OptionPundit

Category: OP Newsletter

  • OPNewsletter May +18%, June +5.3% (Open)

    Another turbulent and volatile period! Last week started with a huge gap up rally after EU announced a $1trillion bailout package but by weekend it was a different story. Now there are questions on how solid it was. The confidence barometer, Euro, is now 4 years low and maybe even headed for $ parity as I wonder if EU will really step in to avoid Euro slide.  They should be pretty excited as EU economy may get much needed push with a weaker Euro. For OPNewsletter, we are 77% in cash. Remainder of the cash is invested across 3 income portfolio and we are nicely up +5.3% for June 2010.

    May 2010 was a record month for OPNewsletter. Since the beginning of Phase-2 of OPNewsletter in Jan 2008, this was the highest % gainer. We achieved +18% gains in May 2010. This is coming on the heels of 9.7% in April 2010. We also avoided market meltdown by going into cash before pullback really started hitting hard. These results don’t include returns on speculative trades like VIX (a few times), Google, ISRG, SLGN, and many more. Euro slide didn’t come as much of surprise too, as we had started anticipating this move when 50days EMA crossed the 200EMA for the first time in 18months.

    If you are not an OPNewsletter member and would like to sign-up, pls click here to sign-up for the waitlist as OPNewsletter subscription is open via invitation only.

    I have been covering market commentary on both OPDiscussion forum as well as on Twitter. Congratulations to all those who benefited.

    If I could make a suggestion, [b]pls don’t over trade this coming week[/b]; keep it simple and watch the show…just watch out for the two levels I mentioned ([b]Dow 10,300 and 10,700[/b]).

    There were a few trade ideas I shared in the Weekly OPN portfolio tracking; Look out for Silver (CEF, SLV). I think silver’s time is coming soon (how soon, I don’t know). Silver maybe more volatile then gold so you gotta be careful.  As usual pls do your due diligence before investing any single $$ into any stocks I/OP mention anywhere. Regarding Gold, congratulations to all those who have been permabull on this, it hit a new record high (but not quite high yet if adjusted for inflation). If you have sometime, pls do read the this link . This is a post I wrote in 2007 which I hope will provide a historical perspective of how far have we come since then.

    50DMA StocksFrom Market perspective, Internals don’t look attractive and it seems that this pull back still has a course to run. Whether this is a full blown Market Top or just a healthy correction in the on-going primary uptrend, we’ll know only in the Hindsight.

    Look at the attached chart of NYSE stocks that are trading above 50days moving average. The lows are getting lower, in fact recent correction had the lowest % of stocks trading above 50days MA in the last 1 year; including all the three pullbacks. The distribution days are increasing and 90% down days are also increasing which doesn’t paint a healthy picture.

    Here is what one industry veteran (Mr Richard Russell of Famed Dow Theory has to say) –

    Russell suggestion — Do your friends a favor. Tell them to “batten down the hatches” because there’s a HARD RAIN coming. Tell them to get out of debt and sell anything they can sell (and don’t need) in order to get liquid. Tell them that Richard Russell says that by the end of this year they won’t recognize the country. They’ll retort, “How the dickens does Russell know — who told him?” Tell them the stock market told him.

    He is of the view that one should monitor the two Averages ($DJI and $DJT) hit “spear point” lows, Industrials at 10380.43, Transports at 4298.12 and he considers these to be of extremely importance. If both Averages hold above their May 7 lows, it will be a bullish indication; If both Averages turn down, and one Average violates its May 7 low but the other refuses to confirm, that could be a very bullish sign; If both Averages break below their May 7 lows, it will be a very bearish action, and could predict a crash (the two Averages do not have to break on the same day, but the closer in time they both violate the May 7 lows, the more authoritative and bearish the action).

    Besides a 10,300 level that one should be careful about, I think hard rain is not coming until the averages drops below following levels-  Industrial at 9,835, Transports at 3,740. Though I am not an expert on Dow Theory, I would stay clear if Dow drops below $10,300 and will reposition to re-enter around 9,835 but with risk management plans in place, in case Markets drops further. If However, Dow manages to remain above 10,700, I think we might have run this pullback course; at least for now.

    Thank you all the positive feedback on “Financial Freedom” article. I am glad you liked it and that it could add some value to your existing knowledge. If you are not an OPNewsletter member and would like to sign-up, pls click here to sign-up for the waitlist as OPNewsletter subscription is open via invitation only.

