May 17, 2012

Yesterday

Another day as the previous with the market opening, then selling off, only to get back much of the losses. The VIX closed at 22.27% (POT people, look for your paper trade in selling premium). Interest rates are falling as bonds keep climbing, while commodities keep falling. Though oil is falling don’t expect any significant drops at the pump as it appears gas only goes up regardless of crude prices.

Today

Tough call. The market is set to open unchanged to slightly higher (less than 10 Dow points). AAPL closed at $546 and change, almost $100 points off the highs from a month ago. This might be a point where we start to look for a bullish position with limited downside risk (i.e. convoluted, unbalanced condor, etc.).

If I had to guess..the market opens a tad higher, sells off, and then recovers somewhat – only because that is the recipe for the last 3-4 days.

Practical Option Trading

Great session last night, and I managed to keep it to 90 minutes for the first time in MANY months.

Repeating last night, you will be receiving a 17+ page write-up on CONVOLUTED SPREADS shortly if you were part of the POT class during the 4 weeks we taught it.

You have received an update about the premium selling. You will get another update about the expiration play with Jelly Rolls shortly.

May 16, 2012

Good Morning!

Yesterday

Yesterday was a bi-polar day. Every rally higher simply failed. Yet, when the time for a hard selling seemed inevitable the market recovered.

The VIX closed a smidgeon under 22% (21.97%).

Today

Prior to 8:30am (eastern) economic numbers the S&P 500 futures were up $7 and the Dow futures were up 58. In addition the US Dollar was showing the first signs of weakness in 12 trading days. It is semi-critical that the market stays higher today. If it can not sustain any gains things may get a tad weak with the Dow going after 12,500.

Housing Numbers

Increase of 2 ½%. Permits were down to 715,000.

I have no idea why anyone would build a new home right now when existing homes can be bought cheaper than the land and materials.

After the numbers the E-minis ticked up a tad only to settle back to a net change of up $7.

AAPL is looking up $2

Practical Option Trading

Every Wednesday at 7:00pm eastern is the practical option trading class conducted online. This is a mix of education and showing/following paper trades designed to learn what a trader is faced with on a daily basis. This is becoming one of our most popular products, much to our surprise as we are proud of our materials.

Tonight’s Topic:

Money Management Guidelines which will lead into Slow Summer Trading Techniques. This was voted on, and futures and futures options will be postponed to a time where it is more appropriate – perhaps the next time the VIX is above 30%.
Thank you so much for your votes on the topics, and always remember that you can make suggestions, comments and concerns: POT@RandomWalkTrading.com

Live Trading Session

I want to thank everyone who participated in last week’s LTS1. We made an adjustment in VTUS yesterday and it was filled at $0.80. We are doing another LTS in July in time for AAPL earnings and a convoluted there. If interested see the website for early enrollment details.

May 15, 2012

It’s always too early to quit.
Norman Vincent Peale

Good Day!

Yesterday

A delightfully fun sell off yesterday. It was strong enough to create a spike in volatility with the VIX closing at 21.87%, but not so strong that it felt as if the markets were going to fall apart. The Dow closed at 12,695 leave people confused about a rally back up, or the next stop being another 195 points lower to test 12,500.

Today

The market is looking 79 Dow points higher with the E-minis up $10 (8:30am eastern).

Facebook

Facebook has their IPO on Friday. I think I will pass on any attempt to purchase shares. Sure it will likely have a nice pop on opening day. Sure, it might run for a couple of days as the lemmings run for it. In 5 -10 years Facebook will be gone and replaced with another social networking site. Keep in mind that the majority of IPOs trade under the IPO price within 1 year of opening.

US Dollar

Today is the 12^th straight day of a rally in the US dollar with weakness in commodities. Much of this is that despite our delicate economy, fears in Europe are making the US a more attractive investment.

Practical Option Trading

The votes are coming in on tomorrow’s topic. Many are wishing for continuation of money management, while others are wanting to venture into new territory with futures options. Right now it is definitely slanted towards the regularly scheduled program.

