OptionPundit

Category: OP Newsletter

  • A Year After That Momentous Day

    Exactly a year ago on Sept 15, 2008 before market opened, I voiced my final warning (first one being a mild one on Nov 23,2007) and suggested OPNewsletter subscribers to stay away from the markets.

    Markets futures are pointing to lower opening, in fact big gap down unless something “magical” happens before market opens. Few months back I had written a post about the general markets and where were we headed-
    https://www.optionpundit.net/market-psychology/where-are-we-heading-now-2

    I think the support points are still valid. If it breaks below 10,700, I’ll caution you to stay away from the markets…

    Markets will be very volatile…and maybe “panicked” as well…

    It was a very active forum thread (Only OPN subscribers can view this). Then on Oct 3rd, 2008 (5 days before massive decline) I wrote-

    Did anyone notice that ToS is not very reliable for very fast moving markets…or is it just me? did any one experience this optionstation/interactive brokers?

    markets are gyrating and difficult to make sense..I am watching for $4K mark on Transports and if that happens together with new low on dow, markets might be in serious trouble..

    Stay cautious, stay profitable, these days “return of capital” is more important than “return on capital”…

    On Oct 5th, 2008, when Dow was around 10K, I shared my view for Dow slipping toward 8,000, On 7th the transports closed below 4 k. Combined the two and guess what, little did I know that Dow is about to hit 8,000 level in just next 5days on Oct 10, 2008.

    For that month, we invested in only 1 income portfolio for Oct’08 employing only <8% of capital, thus avoiding a massive pain that was to follow soon. We are now climbing upwards. This month, we achieved another significant milestone.  On a capital adjusted basis, OPN delivered over +100% returns on capital invested/re-invested in OPNewsletter since Jan 2008  (x-commissions) while general markets are still trading well below the water level.

    A year has passed. A great story, a real time story is here (over 152 conversations were published between Sept 15 and Oct 14, 2008 ). If you are an existing OPNewsletter subscribers, grab a cup of coffee, sit back and read the real trading experience of real traders in real time in a real crisis that it was.

    Profitable Trading, OP

  • OPNewsletter Sep’09 +11.75%, Oct’09 (Opening Soon)

    83% capital invested, no major adjustment needed, almost 1/3 the number of contracts vs previous month, all the portfolios made money, OPNewsletter delivered +11.75% x -commissions and +10.43% including commissions. As good as it gets. We are starting to look out and analyze opportunities for October 2009 income portfolio. If you are not an OPNewsletter member and would like to join, pls sign-up for the waitlist here.

    Another free trade idea (BYDDF) is up over +25% since I posted here.

    A lot is going in the markets these days, but above all, I think a worth watching action is that of GOLD. Yesterday it crossed above 1,000 mark just to close below that level. Well, somehow, someone doesn’t want it above $1,000. Even though Dec’09 futures traded as high as $1009.7, it closed below $1,000 at $997.

    Dollar broke the support at $77.5 (USD index) to close at $77.26, not too far off though. It will be interesting to see how far it has to go before it reaches it earlier bottom support $71-72 area especially when reserve currency status is on shaky grounds. Read more- UN wants a new global currency.

    UN Conference on Trade and Development (UNCTAD) has said the system of currencies and capital rules which binds the world economy is not working properly, and was largely responsible for the financial and economic crises.

    It added that the present system, under which the dollar acts as the world’s reserve currency , should be subject to a wholesale reconsideration.

    I think next few weeks are going to be interesting especially this upcoming earning season has to deliver. It’s time to see whether or not the “green shoots” have grown bigger or did it turn into “Yellow weeds”; the economy has to prove this particularly if the “six month” hypothesis has any truth to it (that markets turns higher 6 months earlier than broader economy does).

    An interesting period ahead.

    Profitable Trading, OP

  • OPNewsletter Sept’09 Portfolio Up 11.5%

    An excellent option trading week, almost no major adjustments and no major market involvement. We increased our capital base by 20% from 69.39% capital last week to 82.97% this week. And OPNewsletter’s results increased from 4% last week to +11.47% thus gaining over 7% in a week and easily outperforming major markets. We have already surpassed our monthly objective of 5-7% returns. All the 5 portfolios are making money !

