Hot Trading Strategies For A Cold Market

Getting Defensive: 7 Blue Chip Stocks With 7 Buy-Write Option Ideas

noreply@blogger.com (Option Maestro) — Sun, 06 Mar 2011 20:01:00 +0000

Today I will write about five stocks which I am rotating into that will allow me to get a little more defensive but still participate in this market. As stated in a recent article How to Hedge With Vertical Put Spreads I believe we are long overdue for a slight pull back. But the stocks I will cover today have already corrected and are undervalued in my opinion. In this article I will explain how I am buying into these already beaten up stocks for a bigger discount with options.

I plan on purchasing the shares of blue chip companies and selling covered calls, allowing me to get into these shares cheaper and allowing me to still clip the coupon at least twice. I will be trimming some of the higher beta names out of my portfolio and replacing them with these seven lower beta stocks. This will allow me to participate if the market continues higher, but if the market happens to correct, my portfolio will likely decline less in value.

To continue reading this, view the full article on Seeking Alpha HERE.

Options Trading With My Three Favorite Consumer Discretionary Stocks

noreply@blogger.com (Option Maestro) — Thu, 03 Feb 2011 12:41:00 +0000

Today I will explain why I plan on getting into three consumer discretionary stocks and how I plan on getting into them. First, I will state that I do expect a bit of a pull back (no more than 5%-7%) as outlined in How to Hedge With Vertical Put Spreads. And second, I will mention that I have taken this into account for the strategies in this article, and two of the three stocks outlined below have already pulled back nicely.

I believe a real recovery is underway and I think the stocks outlined in this article will benefit from this greatly. If we look at the Consumer Discretionary SPDR (XLY) compared to the S&P 500 SPDR (SPY) over the last year, we can see that the Consumer Discretionary SPDR has outperformed the S&P 500 SPDR by almost 9%.

To continue reading this, view the full article on Seeking Alpha HERE.

Return Some Green Betting on the Greenback with This Bullish Option Strategy

noreply@blogger.com (Option Maestro) — Mon, 31 Jan 2011 13:00:00 +0000

Someone once asked me "how have you made the most money playing in the stock market?" I had to think long and hard because in today's market there's no easy answer like the old days "buy and hold", today it's necessary to constantly research and change positions on the market, as the economic environment and other factors change. After I put some thought into it, I was able to come up with one theme that equated to my most successful runs in the market, that is being a contrarian. First of all I'm a big believer of "the trend is your friend", but when things seem to be extremely overdone, I like jumping to the other side and sticking to my guns.

A good question would be when are things extremely overdone? It's just a feeling that comes naturally to most people. One example would have been when the market was melting down in late 2008 and it seemed every person on TV, article online, and even your neighbor, who has no idea how to play the stock market, was calling for an even deeper correction, this would have been a great time to get long the market. Even though you wouldn't have caught the bottom in late 2008 (came in March of 2009), it was an excellent time to be buying stocks.

To continue reading this, view the full article on Seeking Alpha HERE.

Corning Benefits Most From the Verizon-iPhone Marriage

noreply@blogger.com (Option Maestro) — Wed, 26 Jan 2011 12:48:00 +0000

Perhaps the worst kept tech secret in history was that the Apple (AAPL) iPhone would be on Verizon (VZ) someday. Now that it has finally been confirmed by both companies, we're seeing examples of classic buy on the rumor and sell on the news. I'm not saying either company is a sell or a short by any means - I actually plan on accumulating shares of both on weakness. In this article, I will shine some light on one company that will certainly benefit from the increased number of iPhones expected to be sold on the Verizon network.

First I will explain why I am choosing this company versus other companies that will benefit from this news. In the spring of 2010, rumors heated up when The Wall Street Journal broke the news that Qualcomm (QCOM) was ramping up production for the long awaited Verizon iPhone and that it would likely be coming in Q1. As we know, that was right on, since the iPhone is set to debut on Verizon in February. The Google Finance chart below shows the performance of Apple (AAPL), Qualcomm (QCOM), and Verizon (VZ) since May 26, 2010.

To continue reading this, view the full article on Seeking Alpha HERE.