    Trade Carefully, Trade Profitable, OP

  • OPNewsletter May 2010, +11.6% (Open)

    A painful week for worldwide stock markets. I think most are happy that it’s over and a new week has begun with a solid tone!!  On last Thursday, Dow suffered the largest point drop in a single day in its entire history. For OPNewsletter May 2010 , we are up +11.6% with 2 weeks to go. These results don’t include gains on speculative trades. (If you are not an OPNewsletter member and would like to sign-up, pls click here to sign-up for the waitlist as OPNewsletter subscription is open via invitation only).

    Here are some of the key highlights of OPNewsletter commitment over the past week-

    1. Almost 3,000 words written in OPNewsletter Member’s only section of the forum, on Friday alone (with key insights and tips)
    2. A rigorous follow-up with the senior management of one of top US brokerage firms to help find causes for platform failure and tips to reduce it in future
    3. Tons of e-mails replies,
    4. Provided suggestion for personal portfolios to some of the very old members (there is no additional $$ charge)
    5. Risk adjustment plans on almost all type of ‘what if scenarios” (of course there will still be few left)
    6. Provided significant protection plans for the May NDX condors at a time when NDX moved almost 250 points in a week (as much as preceding 2months’ equivalent move) and still come out profitable
    7. A lot of money making opportunities, when Mr Markets almost danced to OP’s tunes (Recall 10,700 and 10,300 points of Dow, just review my general market comments, tweet streams and past 10 posts on the OptionPundit blog).
    8. Above all, early warnings from as early as April 15th which on one hand saved losses from potentially going long, and for OPN we didn’t open new portfolios. The appreciation of early warning is always in the hindsight. The true power of this was observed in Sept’08 (it’s been almost 2 years and many traders are still rebuilding capital lost). I shall write more about this later.
    9. And by Friday, I also positioned OPN members for positive deltas especially on the MNX.

    I don’t know how many of you could really take benefit from all this, but this was one of the fantastic panic sell-off when almost $1trillion has been wiped out from the Markets and we could still do well. Every individual has his/ her tolerance for risk and greed, but it was a time when one equipped with the above information beforehand could have really make a lot of money.

    All the above efforts required huge time commitment (especially during the time when pain was reigning almost everywhere) and it limited my opportunities to personally benefit. In fact during this time, my personal portfolio took a hit but I was able to ride some on Friday and then positioned myself for a deeply positive Monday (2x SPX) (For reasons I shall share later in a separate post, so look out for the new post) and I hope to be net positive by coming week itself.

    Albeit, if nothing else, at least, with this note, I would like to take this opportunity to highlight the commitment OPN has for its members. This is also one of the reasons why OPN has limited number of subscribers. I sincerely appreciate the positive feedback that you send time to time. Pls continue to share your thoughts/feedback as it works as a fuel that needs to be refilled especially during such times.

    If you are not an OPNewsletter member and would like to sign-up, pls click here to sign-up for the waitlist as OPNewsletter subscription is open via invitation only.

    Should you have any questions, pls let me know,

    Warm regards, OP

  • OPNewsletter April +9.7% (closed); May +12% (Open)

    While markets are struggling to make any meaningful advance, for OPNewsletter, we are having another excellent month. We closed April’10 portfolios for +9.7% gains, and for May income portfolios, we are up +12% with 3 weeks to go. These results don’t include gains on speculative trades. Another point to note, these were also two months when I significantly upped investments allocation. In April’10 we invested 88% of capital and this month we invested 75% of capital. If one considers compounding effect, these income trades resulted in +18% gains on overall capital in just two expiration cycle alone (still 3wks to go).

    We achieved most of these results, by having plans in advance and shifting our option trading strategy in way so that more trading alerts can be sent before or after market hours to allow even working professionals to benefit.

    OPTweetsHere is a snapshot of my speculative trades (even for free ideas, just check the screenshot of my tweets). It was an excellent time to generate gains from Goldman Sachs (GS), Harman (HAR), Wynn Resorts (WYNN), VIX, Google(GOOG), Baidu (BIDU), Intuitive Surgical (ISRG). The only losing trade was McAfee (MFE) (we played it as a takeover rumor) which was also up +40% at one time.

    If you are not an OPNewsletter member and would like to sign-up, pls click here to sign-up for the waitlist as OPNewsletter subscription is open via invitation only.

    It has been over 3 years since OPNewsletter was first introduced. I am so thankful to all subscribers and a special thanks to those who have been with me since the beginning. It’s been an absolute pleasure and honor to serve this community.