    To access the member’s section of the forum website, pls sign on with your own username and password.

    Special invitation for x-OPN members- If you would like to re-join OPNewsletter, you don’t need to pay wait-list fee and you will be able be join soon after sign-up (pls send an e-mail to OptionPundit@gmail.com for invitation link and code)

    If you are not a member and would like to benefit from OPNewsletter, pls sign-up for waitlist here.

    Profitable Trading, OP

  • OPNewsletter Aug’09 +7.8%, Sept +4% (Open)

    The Aug OPNewsletter portfolio was closed for +7.8% (x-commission) and +3.8% including commissions. To allow room for some conservatism, i have used some “not-so-good” fills from OPN members even if my actual fills are much higher; and this leads to skewing the portfolio to a conservative scenario. Some members might have in fact done even better than OPN. However, [b]given the extreme moves it is not hard to imagine that some of the members might not have been able to achieve similar performance this month[/b].

    There are a few examples- X 45/50/55 butterfly I opened for 1.24 but I counted 1.43 as shared by another member. I sold 44/46/48 butterfly upto $0.70 but I am counting $0.45. Similarly SPX 1035/1045 buyback was $1.25 but I counted $1.40 as shared by another member. In fact official SPX OPN portfolio closed for -4.5% while his was almost broke even. Similar things elsewhere in the portfolio. Then there was 560/570/580 RUT butterfly, those who kept it for speculative play were rewarded nicely (pls note officially we closed it earlier). It was gut wrenching, but in the end delivered great results. But that’s not the point, the point is that, this was a month where there will be variations in member’s performance depending upon buy/sell of hedges and execution timing, fills, etc.

    Net, while I am encouraged that we were able to navigate from a -15% to positive territory, I am not happy. I have tough standards for OPNewsletter and this is not a month that I want to have a repeat for OPN (more than usual trading).

    Market Measurement Jul Aug 2009Trending and explosive rallies like what we experienced from Mid July’09, are generally not the best friend for income trading styles especially for OPNewsletter types and on top of it, it hit at the time when we don’t want it. Last six weeks had been amazing. I covered the July update here. I am attaching a chart that covers both the periods. Notice X has gone up over 55% with several large corrections on the way. GDX first moved to 17% up, then dropped by almost 10% followed by upward moves of 11-15% followed by another correction on 10-15% and then again up. RUT has almost paired the gains where it was last week i.e. nearly 22% up and both S&P500 and Dow nearly 18% in last 6-7wks. These are no small moves for such a short period of time and if you add drop in IV on the way, it makes it even more difficult. Long time veteran traders can tell you while this may be good for directional traders (hindsight) it is tough for income traders. We had to adjust both RUT and SPX condors for almost one more std deviation and then close some.

    All these fluctuations added to more and more adjustments, particularly for GDX and X portfolio. Net we had to trade significant number of contracts for a assumed 10k portfolio which was way too much. Though it is a cost of doing business, I am not happy about it.

    There are two key learning from this month’s portfolio that I have started reapplying to Sept portfolio and hopefully you noticed those (those who opened September portfolios).

    Learning-1: While capital allocation is still a key, I will not be bound by 10K particularly as this limits my choice of portfolio selections. Why change- This is for 2 reasons. 1) commission/portfolio return ratio will be lower thus reducing cost and 2) This will require less number of portfolios to allocation roughly 60% of targeted capital (4-5) as opposed to 7-9 for lower cash outlay portfolios. However those who have 25k or above should still use sound allocation policy as per their trading objective, not necessarily as OPN’s.

    Learning-2: I shall try to send heads-up trade plans before market open so that members can plan for trading time or let someone place the orders for them, if needed. While this may lead to sub-optimum returns but still it might be better vs. panicking for fills. Pls do note though markets doesn’t always go the way as in pre-market hence sometime there will be ambiguity and it may turn out totally differently. I shall still send the message as soon as the trigger point is reaching so those who trade intra-day have an additional insight.