Live TradingSession
We showed an example of the short VTUS put spread for the “5-Year Millionaire” strategy, and sent an email last night about taking a profit and rolling. See your update on this.

Monday May 14, 2012

Good Day!

I used to hate the weekends, and live for the trading days to start. With age I have learned to enjoy both.

We hope everyone had a delightful and relaxing weekend.

Today

As I have mentioned many times in the recent weeks, when we have a bearish open the media simply attributes it to Europe. Bullish moves are attribute to favorable earnings from a stock, no matter how insignificant the stock is. Today is no different.

The Dow futures are down 100 points (8:40am Eastern) signaling an open right near support levels of $12,750. The VIX closed at 19.89%, and should open near 21% (estimate). If this level holds it will be a great vega play (a la Iron Cockroach, iron condors, etc.).

Real Culprit

Market participants. Whatever the news was (for the most part) the markets would be doing the same thing as they are now. We had a Dow hit 4 year highs 2 weeks ago, and they were withing 900 points of the all time highs. We breached the 13,000 barrier, AAPL broke above $600, and PCLN was almost at $700. Profit taking was bound to happen at the first sign of weakness.

Government

Once again nothing is so bad that the government can’t get involved and screw it up in the name of making things better. After the $2Bln trade loss of JP Morgan Chase last week, now senators are calling for hearings about the trade – as if any one of them would have the most remote chance of comprehending what happened. Jamie Diamond is likely only up to speed on the trade after a weekend of intense study. What chance does a senator whose previous career was selling real estate have in understanding multilayer CDOs?

Yet, policy will be made which will always be punitive to the markets, thus crippling the economy even worse. If only they had hearings on their own corruption perhaps the American people would actually have restored faith in their elected officials. Perhaps one day parents will want their children to grow up to be President again. I would rather have my kids manage a brothel, and it appears my son is well on his way to achieving that goal!

Sacrificial Lamb

Expect someone to get paid huge amounts of money to be the “real culprit” on the $2bln loss, and be let go, take retirement, etc. Jamie Diamond is a brilliant and calculating man. He will come up with a way of also making amends while distancing himself from the problem. Perhaps $1 in salary this year, etc. Just a prediction that may not come to fruition.

YAHOO

Scott Thompson at Yahoo is exiting over a scandal concerning a resume only Disney’s creative department could create. The only thing he has not done in his career was mission specialist for NASA and gynecologist at the Mayo clinic….but I have not seen his most recent edits to the resume.

Practical Option Trading

Great session last week, despite it taking 2 hours and 15 minutes. Though the webinar is scheduled to last only 60 minutes, we never end a session before a complete thought has been presented.

This Wednesday (7:00pm eastern)

Please vote on what you would like to see this week by sending an email at POT@randomwalktrading.com. Unless overturned by vote the class will focus on futures options (VIX options, E-mini options, currency options, etc.).

Live Trading Session

An update is coming on the current positions after the weeklies have expired. Don’t forget these are all paper trades and NOT intended to be anything other than an education example. Please do not trade off of this.

May 11, 2012

Good Day!

Media

This year has had up days and the media attributes it to an economic recovery. The market goes down and the media attributes it to a weakening economy. Today the market is looking down for a new reason.

Jamie Diamond – In the Rough

JP Morgan Chase is taking a $2 bln loss on one portion of their portfolio (not as a company) on credit default swaps in London to hedge their American portfolio risk. Unfortunately this will make the crummy Volker rule look more like a good thing. This is not too far of a stretch from saying that kids in America are obese, so let’s outlaw McDonalds. Not sure every obese kid eats at McD.

Today

The markets are looking lower by about 62 Dow points, bring the Dow back down under 12,800 – though anything can change by the open. It should be a relatively boring day unless the market falls appreciably below 12,750.

PCLN

The stock is looking a couple of dollars lower on the open at $678. Remember that we need the stock to close today lower than $690 for one convoluted spread and lower than $700 for another (LTS).