How to Hedge With Vertical Put Spreads

noreply@blogger.com (Option Maestro) — Tue, 25 Jan 2011 03:00:00 +0000

I always say it's better to have insurance before your house burns down rather than try to buy it as it's burning down. This can also be said when talking about purchasing insurance or put options to hedge an equity portfolio.

With the market up over 25% since early July and the market being quite complacent lately, volatility is relatively cheap making portfolio insurance or put options also relatively cheap. Many have been stating the market is overdue for a pull back, and I also believe a correction could occur whether it be worse than expected economic data in the United States, some bad news out of Europe or Asia, or even another flash crash that spikes fear in the markets, who knows what excuse the market will use to pull back, but it will likely find one soon as we all know trees don't grow to the sky. Another thing to remember is the more we rally before any type of pull back, the worse the pull back will likely be. A 25% move higher in just 6 months is certainly a gift and some of the profits made in the recent months should be set aside to hedge out the next few months, as I stated the greater the rally - the greater the correction is typically.

To continue reading this, view the full article on Seeking Alpha HERE.

Time for a Correction? 5 Hedging Strategies

noreply@blogger.com (Option Maestro) — Thu, 20 Jan 2011 12:50:00 +0000

As the market has been grinding higher over the past few months, we've heard many bears state that we are overbought and that we're due for a correction. The overbought part was likely true, but no correction was in sight on the back of QE2. I don't like being short when the printing presses are on full steam and I believe a real recovery is underway, but I'll never flinch at taking a profit or even use some of them to put on some hedges... After all, would you buy a house without insurance?

I have spent the majority of Wednesday evening reviewing charts - mainly of indices and sectors, to see where I would like to place my hedges. When I believe we are due for a correction, and only expecting a minor 5-7% one if that, I have no problem putting up to 2%-3% of my entire portfolio value into hedges. Just like it is smart to be diversified when purchasing equities and call options, it is smart to be diversified when shorting and buying put options. In this article I will show you 5 ideas on how I plan on hedging my portfolio and why I believe it is a good idea.

Idea #1: Hedging the S&P 500
Most portfolios have exposure to the S&P 500, so it is worth spending some money on insurance against this index.
(click chart to enlarge)
As we can see from the S&P Index SPDR (SPY) chart above, we had a pretty ugly day on heavier than normal volume Wednesday. You can also see that the RSI or relative strength has been trading in overbought territory since January 3. Typically it is a good time to lighten up or purchase protection when trading in overbought levels like this. We sold off by close to 1% Wednesday and the RSI still is trading at the higher end of the range, 64.59. You can pull up a chart of the VIX or Volatility Index, which trades inversely to the S&P 500, and you will see the VIX was trading near oversold levels in that same time frame. The VIX also had a big 9% spike Wednesday regaining the 20 day moving average, the VIX is another great indicator to get an idea of when to hedge.

S&P Hedging Strategy:
Although volatility is cheap (yes even with the 9% spike Wednesday) I would purchase put spreads versus outright put options on the S&P 500 SPDR (SPY), but I would purchase more time versus if I were just buying puts I would likely choose to purchase less time. Purchasing more time requires me to be proactive as I might have to decide when to trade out of this strategy so the hedge actually works. I would purchase March 127 put options and sell (1 for 1) March 117 put options against them. This strategy would cost me roughly $210 per put spread and would protect me down to just above the 200 day moving average at 117. If the market corrects more significantly and the SPY is trading below 117 on March expiration this strategy would return $1,000 per put spread or a return of 476%. Of course us bulls out there don't want the maximum return from this spread, but it would certainly help pad the portfolio if the market did correct in such a manner.

Idea #2: Hedging the NASDAQ 100
Like the S&P 500, many of us have exposure to big tech names which fall into the NASDAQ 100. One way we can hedge many of our stocks in the NASDAQ is to purchase similar put spreads on the Powershares QQQ Trust (QQQQ).
(click chart to enlarge)
From the chart above, we can see many similar comparisons to that of the S&P SPDR chart. ETF was trading in overbought territory for days, heavier than normal volume to the downside. But the really bearish signal I see from Wednesday's price-action, and signals a potential key reversal, is that the QQQQ managed to open on the highs, which also happens to be higher than Tuesday's high as well as the 52 week high, but gave all of Tuesday's gains back closing below Tuesday's low and on heavier volume. This is called a bearish engulfing candle pattern and cannot be illustrated any better than this.