    As part of my final phase of OP Brand development, I am discontinuing “No Profit, No Fee” business model after May expiration cycle and make it a fixed fee. Old members may recall OPN Phase-1 was introduced @ $28/month, Phase-2 @ $148/month. I shall continue to limit subscribers through waitlist so that we continue to have quality in the OPN besides obtaining fills for our trades; for new members, their first month will still be “No Profit, No Fee”.

    With this change, I hope to bring more value to OP subscribers via-

    1. Introducing multiple months’ strategies; tracking those on monthly basis is challenging as those span over various months.
    2. Introducing more opportunity via additional income trades; I often run out of the limit for a $10k model and hence I step back from suggesting new trades.
    3. Spending time on developing OP into a full scale Option’s boutique introducing trading options on futures, forex and add even other countries.
    4. Eliminate transaction time required in refunding; instead redeploy that time to find more opportunities.
    5. Spend more time/develop plans for speculative/directional trades as well.

    I hope to bring more and more value to OPN members and make it much more rewarding experience. Thanks again for your valuable feedback.

    OPNewsletter is still not about “make money” in 5min per day. It still requires one to think and act vs let robots do it for them (at least to begin with). There are no short cuts for making money, consistently. Making money is a hard work and requires one to be patient and to learn and continuously sharpen the craft.  If you are not an OPNewsletter member and would like to sign-up, pls click here to sign-up for the wait list as OPNewsletter subscription is open via invitation only.

    Though it is still an art to make 5-10% monthly on small capital, making rather big % on large capital accounts, consistently, is a completely different game. (How large are the investments via OPNewsletter Portfolio?). That’s what the aim is, so that even if you have a medium to large sum of capital from retail investor perspective, OPNewsetter should be able to help you make consistent income.

    Option Trading strategies used were Double Diagonal, Iron Condor, Iron Fly, Butterfly Spreads, Credit spreads, Calendar spreads, Vertical spreads and some more.

    If you are not an OPNewsletter member and would like to sign-up, pls click here to sign-up for the waitlist as OPNewsletter subscription is open via invitation only.

    Should you have any questions, pls let me know,

    Warm regards, OP

  • OPNewsletter April (Open) +9.8%, May (Open) +2.6%

    Though we shifted our option trading strategy in way so that more trading alerts can be sent during “pre and post market hours” vs during market hours to allow even working professionals to benefit, OPNewsletter is still not about “make money” in 5min per day. It still requires one to think and act vs let robots do it for them (at least to begin with). There are no short cuts for making money, consistently. Making money is a hard work and requires one to be patient and to learn and continuously sharpen the craft. OPNewsletter April portfolios are up +9.8% while May portfolios are up +2.6% (both are still opened). If you are not an OPNewsletter member and would like to sign-up, pls click here to sign-up for the wait list as OPNewsletter subscription is open via invitation only.

    Let me use an analogy on why I say making money requires discipline and hard work especially for new traders-

    Before one get to a earn say $5-$7k/month; an engineer need to go through 4 years of professional education including one or two summer projects before he is allowed to be even called an Engineer Trainee. Medical professional is required even much more rigorous training before one is allowed to even touch knives for first surgery. Then why do people think trading is any different if it were to give you $5-7k/month to start? It’s because the “barriers to entry” are almost nothing; give a call to a broker, he can do the paper work for you, set you up with an electronic trading account, help you personally to transfer funds and all set and most novice traders can enticed by the marketing sales pitch that you sign-up for blah/blah and you can make money in 5mins/day. It doesn’t take long before one starts to realize that trading is not easy as it seems on the surface (sadly after either account is wiped out or suffered a major loss) . Making big %  may be fine for small capital account, but when it comes to large capital accounts, it is a completely different game. (How large are the investments via OPNewsletter Portfolio?)

    Let me ask a question, assume you make $10k/month; assume a good job with perfect work life balance; assume you work for 40hrs/week, 4 wk/month, that’s 160hrs/month, and this your monthly profit before tax. Have you spent 160hrs before investing $10K in that “idea/hot tip”? If not, why do you expect results to be different assuming you are not a professional trader/investor and are not equipped with “investment/trading” training?

    More on this later. Let me comeback to OPNewsletter performance.

    One of the ways I manage OPNewsletter is through capital allocation. I use US$10 K as the model portfolio (I invest my real money in those portfolios, and then in some more) which I then allocate across multiple portfolios, multiple option trading strategies to diversify the risk.