FUTURES

Don’t forget to check out this month’s article in FUTURES magazine. See our website for the link.

LTS2
Live Trading Session was such a hit that we are going to have a LTS2 in July right before AAPL and AMZN earnings. See the website for more details. The LTS people have an extensive write up on the way right after this.

May 10, 2012

Yesterday

The markets fell for the fifth day in a row. Getting down to a support level of 12,749 the market bounced and closed modestly lower. The VIX closed at 20%.

Today

The markets are looking to open higher with the E-minis looking up $8 and the Dow futures up 46. Keep in mind that the Dow closes at 3:00pm CST or 4:00pm EST. After the Dow closed the futures sold off after hearing about Cisco and PCLN earnings, which means that they started in a hole and have to run higher to keep with an unchanged Dow.

PCLN

Earnings blew away estimates coming in at $4.28 per share on $1.037 billion in revenue. The forecast for Q2 was lower than expected by analysts which had the stock selling off as low a $660 before coming back to the $700 area.

The stock is all over the place since last night, which is going to give us a small window of opportunity to wiggle out of the convoluted trades placed in LTS. Look for a special update shortly on this if you participated in this class.

LTS

Your update will be coming shortly. We will be wiggling out of the PCLN trade(s), but the selling of premium above 20% and 21% will be working out wonderfully today.

Practical Option Trading

You will be having a special update as well. We are working an iron cockroach paper trade that I am electing to lower the price down to $10 even on given the stronger open.

May 9, 2012

Good Day!

Yesterday

It was a great day for trading yesterday, and we took advantage of it in the Live Trading Session. The Dow fell over 200points only to pair its losses to double digits. Even the VIX was unchanged by the end of the day.

Greece

More elections in June. What is the problem in Greece? This is important to understand because most other countries are headed in their direction, including the US, which has doubled its deficit since Obama took office. $10.4 billion to 19 billion – NICE WORK pulling that off without one tangible item to show for it. I would at least have a new AMG in the driveway.

Now pay attention because this is where our entitlement society (in the US) is headed, and no politician waiting for reelection wants to be the bad guy and bite the bullet. FORMULA: So hand out all the entitlements so people are not upset…..win reelection….keep your political position…..continue to steal (Yes, I said it)….and let the next person holding your job do what you were sent there to do.

If Greece stopped paying its debt, it is still spending more than it takes in. Hmmm. This is equivalent to someone with a job who decides to not pay their mortgage and credit card debt, and still spends more than they get in their paycheck. We have a term for that in the inner parts of Chicago – but I will keep that to myself.

Now Greece wants to stay in the EU, but does not want to do what is told to get their austerity measures passed. In short, they want to run away from home, but still want their allowance.

Today

Do NOT Worry

A reemergence in concern about a double dip recession in Europe is surfacing, especially with the problems in Greece, and the new socialist French government. This is spooking our markets as we are all interconnected economically.

Selling right on the open. Keep in mind that the S&P is still up 8% for the year, and we were at 4 year highs 2 weeks ago. It doesn’t feel that way since falling 500 points in two weeks, but this is ONLY selling to get the weaklings out of the game.

It could be an ugly day. The Dow has a support point around 12,750. The market might even fall this week to 12,500. Don’t worry. The news is going to be gloomy. The national debt could be fixed, we could find a cure for cancer, and clean fuel for our cars for the next 2000 years – yet the media could still make it sound like a bad day.

Practical Option Trading

Tonight at 7:00 pm we will be having our regularly scheduled webinar. Don’t miss it. A lot to talk about now, especially with the opportunity in the markets.

May 8, 2012

“I think one of the worst things we do as investors is run to and from the latest headline”

- Warren Buffett.

Good Day!

Yesterday

Yesterday looked like it was going to be a lot of fun with the Dow opening down 150 points at 12,900. This would have had the market volatility spike, an opportunity to sell some premium, and a chance to do a tad of bottom fishing. It was not to happen. The market stuck to 13,000 like it had a nail in its foot and keep doing circles around the millennium mark. Volatility came in a tad, and not even a good scare to the downside came as usually is the case. Today it looks like we will get it.