NASDAQ Hedging Strategy:
Again I would look at using the 20 and 200 day moving average to get an idea on where to purchase and sell put options. I would buy the March 55 put options and sell the March 50 put options. I could get this strategy for roughly $84 per put spread. If the NASDAQ corrected significantly and the QQQQ was below 50 on March options expiration this strategy would return $500 per spread or a return of 595%.

Next I will outline 3 specific sectors using the Sector SPDR ETFS. I have looked at many sectors and believe the three to follow have the greatest risk and could have the most significant correction if we get a pull back.

Idea #3: Hedging the Health Care Sector
This sector had some very ugly price action as well Wednesday. We can see a very similar bearish engulf candle pattern from the chart below of the Health Care Select Sector SPDR (XLV).
(click chart to enlarge)
We can see the ETF opened within pennies of its 52 week high before selling off throughout the day. This ETF also engulfed all of Tuesday's move on greater volume. Not looking too promising for the bulls out there.

Health Care Sector Hedging Strategy:
With this ETF I am going to stay shorter term and purchase at the money February 32 put options for $46 per contract. I am choosing to stay shorter term on this ETF because the volatility stands at a whopping 14.75% (sarcastic) for February, and because I am trading on this signal and because this is sector specific I wouldn't want to overpay for time value.

Idea #4 Hedging the Energy Sector
This sector is by far one of the best performing sectors since the most recent market bottom, which leads me to believe it may have the biggest correction if we get an overall market correction.
(click chart to enlarge)
As we can see from the Energy Select Sector ETF (XLE) above, it opened on the 52 week high and sunk like a stone all day engulfing Tuesday's entire move higher, all on greater volume. This again is very ugly price action and would signal me to sell energy stocks or purchase put protection. This is one of very few ETF's that traded above 70 on the RSI for more than 3 days.

Energy Sector Hedging Strategy:
I would also plan on purchasing shorter tem puts on this ETF, because this is sector specific and would think based on the ugly price action and recent overbought levels, it is due to correct sooner rather than later. I am structuring my bet on this ETF a bit differently than the last few. As you can see from the chart of the XLE above, the stock left a couple of gaps on the way up, and I believe those have a high probability of being filled if we get a pull back. I would purchase puts below the 20 day moving average at minor support near 68, and I would sell puts near 60. Therefore I would put on a February 68/60 put spread. This would cost me roughly $75 per spread. This strategy is a bit more bearish and factors in quite a significant correction, but selling the 60 puts versus the 61 or 62 puts didn't make too much of a difference compared to potential returns, especially because that lower gap which would need to be filled around 59.94. If this ETF sold off and closed at or below 60 on February options expiration this strategy would return $800 per spread or 1,067%.

Idea #5 Hedging the Materials Sector:
This sector was perhaps the ugliest of the day Wednesday. Many of the largest holdings in the Materials Select Sector ETF (XLB) such as Monsanto (MON) and Freeport-Mcmoran (FCX) have had unbelievable runs lately and need to take a breather.
(click chart to enlarge)
This ETF had an extremely ugly potential reversal day Wednesday . The ETF opened near the high and 52 week high and sold off the entire day on very large volume engulfing all of the previous two days moves higher. This stock also fell below the 20 day moving average for the first time since mid November. This again is a potential key reversal day to watch and would be a signal to sell material stocks or put on some hedges.

Material Sector Hedging Strategy:
As we can from the minor pull back in mid November the ETF broke below the 20 day but then bounced off of the 50 day moving average and continued a nice uptrend. You will also see Fibonacci retracement levels drawn on the chart which are also key levels to watch. The Fibonacci levels come in very close to the moving averages on the chart, but I will use both to structure my put spread. Again I would choose the February contracts to keep this hedge shorter term. I would purchase my first put near the 50 day moving average at 37 and sell put options near 34. If it broke below the 50% retracement, I would want to roll out into the next month and purchase another put spread (perhaps the 34/30) as the stock would likely head lower. This strategy would cost roughly $45 per spread and would return $300 per spread or 667% if this ETF closed at or below 34 per share on February options expiration.