    We are fine and are up 4% in the very first week for Sept’09 OPNewsletter portfolio. We have utilized almost 70% of capital and have allocated it over 5 income portfolios. If you would like to join for the OPNewsletter, pls click here to sign-up for the waitlist.

    Profitable Trading, OP

  • OPNewsletter (Jul’09) +5.2% (Open)

    General Market Move Since opening of OPNewsletter Jul'09 portfolio
    General Market Move Since opening of OPNewsletter Jul'09 portfolio

    4th down week for the markets. It’s interesting to evaluate how underlyings have moved since we started our portfolios. X moved +1% to -23% and moved wildly. GDX moved from +3% to -11%, and all major market indices including S&P 500, DOW and Russell 2000 ended down, ranging from -5.5% to -6.5% (Ref point June 16th). On contrary, OPNewsletter, using 43.3% of capital is up +5.2% x-commissions.

    If you recall mid-June when we started our portfolios, the “green shoots” theory was gaining momentum (maybe still it is, but less so) and markets were making high. These pages on OptionPundit reflect my bearish bias. The problem with bear market is that you may know it is about to happen, but not sure of time. Hence we have to keep OPN portfolio to cater to upside moves as well. The strategy paid off.

    The above results don’t include returns on speculative trades of either VIX or RIMM, POT or Indonesia related Trades.

    I have been saying for sometime now Smiley I shall say it again-
    As I shared earlier, market internals are deteriorating day by day. I don’t know when will the tide turn upside down “big time”..I feel that March lows are about to be tested..if not all, then maybe a significant gains will since then might be reversed. If you have a long stock portfolio, you may want to erect defense lines while the IVs are lower and defense will be cheaper. For stocks, there is no harm in reducing the gains in order to protect and preserve capital. I’ll reinforce what I often say- Making money is not difficult, preserving it is.

    We shall soon be starting Aug portfolio. If you would like to join, pls click here.

    oNext week is an interesting one, as it has GOOG, IBM, HOG and some other great earnings’ play; option expiration is on Friday which sets it up for a highly leveraged opportunistic time. I may share some trade ideas via e-mail alerts to registered members. If you have not signed-up for free membership, you may want to join now.

    Profitable Trading, OP

  • OPNewsletter (Jul’09) + 2.64% (Open)

    DJI Market techincals Jun 28 09Overall an interesting week that it was, but I think there is more to come. On a weekly basis, it appears as if MACD and RSI are about to register sell signals. Mr. Market can go whichever direction it wants to, but hey, at the end of the day, this is all about probability. And as I interpret the current market data, the probability of markets going lower are higher vs probability of its rallying higher. Oh well, maybe that I am the only one still standing and claiming that it is bear market rally. The jury is still out there and soon we shall know what lies ahead as companies starts to announce earnings, and window dressing comes to a completion. Hedge funds who participated since March lows are up and probably have booked bonuses for the year.

    For overall OPNewsletter, we increased investment from 38.7% to 43.3% (for an assumed 10K capital). We are up +2.64% x-commissions and +0.68% including commissions. I usually aim for +60% capital deployment but overriding philosophy here is “preservation of capital is more important than missing a potential investment opportunity”. According to Lowry’s statistics, as I interpret, in spite of a very little change in the Friday close, the markets internals almost gave back whatever it gained during Thursday’s rally. It is a very interesting market; It is seems very different on the surface vs. what lies beneath.

    As I shared earlier, market internals are deteriorating day by day. I don’t know when will the tide turn upside down. If you have a long stock portfolio, you may want to erect defense lines while the IVs are lower and defense will be cheaper. For stocks, there is no harm in reducing the gains in order to protect and preserve capital. I’ll reinforce what I often say- Making money is not difficult, preserving it is.

    Let the week begin, there is more economic data this week

    Profitable Trading, OP