Today

At 12, 1, 2 and 3 am the E-minis futures were down about $1. Today at 6:00am the E-mini is down about $7 on European trading with the Footsie having 7 to 2 losses to winners. This will have the Dow futures down 70 points and below yesterday’s lows. If this does NOT have the VIX spike to ≥ 20% we will likely continue to sell. If the VIX spikes right on the open, the selling might be over.

There is no real news causing this other than the European elections. I am not a frog, but I just don’t understand how big of a role France plays in the whole scheme of things. Yes, I have 4 or 5 Louis Vuitton bags laying around the house and a Cartier watch, but I could do without and am not a real big factor in the France economy. California alone is a much bigger factor on the global economy than France, and the markets pretty much stated that with a big yawn after the elections the media was anticipating to be a big reason to sell.

Direction – 12,700 is probably the low for this week, but if that doesn’t hold….hmm….have to reevaluate things.

Live Trading Session

I did as promised and created a 6 page write up that is going out to you this morning. It is a further clarification of what I was explaining on the open yesterday – specifically what to focus on before even starting to look for a trade. It has NOT been proofed yet and may contain some spelling and grammar errors as it is hard to type with only one eye open at 2am. It will be sent, then cleaned up and proofed, and then resent. I am also looking for more examples before the open and will deliver as I promised.

Thank you so much for your patience for 30 minute glitch yesterday while we working through the TOS technical glitch yesterday. Another update is coming to you very shortly.

May 7, 2012

Great Day!

Last Week!

The Dow was down 198 points for the week, with 169 of them coming on Friday. The VIX was up 1.60 on Friday to close at 19.16%. Also AAPL was down $16.57 to close at $565.25, roughly $71 points off of the highs from last week.

Weekend

Fracois Hollande defeated Nicholas Sarkozy for president of France. This socialist country was frustrated by government spending cuts, and so they elected a socialist. Much like a few liberal states in the US, everyone wants free benefits without having to pay for them – as if a magic fairy came down with a wand and waived 3 month free vacations to Cannes. We will see how well that works for them when their deficit doubts like ours has in the last 3 years.

Today

The Dow is set to open at or below 13,000 as a result of the elections in France and Greece. Particularly troubling in the Greek elections as people are upset about all the concessions made to get their debt financed. The E-minis are down 7 with Dow futures poised for a 61 point drop.

Hopefully this is enough to spike volatility above 20% in the VIX as it will create opportunity during today’s Live Trading Session set to start at 9:00am eastern and run through tomorrow.

Live Trading Session

Good news for today. Sometimes things just work out well. The VIX will open at least where it closed, if not higher. AAPL has taken it on the chin since earnings came out, and is $75 lower from earnings time. PCLN reports earnings on Wed for us to demonstrate a convoluted spread. Not much could be better other than if the VIX were still on a 40% like it was 6 months ago.

I am looking forward to seeing everyone there today, and if you want to still get in on the sessions please contact the office at (302) 252-0526.

Have a great day!

May 4, 2012

SPECIAL UPDATE

The Dow is down 150 points right now, and it looks like it is going to continue to fall towards 13,000. This is all a result of the jobs report, and great news as the VIX is at19% and likely to hit 20%. This will create huge opportunity in the markets to once again sell volatility at good levels, place excellent directional trades, and get the vol in names like PCLN even higher than we expected.

Live Trading Session 

Monday morning is going to be a busy day for us. As I stated in previous emails, this session I will pick a few trades to illustrated things like the convoluted trade going into earnings for PCLN ($736 right now).

BUT you will be picking most of the names and strategies as I help walk you through a systematic approach to finding the best trade available (given the current conditions). So now that the VIX is a sale once again, and the Dow might be at 13,000 (support/resistance), send in your ideas of what you want to see so that I can prepare for Monday. We want to hit the ground running.

Have a GREAT weekend, enjoy the time off the markets provide, and don’t forget to dream big.

Thank you.