The ideas outlined above are bearish strategies and should not be considered if you think the ETF will continue higher or have a very minor correction in the near future. However if you feel the ETF could correct in the near future, these strategies could help protect your portfolio. To get a better understanding of stock options and different option strategies please check out my Simplified Stock Option Trading E-Books. These are just examples and are not recommendations to buy or sell any security; if you're more bullish/bearish, you’ll want to adjust the strike price and expiration accordingly.

The reason option volumes have surged in the last five years is because they are a great way to hedge your portfolio as well as create income off of your shares (see chart here). Keep in mind when using this strategy it is essential that broker commissions are low enough to profit from the position.

I currently do not own any strategies mentioned above, but may open them in the next few days.

Options Market Findings: January 18, 2011

noreply@blogger.com (Option Maestro) — Wed, 19 Jan 2011 04:44:00 +0000

Today we have a continued Bull and a BIG Bear. One strategist looks like they're going to keep their bet on CB Richard Ellis Group (CBG) rolling out of the January 20 calls and into the February 22 calls. Over 9k January 20 call contracts traded on open interest of 9,223, and 9,019 of the February 22 calls went out against open interest of 22. This indicated to me the strategist is taking a large portion of risk off the table, but keeping the bullish bet intact. The net credit received from this strategy would be about $1.15 per share. Going back on my option chart it looks as if the strategist opened this strategy on December 16 for just under $1 per share. Now the strategist is almost 50 cents in the money and playing with the houses money. Not a bad deal at all!

The BIG Bear bet we have on January 18 was on the Dow Jones Transportation ETF (IYT). Over 12k contracts traded for the March 90 puts on open interest of 228. It looks like multiple institutional size blocks were taken out throughout the day, with the majority of them being purchased near the ask price. This could be a hedge but it would be a very expensive one if that. It looks more like someone is betting on a correction and thinks this sector may perform the worst. I will likely follow this trade for a hedge myself, as this type of conviction is worth following.

Banking on Citigroup to Outperform: A Bullish Option Strategy

noreply@blogger.com (Option Maestro) — Tue, 18 Jan 2011 15:01:00 +0000

As stated in my last article 3 Dow Stocks to Buy-Write Now I believe financials will outperform the market in the early part of this year. The most attractive financial stock to me is Citigroup (C). I believe Citigroup will outperform both the market and the very popular Financial Sector SPDR ETF (XLF). Below you will see a chart from Google Finance comparing many of the largest financial stocks as well as the Financial Sector SPDR ETF (XLF)...

To continue reading this, view the full article on Seeking Alpha HERE.

3 Dow Stocks to Buy-Write Now

noreply@blogger.com (Option Maestro) — Mon, 17 Jan 2011 17:50:00 +0000

In this post I will outline three Dow stocks which are attractive at the current levels and will explain why I would choose to buy-write them. The buy write option strategy is the simplest option strategy it is simply purchasing at least 100 shares of a particular stock and then sell one option contract against it (standard contracts in multiples of one hundred so you could sell 5 contracts against 500 shares of stock). This strategy is a way of creating income and for those already holding the stocks with a nice gain it is also a form of hedging or protecting to the downside by taking a little profit off the table. The downside is that it locks your shares up and if the stock catches fire you may be called away and miss out a ton of upside.

The first stock I find attractive from the Dow Jones Industrial average is Boeing (BA). I feel this stock is undervalued based on the future of the company and the dividend they pay. The last dividend of 42 cents was paid on November 3, 2010, so it should yield another two dividend payments by May options expiration - therefore I would likely look to write shares of Boeing out no later than May expiration. I could write the May 75 calls against shares of Boeing for about $2.00 per share bringing my cost down about 2.67% to $68 per share...

To continue reading this, view the full article on Seeking Alpha by clicking HERE.

