OptionPundit

Tag: option trading

  • OPNewsletter Jun’09 up 11.7% (Open), Jul’09 (Opening Soon)

    Another turbulent but positive week for the broader markets. I sent out a note to OPN Subscribers and Basic Members (Free, till dec’09) that don’t trust the sharp rally post employment numbers. The rally did disappeared.

    Overall OPNewsletter gained almost 3% this week, we did raise investment capital by a few percent behind some adjustments. Overall OPN is up +11.77% (x- brokerage commissions) and +9.27% (including commissions). We have invested almost 60% of 10K assumed capital across various sectors and diversified strategies. As of Friday closing we have 44.11% cash available that we can start employing for July’09 portfolios.

    • RUT Iron Condor was closed for +23%
    • GDX increased to +7.95%  from +2.27%
    • X portfolio increased to +12.37% from +10% last week
    • UPS increased to+6% from -2.33% last week
    • IWM portfolio decreased to +13.3% from 17.78% last week
    • DIA increased to +19.6% from +3.4% last week

    So far 100% winning record on RUT Iron Condor wins since I reopened OPNewsletter in Jan 2008. That is “Consistent Income” from option trading. The above returns doesn’t include returns on speculative trades on POT, GDX and GMCR.

    Though we are short delta, Theta and Vega are in our favor. Just one more down leg in the markets and our results will significantly sweeten by few more percentage points. But again, hope is not a strategy. Believe it or not, market internals are deteriorating day by day and the surprising thing so far is that it is still holding very well. I have been trimming my personal stock holdings as lot of those increased significantly over past few weeks. The only major holdings where I still continue to hold (or rather increase on every pull back) is gold. But pls don’t follow it without full due diligence as gold trading is not for everyone.

    If it walks like duck, if it quacks like duck, it might possibly be duck. The markets are showing symptoms of “Bear Market Rallies” so I shall count for higher probability on that. But as I always mention, be prepared for this rally as a “bull rally” too. Anything can happen and a true market participant is ready for both possibilities.

    Trade carefully, Trade profitably, OP

  • OPNewsletter Jun’09 is up 8.6% (Open)

    A turbulent but positive week for the broader markets, as well as for OPN. OPNewsletter is up +8.6% (x- brokerage commissions) and +6.6% (including commissions). This excludes returns from bonus trades on GDX straight calls, GMCR and POT. Though we have started generating credit thus increasing the cash portion, we are still assuming 57.3% of 10K as maximum capital invested to calculate OPN results. 10K is a model capital, but these are pretty much scalable to several times.

    Sectors include – Steel, Gold, Transport, Overall General Market and Strategies include Iron Condor, Calendars and Covered Calls.

    • GDX is down from +5.3% to +2.27%
    • X is flat +9.6% last week to +10%
    • UPS is up -5.11% last week to -2.23%
    • RUT Iron Condor is up from +18.27% to +22.12%
    • IWM is flat 17.78% last week to +18.28% this week.
    • DIA is up from +3.4% to +6.6%

    This doesn’t include returns on POT (>+30%), GDX (almost double) and GMCR(>+5%). If you would like to join OPNewsletter, pls click here.

    I shared another free trade idea [those who are either Basic Member (Free until Dec’09) or OPN Members received the alert] on Moody’s (MCO) which is also in positive territory inspite of MCO moving up.

    My Bias- I am still in the bear’s camp but I am also doing selective buying.

    Have a great weekend, profitable trading, OPПодаръци

  • OPNewsletter Jun’09 is up 7.34% (Open)

    OptionTrading|Recent Market MovementA week in which Dow moved between +2.5% to -1.75%, S&P500 from +3.25% to -1.5% and RUT from +4.75% to -1.50%, and all closing in negative territory, OPNewsletter gained +2% that too after increasing capital investment by 36% over last week. Overall OPN is up +7.35% (x- brokerage commissions) and +5.3% (including commissions). This excludes bonus trade gains from GDX straight calls, GMCR and POT. We have invested almost 57.3% of 10K assumed capital across various sectors and diversified strategies.

    Sectors include – Steel, Gold, Transport, Overall General Market and Strategies include Iron Condor, Calendars and Covered Calls.

    • GDX is up from -2.27% last week to +5.3% (and BTW GDX moved almost $5 in last week, and those straight speculative calls might have doubled)
    • X is up from -1.15% last week to +9.6%
    • UPS is down from +3.88% last week to -5.11%
    • RUT Iron Condor is up from +9.6% to +18.27%
    • IWM is up from +12% to +17.78%
    • DIA is up +3.4%

    This doesn’t include returns on POT (>+30%), GDX (almost double) and GMCR(>+5%). If you would like to join OPNewsletter, pls click here.