    We invested a maximum of 88.15% of $10k this month; and April portfolio is up +9.8% as of Thursday close. I use maximum capital employed as a base for calculating results even though the cash is available through closure of some portfolio; thus my results are conservative. As of Thursday close, we have 28.93% cash from April portfolio; and 95% of this (~27.6% of 10K) is invested for May portfolio which is also up +2.6%; Net, we have 1.26% cash available from $10K and have both April as well as May income portfolios both of which are up as of Thursday close. Option Trading strategies used were Double Diagonal, Iron Condor, Iron Fly, Butterfly Spreads, Credit spreads, Calendar spreads, Vertical spreads and some more.

    If you are not an OPNewsletter member and would like to sign-up, pls click here to sign-up for the waitlist as OPNewsletter subscription is open via invitation only.

    We closed some April portfolios and then reinvested the cash into other portfolios for the same month or for the next month thus effectively multiplying returns on our money. To share an example, we opened FDX income portfolio with 9.5% of $10K capital; the portfolio was closed for +27% gains, part of the cash thus generated was redeployed for opening an Iron Condor for Russell 2000 (RUT) for May 2010.

    We had earlier opened Iron Fly of Nike (NKE), ATM butterfly on Pepsi (PEP) which resulted into +24% gains and +62.3% gains respectively and the cash thus generated was used for placing a hedge for our April NDX Iron Condor. The Hedge was placed on Thursday before market close to protect our portfolio against any sharp move might result from unemployment report. Thus by effectively managing the hedge, we are fine (short term) regardless how much NDX moves on Monday.

    To put things into a different perspective, if you were to go for a seminar/workshop to just learn how to trade Iron condor (and some other strategies we use) and how to protect those (theoretically), that learning itself is worth several month’s (if not years) OPN subscription fee.

    Portfolio insurance (aka Hedging) costs money (reduces returns) but that’s always in the hindsight. Just like insurance, you do it to safeguard against any disaster. You spend this money for the things you don’t want to happen.

    Our first hedge was against any sharp downward move that were to happen due to Health care bill being either approved or disapproved. Markets didn’t react thus we lost some money on that, but then we converted into a bullish spread and reduced the hedging expense. We could have still kept it till April expiration and completely eliminate the expense, but I chose to close it to redeploy the capital to open other portfolios for a better risk/reward ratio.

    Our 2nd hedge was against our Nike (NKE) income Iron Fly. This hedge cost us about 19% of the NKE income portfolio; but we still netted with a +24% return on portfolio. Excluding the hedge, the returns would have been above +42%. The portfolio still had potential to double the gains, but I decided to take it off before the unemployment report; when trading is a business, operating discipline is important and one needs to follow a plan to make money consistently. Speculation is fine but that has a separate place and completely different game.

    Not all the portfolios are winners. There are losing ones as well and the returns are net of winner and losers. In order to make money consistently one has to keep in mind that Profit Volume (=Winning Occurrence X $$ profit) should be greater than Losing Volume (=Losing Occurrence X $$ loss).

    I don’t count speculative trade’s returns into monthly returns. Even though we had >75% winners and sometimes fairly large returns than losers, the result probabilities before placing the trade don’t favor investing large amount of capital (more spec updates here)

    So far for the month of April, we have 100% success rate on speculative trades. Our BIDU bearish trade resulted into +17.6% gains for two days holding, SLGN (shared it for free) resulted into +26.9% gains for two days holding and we just opened a straddle on WMB.

    If you are not an OPNewsletter member and would like to sign-up, pls click here to sign-up for the waitlist as OPNewsletter subscription is open via invitation only.

    Profitable Trading, OP

  • Millipore (MIL) is offered $107/Share in Cash

    According to reuters MRK is buying MIL for $107 cash/ share. Congratulations to all OPNewsletter members or twitter reader those who played MIL directional speculative trade, a 3rd successful trade after PCLN and FSLR earnings play.  These are bonus trades that are not part of OPN performance calculation. For previous speculative trade’s results, pls click here.

    If you would like to enjoy both from Income as well as speculative trades, pls sign-up for the OPNewsletter waitlist. Pls read subscriber’s testimonials that might help you understand more about OPNewsletter.

    I have been updating in the OPDiscussion forum on how I was playing this trade. Here is the chronological order-

    Feb 22, 2010-

    There are two take over rumors CMC and MIL; rumors occur time to time; sometime true, at times not. You may want to assess and play accordingly. If you do decide, pls use only the money you can afford to lose 100% and sleep well…

    disclaimer—I forgot to mention..I am in both as I do play rumors, over a long run it does payout [for me at least] CMC (Apr 15/17.5 Bull call debit spread) and MIL (Mar 90 calls)…and i may change/close anytime as well..