Corning a Buy on Apple Verizon Marriage

noreply@blogger.com (Option Maestro) — Fri, 14 Jan 2011 03:44:00 +0000

I am getting long Corning (GLW) on the back of this deal. I believe demand for the Apple (AAPL) iPhone will pass even the most bullish estimates once it's selling on Verizon (VZ). Both Verizon and Apple have rallied greatly as well as Qualcomm (QCOM) in anticipation for this announcement, as this was a poorly kept secret.

This deal is also good for glass maker Corning Incorporated (GLW) which has been trapped in a tight range between 15-19 the last year. It looks as if the stock is finally trying to break out. I am long January 20 calls, as well as February 22 calls but I am looking longer term. I believe May 22/25 call spreads look very attractive at this point and plan on purchasing some for my portfolio on any weakness. For more information in how to trade these strategies check out my options ebook.

New GoldenAgeCheese.com Sitemap

noreply@blogger.com (Option Maestro) — Wed, 01 Dec 2010 15:08:00 +0000

Hedging with Butterfly Put Spreads

noreply@blogger.com (Option Maestro) — Sat, 20 Nov 2010 22:15:00 +0000

In times of a declining market and rising volatility, it can be hard to dish out the higher costs of put option premiums. One way to do this more cost effectively is to purchase something called a butterfly put spread. The good is that these spreads will cost you much less (especially in times of rising volatility) than purchasing just put options, however the bad is that these limit the potential gains (or protection) AND if the market or equity drops too much in value you could still lose your premium paid just as if the the market or equity didn't drop enough for the spread to pay off. I will give you an example in this article using a major index ETF. This article is for educational purpose only I am not recommending buying or selling anything mentioned.

Hedging an entire portfolio with out of the money butterfly put spreads:

The market is up over 15% since late August, so it may be worth looking at buying some protection. First I will have to develop targets: how much I am willing to lose before my protection kicks in, how much I want to hedge, and the time period I want to hedge for. The more and longer that I choose to hedge, the greater the cost.

Let's say I can stomach losing 5% from the current market levels and I think the market is due for a 15% pull back from current levels over the next 2 months. I would then use these targets to develop my option strategy.

Step 1: Using the very popular, very liquid S&P 500 SPDR ETF (SPY) I would purchase the January 114 put options. Note how I got the 114 strike put option. I stated I can withstand declines of 5% from current market levels (at the time of this writing SPY is at 120.29), so a 5% decline from here would put the SPY at roughly 114.

Step 2: I would then sell TWO contracts for every ONE purchased of the SPY January 102 put options. Note how I got the 102 strike put options. I stated I expect a total decline of 15% from the current levels near 120 on the SPY which comes out to 102.

Step 3: I would then purchase the January 90 put options. Note how I got the 90 strike put options. This is just the difference of the contracts in step one and two subtracted from contract in step two. In this case the difference is 12 so we take 12 and subtract it from 102 which gives us 90.

As of current market data each spread can be purchased for $108. If I were to just purchase put options it would cost $173. If the market in fact sells off this would give me protection from roughly 1,140 down to 1,020 on the S&P 500. The maximum profit from this spread would occur if the SPY closed at 102 per share on January options expiration. This would return $1200 per spread or a return of 1,111%. The most that can be lost from this spread is the premium paid of $108, and would result if the SPY closed at or above 114 per share or at or below 90 per share on January options expiration. The two break even points would be the SPY at 112.92 and 91.08 on January options expiration. Commissions were not factored in the calculations above.

This completes the butterfly put spread. Note for safety and saving on transaction costs it should not be done as shown above in three different steps. Most brokerages today have a butterfly put spread order entry form. If they do not I suggest using a two part put spread approach which every brokerage should certainly have. Using put spreads I would first get long the 114/102 put spread, and then get short the 102/90 put spread. This is the exact same spread and should only be entered if brokerages do not offer butterfly put spreads. To learn more about options in general or to get a better understanding of stock options and different option strategies please check out my Simplified Stock Option Trading E-Books. If one has a more tech heavy portfolio it may be a better idea to structure a butterfly put spread using the PowerShares QQQ ETF (QQQQ). If small cap stocks are a holding in the portfolio one should also consider opening butterfly put spreads on the iShares Russell 2000 Index ETF (IWM).