    This 2nd leg of rally since early May has been characterized by thin volumes. The volume is increasing on the down days and reducing on the up days, showing signs of increasing market fatigue and probably some degree of further market weakness could be ahead. Will a limited correction be followed by another attempt at new rally highs? Or, is it possible that a decline back to the March lows, or below, could occur in the weeks or months ahead? As Market Veteran Richard Russell of Dow Theory says- “Dollar down, bonds down, gold up, it all fits together — trouble.”

    We’ll address more issues when market returns to full trading volume post long weekend holidays.

    Profitable Trading, OP

  • Show Me the Volume

    I hope you benefited from the 3 free trades ideas I shared with the Basic Members of OptionPundit (You may signup for the basic membership that is free till Dec 2009).

    • POT Trade was closed for +35% within two days. Here is the e-mail I sent to Basic Members-

    POT is having tough time crossing $115, volume has also been declining for past several days on each rise. A bear debit vertical spread (Jun Put 115/105 or 110/105) for 1-2% of capital maybe a good speculative idea to play a pull back. (This is not for official OPN trades)

    • Earlier I mentioned about GMCR, though it has not fallen much since that post, The Covered Put Strategy is already making money and has potential to deliver nice profits.
    • This was another trade on GDX that has almost doubled since GDX crossed $39 (Assuming one had near OOM calls)-

    Here is another thought for a potential trade- I am generally bullish on gold (and been vocally so since Bernanke cut his first interest rate during late 2007 and I called out, in Oct/Nov’07, potential bear market ahead). $39 is a resistance area for GDX and so is about $1000+ for Gold. If you have risk appetite and capital that you may afford to have losses on, get into straight calls for either GLD or GDX. Gold hasn’t seen the mad rush yet and I think next leg lies ahead of us. But don’t be greedy and risk only what you can afford based on appropriate capital allocation.

    If you would like to sign-up for the Basic Membership, pls click here. If you would like to sign-up for the OPNewsletter, pls click here.

    A lot is going on. The short term rally from the May 15 low has been driven by low volume. Typically, low volume rallies seldom succeed in extending price gains.  At the same time though, in order to confirm the extension on this fall,  the index prices would need to decline to below their May 15 low, creating a lower low, preferably on increased volume.

    I don’t think much will be achieved today as a lot of traders might be staying away due to long Weekend. Prices may move in either direction but the true underlying trend will become clearer post holiday next week.

    UK is on negative watchlist. Ratings agency Standard & Poor’s lowered its outlook on Britain to negative on Thursday, citing government debt that would be hard to rein in and political uncertainty about the policy response with an election looming. The agency affirmed Britain’s ‘AAA’ long-term and ‘A-1+’ short-term sovereign credit ratings.

    Is US about to lose or even put to “negative” watch list? The dollar dropped to its lowest level this year this morning and was on track for its biggest weekly fall in two months on concerns about the AAA-rating status of the United States. T he dollar index is on the verge of breaking down through the 80 level. There might be some sort of support here for dollar but nothing is sure in this environment. This fall is giving some temporary boost to Agriculture and commodity related stocks (POT, CF, AGU, MOS).

    A mix picture, is it the beginning of the new leg down? is it just a pause for the Bulls? And many more. Hope for the best but prepare for the the worst case scenario i.e. What if the light at the end of tunnel (or call it green shoots) is another locomotive?

    Trade carefully, Trade Profitably, OP

  • OPNewsletter – May’09 (+9.48%), Jun’09 (Open)

    OPNewsletter closed May’09 for +9.48% x-commissions and +6.76% inclusive of commissions. As I stated earlier, after many months of waiting, we crossed our 60% portfolio investment target. It’s always an advantage if the capital was preserved. Yes we did have a few months of low returns, but that preserved capital is an out performance (vs general markets) already and now we can start using this preserved capital for further gains vs. wasting energy in recouping the losses. Just 1 single covered call (X) was more than enough to cover OPN fee  (and triggered no adjustment needs).

    Sign-up for the OPNWaitlist here.

    Maximum investment incurred was +64.4% (reached on April 23) and since then we continued to use that as basis for returns calculation even though we were generating credit since then for the next two weeks. Here is the tally-

    • IWM, USO and UPS were almost breakeven
    • USO was closed for +0.8% (after Mar @ >+22% and Apr@>+13%)
    • GDX closed for +18.38% in May
    • X closed for 23.29% gains
    • HAL was closed for +22.69%
    • AMZN was closed for +15.83% and
    • IBM was closed for +23.01%

    This doesn’t include bonus speculative trade on Visa earnings (V) that was closed for +35%, CSX , GS, GOOG and others some of which didn’t make much money or closed for breakeven. We have already opened our June’09 income portfolios and invested almost 35-38% of capital. After a few months gap, we opened a 160 points wide RUT Iron condor for $2.20 credit which is already making money in two days.

