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  • Is Crude Oil Bottoming?

    Crude oil has fallen more than 50% since May of 2014. It is now approaching a 15 year supportive trend line that can be traced back to 1999. This line says that support may be found in the vicinity of $45-$47. This is also a price range OP has been mentioning on his tweets. As I write this, oil is trading at $48.26. We are very close.

    Is Crude Oil Bottoming?

    However, we have not seen any price action that says the buyers are coming back. If this trend line does not hold, the next target will be $40.

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    As crude oil moves into these regions of significant support, the risk reward of shorting oil becomes less and less attractive. I will be looking for a bounce or some form of consolidation over the next few weeks.

    Cheers,
    Ethan

  • OP Income Newsletter Dec’14 +4.8%, Jan’15 +1.3% (Open)

    Dec 2014 was, what I call, a “mis-direction” month. First there was a pullback leading some to believe that this year Santa may not visit with plenty of gifts, then on Dec 16th, SPX found a support and powered another rally taking SPX to new high around Christmas. After hitting the upper resistance line at 2095+/- SPX gave back all the December gains and then some more. However, in spite of such a roller coaster month, OPNewsletter Dec portfolio delivered +4.8% gains. And even though SPX has dropped almost 100 points during the past week, our Jan’15 portfolio is already up +1.3% and I am adding more portfolios.

    2015 is going to be an interesting year for Options traders. I expect higher vols vs what we have seen in recent past giving us, the options traders, much more advantages. There are few unique strategies which will be more viable in 2015 then those were in 2013/2014. Besides, next few weeks might bring some incredible opportunities for those who are prepared.  OPN 2015 portfolios will also see some additional strategies that I have experimented with in 2014.

    All in all, if you are an OPN Member, get ready for an interesting 2015.

    Depending upon Technical or Volatility reasons, OPNewsletter trading ideas includes IRON CONDORS, CREDIT SPREADS, CALENDARS, STRADDLE, STRANGLE, DOUBLE CALENDARS, BUTTERFLIES and much more.

    Wait-listing fee is currently waived. NO Profit, NO Fee* offer is still applicable and if you sign-up now, you will have immediate access to all the 20,000+ historical posts, thousands of historical trades with real-time adjustments, market commentary and so on. You will also have access to numerous educational resources.

    Here is a customer feedback on how was his experience with OP Income Newsletter (you may kindly read more here)

    I have been trading for about 16 years witnessing my capital being managed by different brokers. Some brokers were purely option traders and others were stock fund managers. I have had both very good years and bad years but progressively the good years have being vanishing. Last year I decided to start working more aggressively to learn different options techniques and put them to the test. In my search for knowledge I came across the Option Pundit website.

    On my first month of trading with OP, I made enough money to pay my annual subscription and provided a good boost to my portfolio. Option Pundit is well tuned with the market and exhibit option trading techniques far more sophisticated than my previous options brokers. I am also very impressed with the caliber of many forum members who constantly add valuable comments and information. My experience these first two months with OP have being very enriching and rewarding.

    Luis González
    Thousand Oaks, California, USA

    If you would like to know more, or should you have any questions, please feel to write to us at Ask@OptionPundit.com

    To succeeding together,
    The OptionPundit Team

  • A Trader’s Second Most Important Virtue

    Stay Hungry, Stay Foolish

    In the first part, we reviewed VIRTUE OF PREPARATION i.e. that the very first quality to succeed in financial markets is PREPARATION which includes everything e.g. know-how, practice, patience and continuous improvement process for increasing your odds of success.

    Once your are well prepared, the next quality that will shape a trader’s success is PERSEVERANCE.

    So lets understand what perseverance is and then I will explain how it is linked with succeeding in trading the markets.
    per•se•ver•ance
    noun \ˌpər-sə-ˈvir-ən(t)s\

    Perseverance is the quality that allows someone to continue trying to do something even though it is difficult …or saying differently steady persistence in a course of action, a purpose, a state, etc., especially in spite of difficulties, obstacles, or discouragement.