    Then some OPN subscribers sold it for roughly 30% profits; I converted this into a backspread-

    Congratulations, now selling for almost $3.90, that’s 80/310 > 25% for a short duration ..do keep in mind when do u want to get out; in order to lock my profit, I have converted this into a backspread by selling Mar 85 call for every 2 Mar 90 calls. btw, there were news yesterday—> A spokeswoman for Thermo Fisher Scientific (NYSE:TMO) said Monday afternoon that reports the laboratory-instrument maker has made a takeover offer for Millipore (NYSE:MIL) are “definitely a rumor,” according to Dow Jones Newswires.
    http://www.mysmartrend.com/nw/19015

    I don’t know who to trust now, bloomberg or this corporate…my bias though is for bloomberg Wink take care, rumor plays are not easy ones to digest.

    And then I converted it into a reverse Christmas tree (Investopedia defines Christmas Tree strategy as one of option trading strategy that is generally achieved by purchasing one call option and selling two other call options at different strike prices. When drawn structurally, the strike price of the long option is located below the two successively higher written calls and loosely resembles a Christmas tree)-

    And here is the confirmed news-
    http://www.businesswire.com/portal/site/home/permalink/?ndmViewId=news_view&newsId=20100223007489&newsLang=en

    Recall what did the spokeswoman said “definitely a rumor”… over a period of time I have come to realize to trust media more, for rumors, than to listen to corporate execs (but that’s just me)…

    an update, I converted the backspread into a reverse “christmas tree” spread by buying more of Mar 95, also Mar 100s..net position as of yesterday close- for each 85 call sold (@$6), I bot 2 Mar 90 (@3.10), 3 March 95 (@1.75) and 2 March 100 (@0.85); so far the trade is doing good.

    CMC is not doing that well, as of yet, but I didn’t increase my exposure on that as I didn’t see share price movement on the upside, I shall be waiting till today..if there is no move up..I’ll book the loss on this one and move on

    Waiting for Millipore to open on Monday.  For OPNewsletter, as of last Friday close, we are up +2.5% on 62.5% capital investment (these results excludes gains on speculative trades like PCLN, FSLR earnings and MIL M&A speculative play).

    If you would like to enjoy both from Income as well as speculative trades, pls sign-up for the OPNewsletter waitlist. Pls read subscriber’s testimonials that might help you understand more about OPNewsletter.

    Profitable Trading, OP

  • Testimonial of the Week

    An interesting week. Major market indices broke their four-week-long losing streak this past week. Whether it is a pause before next downleg begins or resumption of the primary Bull market, remains to be seen. We opened 3 portfolios for March 2010 by investing 43.4% of portfolio capital so far. As of Friday close, OPNewsletter for March’10 is  up +4.9% x-commissions. If you would like to sign-up for the OPNewsletter, pls click here to sign-up for the waitlist.

    Here is the weekly testimonial and this is from one of the anchor OPN members, Sam Russo. Sam has been with OPNewsletter for now almost 2 years. During this period many interested visitors wrote personal e-mails to him to clarify about OPNewsletter. I am so much grateful to him for his kind words and patient replies to them; many of whom have become OPN members. Sam is not affiliated with OPNewsletter and doesn’t get any commissions etc. for referring. This is in the true spirit of helping other traders learn-n-grow together. Sam has not only helped other members but also helped me in improving OPNewsletter’s overall structure by providing continuous feedback. Thank you Sam.

    I have been an OP Newsletter subscriber for about 3 months. I’ve been trading options for 2 years.

    I am extremely Happy with my subscription. I have taken most of OP’s suggested Income Strategy trades and they have been overwhelmingly profitable. The ones I did not take, due to travel or just plain second guessing, ultimately turned out to be profitable as well. LOL.

    Most of the spec trades that I’ve taken have been overwhelmingly profitable as well.

    OPN differs from other Newsletters in that OP provides timely, suggested adjustments for his Income Strategy recommendations. He, or other subscribers, are quick to answer my questions. This keeps you in the trade with an expert assisting you, and teaches you how to trade these strategies at the same time. In addition, I have found OP to be very responsive to questions as well as feedback.

    I’ll be happy to answer any questions you may have.
    Feel free to contact me at smrusso@aol.com.

    Sam Russo
    Boynton Beach, Florida, USA

    Thank you so much Sam.  I appreciate your kind words and support.

    To read more testimonials pls click here or to sign-up for the OPN waitlist, pls click here.

    Profitable Trading, OP