we live in and the companions, friends and families are what makes the life fulfilling. The success, without the success of those who matters, is not tasty.

I like the consistency in monthly profits from your your service. Capital preservation is very important in investing and this service seeks to do that making sure that our hard earned money is preserved at all costs. Keep up the good work and the great consistency in making money month after month.

Thanks again.
Chik
Singapore and investment experience 5 years.

Thanks Chik. Yes, we are driving for consistent monthly income. And that’s why we don’t speculate and we don’t over allocate our hard earned capital.

Thank you all. I shall remaining feedbacks later.

Profitable trading, OP

What a week!! Absolutely fascinating for OPN as well for my personal account. We are up nearly +5% vs last week and to +11.54% for the month. This is nearly double of my own target of 5-7% per month. Before you proceed reading further, pls note-

1. OPN uses its Member’s fills for tracking (Not the newsletter suggested one)
2. OPN uses maximum investment for calculating returns for the month, even though it was for 1day (For example- 10K portfolio, we used 6K for the month, but we used 1K more for one day, the whole portfolio returns are calculated using 7k as base)
3. OPN now factors commission in it performance tracking.

Out of 5 mini-portfolios, We have closed 3 portfolios :

• RUT Iron Condors for +18.35%
• VISA Mini-Portfolio for +17.6%
• PBR portfolio +16.2%

We have two mini-portfolios, CTRP and FLR, via debits trades that are losing but we invested only 1.55% and 1.8% respectively. We have cash available that we can use anytime after finding opportunity that might have surfaced after big sell-off on Friday. I am on the lookout for trades for next month.

Some interesting things about the market action yesterday, and yeah it’s not good:

• All 30 DOW components closed in red
• Top 10 active on NYSE and TOP 10 on Nasdaq (with exception of Yahoo) all closed lower
• 98 out of 100 stocks of Nasdaq 100 closed lower.
• Down volume on NYSE was > 90% of up+down volume
• It was probably the highest daily volume for S&P500, NYSE and Dow in past nearly 2months.
• VIX is now over 50 as well as 200 days MA.

It was a panic day and seems everyone just wanted to get out of the market. Let’s see what next week brings.

I would also like to share some of the milestones that I have achieved with the May calendar month closing. These are my actual capital results and are different from OPN which is rather far superior. I have compounded my capital at +3% per month in 2006, +7.11% per month in 2007 and +10% per month in 2008 so far. I injected capital 4 times (every time more than last time) during those periods which means the returns are increasing even with a increasing capital base. There is not a single loss making month in 2008 in spite this being one of the worst recent years of the market. 2008 has been the best year so far.

The Asset allocation played a very important role yesterday, else my portfolio would have also suffered big loss. It was one of the worst possible days for me when I was >90% invested (I am generally 60-75% invested). However due to mix asset allocation the effect was a minor 4% only.

Have fun and profitable trading, OP