    At times, many people confuse persistence with perseverance. While both persistence and perseverance require discipline, focus and determination, Perseverance is much more than just persistence. Yes, you would need persistent desire to succeed, to stick to your preparation and to follow through your plan! Mr Market will toss your trading around. One day up, another day down and you will most likely see losses first before seeing consistent profits. You have to have that burning desire to succeed. And thus you have to have persistence.

    (OPN subscriptions are currently open, If you would like to join a POWERFUL, PROVEN AND PROFITABLE trading ideas newsletter, please click here).

    However, wrong persistence will lead to frustrations. Sticking to your unproductive actions and doing the same thing over and over again without learning from your mistakes will turn out to be a recipe of disaster.

    Persistence is a skill whereas perseverance is a virtue.

    So how do you PERSEVERE? Let’s take it step by step.

    It all starts with the PURPOSE.

    Your purpose for trading and goals will provide you with a strong desire to achieve. As I like to say “Discovering WHY will lead you to HOW“. That purpose driven, persistent desire to achieve your goals will allow you to persevere.

    OP Income NewsletterNo matter what others would like you to believe, the fact is Mr Market is brutal and doesn’t care for anyone. There will be ups and down. There will be irrational days questioning even the best systems or strategies you had in your toolbox. You might see Murphy smiling at you. Times when nothing seems right. During such moments, it is that PERSISTENT DESIRE to succeed that will keep you going. Trading/ Investing or Financial Freedom is a long journey and one needs to persevere through this tough journey by continuously working on what’s working and removing what’s not. I would like to quote Dev for one of the best definition of PERSEVERANCE

    Perseverance is persistence applied towards positive outcomes.

    I have done my share of mistakes, plenty in fact and it is still an on-going journey. It is the persistent desire, to continuously upgrade my skills to deliver best ideas for OP subscribers or train new traders so they can see success they never saw before, which keeps me going. It’s not easy but it’s not impossible either.

    Your positive feedback adds motivational fuel to my desire too taking it to the next level.

    PREPARATION and PERSEVERANCE are the basic building blocks that are going to determine your trading success. Well not just trading, but almost any business you are going to get into. The third virtue is specially true for trading or investing business. Without this 3rd virtue, both preparation and perseverance will dry out after sometime.

    (OPN subscriptions are currently open, If you would like to join a POWERFUL, PROVEN AND PROFITABLE trading ideas newsletter, please click here).

    What do you think? Share your thoughts or your personal experiences where you found these virtues to be of utmost importance. What else did you find to be very useful to be a successful trader?

    Profitable Trading, OP

  • 3 Things You Need To Know To Be A Successful Trader

    3 Things You Need To Know To Be A Successful Trader

    So you think you can trade? Many traders, especially the beginners tend to think that trading is easy.

    Attracted by glitzy returns promised by various marketing campaigns, new traders tend to think that investing or trading is going to be an easy money making machine. And I am often asked why is it so?

    One of the key reasons is that contrary to traditional business, it is much easy to start a trading business. Have extra cash, open a discount brokerage online account and voila, you are all set. Money rolling in!!

    The reality is much different. Ask any experienced trader and he is going to tell you that trading is probably the toughest thing you will do for an easy life. There is no doubt that many traders have made a lot of money, much beyond what one could do from day-to-day job, but this also a fact that even professionals find it difficult to trade market. Ever heard of Warren Buffett’s famous bet where he says that majority of the professionals can’t beat simple S&P500.

    I personally think that one needs to experience at least one full market cycle before concluding that trading business is yours. In current market cycle term, it means having at least about 7 years of experience i.e. Bear market of 2007-09 and then bull market from 2009 onwards. While some may say this market is different from XYZ times, yes it maybe but just like any other business trading and investing also boil down to some common attributes.

    It goes without saying that in order to operate a business successfully you need to understand it well i.e. all inputs, all the levers that control the output. Be it things like why should you trade, which market, long-term or short-term, which strategy and why, which broker, which system and the list goes on.

    (OPN subscriptions are currently open, If you would like to join a POWERFUL, PROVEN AND PROFITABLE trading ideas newsletter, please click here).