    If you would like to join OPNewsletter, pls sign-up for the waitlist here.

    Profitable Trading, OP

  • What’s Next for Stocks Markets and Me

    So we are having a great rally. It doesn’t seem like it wants to pause. If Dow is up this week, it will be up 8 out of the last 9 weeks. Wow, what a complete reversal of a downward trend that we had been observing since last year. What an extended overbought period. The bears, including me, have been waiting for a pause or correction which seems not to take place. The stock markets are currently behaving like a shock absorber and nothing seem to discourage bulls. All well, till it is not.

    A lot of my personal holdings are up sharply over the past few weeks. There is a big margin of safety in those holding but those have risen just too fast that now I am scared of these gains and starting to book profits and probably reenter after a few weeks.

    If you are looking for what some of the prominent thinkers think, here is a good piece of advice from good experienced Richard Russell-

    What to do? I’ve done a lot of thinking on this question, and my conclusion is as follows — hold a fairly large quantity of physical gold (coins), hold cash, hang on to your house, and you might even buy a bargain-priced foreclosed home if you wish — but above all, cut back on unneeded expenses (cut back on coffee, vacations, movies, fast food, and other non-essentials). Cash is for deflation if it continues, gold is insurance against future inflation, a bargain-priced foreclosed home is good value and it’s also a tangible asset.

    That advice is coming from a market veteran who has been observing markets for almost 5 decades and have first hand experienced The Great Depression. Below is what John Hussman thinks? He is one of the value investing fund managers whose market insights I read quite often-

    Are stocks in a bull market or is this still a bear market? Frankly, I don’t put much energy into that question. The S&P 500 has now corrected about one-quarter of its prior losses. Bear market corrections of about one-third are not unusual, but I wouldn’t bank on that. Having failed to do anything effective to mitigate the second wave of foreclosures that is set to begin later this year, and seeing very little sponsorship in trading volume (despite good breadth), my impression is that we most likely are in a strong correcting rally in the context of an ongoing bear market. At the same time, cash-equivalents are yielding next to nothing, so it’s unclear to what extent investors will decide that stocks are their only real alternative, which might allow a continuation of this advance.

    I am not including the bullish perspectives as I am bearishly biased. The internet, every business website, analysts sites and almost all the stock newsletters, are filled with bullish calls from tons of market analysts. Oh btw, do remember, a lot of them never saw the meltdown coming. There are stock upgrades left, right and center. An enthusiasm is on and it seems retail investors are on shopping spree aka bottom fishing.

    What do I think-

    My desire to get into this rally is getting stronger and stronger, at the same time, “hindsight bias” of missing rally, by not investing in bigger way,  is also making it irritating, at times. If it is forcing even myself to think my view again. I take this as a sign of retail public entering into the market (no co-relation and there is no statistical data to prove this). I am being requested by many if I would be willing to manage their money, including those who can’t even spell “stocks” properly (don’t worry they know English well), which I interpret as “trouble ahead”. I think of it as on-going correction in a primary bear market trend that has not run its course yet.

    I have different investment strategies in place. Separate for stocks, another one for Yield and last one for options & futures. These fall into “Stocks and Options” asset classes. Gold etc constitutes other classes.

    I am beginning to book my profits on the stock holdings and collect cash. I wanted a market turn-around but I didn’t want such a quick and violent rally. The returns are generated in such short span vs. a few years time i would expect. The rally is now overextended and I am not going to be opened to Mr. Market’s mood. All indicators say time for a turn, but guess what “Markets can remain irrational longer than I can remain solvent”.

    For Options & Futures, large portion is based on OPNewsletter strategies and I am fully invested there, as per OPN’s objective of about 60-70% investments. This was after a long time and I shall continue to remain invested using OPN strategies. However, depending upon indications of deterioration or accelerations, we might choose to add straight calls and puts. The overall strategy is bearish bias. (Sign-up for the OPN Waitlist here)

    So ladies and gentlemen, all I can say is that it is time to “stay very cautious”, the optimism is running very high, and these are times when everyone else but Buffet and a rare few more is positive, and often that is the time to off-load garbage.

    Choose the strategy that works for you. Don’t give your hard earned money to any “managers” unless they can show you that they deserve it. Ask them for their performance record of past 18months and judge yourself.

    Trade carefully, Trade Profitably