    I have been searching to find what makes a good trader, what allows some people to excel, while others continue to languish? In this quest I have been talking to many successful traders and based on my research and conversation, I have summarized into three human qualities. The good news is that all three can be learnt. The bad news is that you have to TAKE ACTION.

    So lets get started.

    (more…)

  • 30 Year Bonds, Which Way Forward?

    Scottish Poll Results #ScotlandDecides will be available tomorrow. The GBP condor trade idea can now be closed for +50% collection of profit in just two day. If you followed it, please close the trade and book your profits.

    Now over to the the 30 Year bonds.

    The 30 Years Bonds futures are trading at 136.06 (as of this writing), testing an important support level at 135 which has been very well respected as both support and resistance multiple times since 2010 very obvious if you look at the attached weekly chart.

    Bonds, Which way Forward?

    Right now, I am bearish bonds. There are 2 reasons for my bias:

    1. One, recent weeks’ price action has been very weak
    2. Two, I am not seeing strong commitment from bulls even though price is testing a strong level.

    Should price close below 135 at the end of the week, I would look for a setup to go short and update to IFO subscribers. NO action, unless price confirms.

    If you are not an IFO member and would like to join our Income via Future Options Newsletter, pls sign-up here.

    Regards
    Ethan

  • Scottish Referendum – Opportunities for Options Traders

    Scotland’s independence will be determined by Scottish Referendum poll results on 19th.  Polling stations in Scotland will be open from 7am until 10pm on Thursday 18 September for the public to cast their vote on independence. A key question before determining any trading opportunity is when will Scottish referendum result be announced?

    According to The Guardian–

    “The unofficial estimated time of the result is around 7am on Friday morning, but the lack of precedent makes this hard to predict.

    All these timings are based on Edinburg timezone. In order to check timing on global level, you may want to use this world clock.  Counting starts when the polls close at 10pm on Thursday 18th so early results could trickle in from around 1am and best guess will be that most of the results will pour in from 3 – 6am. Whatever it maybe, assume that from 10pm on Sept 18 till 7am Sept 19th, it will be volatile.

    So what does Scottish independence mean for Option Traders? Are there any trading opportunities for Option traders?

    British Pound Movement (Past 2 years)

    Attached chart shows British pound weekly movement for the past 2 years.

    During the past several years, markets have gone through multiple crises e.g. Greek (Euro exit) crisis, The fiscal cliff, Cyprus, Euro Crisis to name a few. The QE infinity taps were open and nothing really mattered much in-spite of lot of noise before the event. Will it be different this time? I don’t know.  What I know is that currently implied volatility of British Pound aka cable (GBP) is at record high levels. Options are pricing roughly 2% or 350 pips move in either direction. Dec futures are trading at around $1.62 level as of this writing and thus based on implied move that range is $1.59 to $1.65.

     

    (Click to Sign-up for OP Monthly Income Newsletter. Subscriptions are Open currently)

    Based on the currentl IVs, here is a trade I am envisioning-

    • Sell to Open Weekly 6b Futures 166 Call
    • Buy to open Weekly 6b Futures 167 Call
    • Sell to Open Weekly 6b futures 157 Put
    • Buy to Open Weekly 6b futures 156 Put
    This will generate $0.0020 credit (Multiplier is 62500). The options expires on Sept 19th i.e. Friday i.e. the day of Scottish Referendum Poll Results. If however, the trade is already profitable, before the announcement, you may want to book profits beforehand.  The risk is to lose $0.0080 thus reward/risk of this condor is 1/4.
    A watch-out though- before you follow this trade make sure you know how condors work? make sure you understand how future options work and also make sure you have a full plan before entering into the trade. Even though this is a high probability set-up to keep $1, there is also probability of losing $4 that every $. There is NO FREE lunch.

    Disclaimer- As of this writing I am in GBP condor trade (different strikes as I entered into it last week). I also have other GBP trades. I might open, change strikes, close etc, anytime without prior notice. AS ALWAYS, All e-mails are for educational and entertainment purpose only. These are NOT trade recommendations. You should do your own due diligence and follow your own trading plans.