These are just examples and are not recommendations to buy or sell any security; if you're more bullish/bearish, you’ll want to adjust the strike price and expiration accordingly.

The reason option volumes have surged in the last five years is because they are a great way to hedge your portfolio as well as create income off of your shares (see chart here). Keep in mind when using this strategy it is essential that broker commissions are low enough to profit from the position.

Disclosure: Long SPY December 115 Put Options

Google Strategy Update

noreply@blogger.com (Option Maestro) — Sat, 25 Sep 2010 02:42:00 +0000

Hey guys, hope all is well. I wanted to update you all on that Google option strategy I did last week. I took my money off the table Friday with a nice profit. I still have some call spreads open which are now free and I have limit order in to sell them for $2,400 and $2,600 which I believe will be tough to get this week unless Google buries the upper strike price. I believe I want to get out before earnings just because I feel more comfortable and even though I may kick myself for leaving $500 on the table, it's a lot better than kicking myself for having them expire worthless! Anyway, I wanted to share my family companies cheese blog with you all. Lots of cool (cheesy) stuff there so check out my cheese blog.

Time for Google to Run: How I'm Playing It

noreply@blogger.com (Option Maestro) — Mon, 20 Sep 2010 11:13:00 +0000

Trading at just 21X earnings and projected earnings growth of 14% in 2011, Google has become an oversold value stock. With Google (GOOG) pinning to 490 on options expiration Friday, it confirmed a nice breakout and could be a potential trend reversal for the search giant. As an options trader these pattern breakouts are key when choosing my strategies. Following the marked up chart of Google below, I will highlight some key points which led me to put on a bullish option strategy.

(Click chart to enlarge)

Why I am bullish: From the chart above you can see Google broke a major down triangle on September 13 (blue lines). This breakout projects Google back up between 520 and 550 per share. However that is just the beginning... You can also see from this chart above a very choppy inverse head and shoulders pattern with the neckline coming in around 510 per share (yellow dotted line). This 510 level is a key resistance area and if it can break above that (as the triangle breakout suggests) the stock could run back up and test its recent high near 590 per share.

How I am playing it: I am playing quite conservative by purchasing October Call Spreads. I plan on purchasing October 510 calls (the neckline breakout point) and selling the October 540 calls against them. I can get into each spread for a net debit of around $550 which doesn't seem too expensive considering an earnings report falls in that time frame. The reason I'm not purchasing just October calls is because I don't want to purchase too much volatility with the Google earnings announcement falling before expiration (selling an upper call against the lower call will help offset this). The reason I'm not purchasing November calls or call spreads because I don't want to purchase too much time in case Google sells off. If significant profits can be taken, I may choose to close my position before earnings.

Number Crunch: The most that can be lost from each 510/540 call spread is $550 (plus commissions) and will result if Google closes at or below 510 per share on October expiration. The break even point from this spread is shares of Google at 515.50 (less commissions) per share on October expiration, anything above that price until 540 per share will result in unrealized profit. If Google closes at or above 540 per share on October options expiration it will return the maximum of $3,000 per spread or 545%.

As stated, I believe Google is oversold and will use any dips after earnings or in the near future to accumulate shares for my investment account. I still think in order to get some real momentum behind this stock, Google needs to purchase shares back of the company, do a stock split, or declare a dividend... I would be a fan of all three.

The ideas outlined above are bullish strategies and should not be considered if you think the stock will sell off in the near future. However if you feel the stock could move higher in the near future, this strategy could yield a nice gain. To get a better understanding of stock options and different option strategies please check out my Simplified Stock Option Trading E-Books.

These are just examples and are not recommendations to buy or sell any security; if you're more bullish/bearish, you’ll want to adjust the strike price and expiration accordingly.

Still Bullish on QCOM, but Taking Some Profits

noreply@blogger.com (Option Maestro) — Fri, 10 Sep 2010 11:34:00 +0000

Today I am looking at closing out my October in the money call options on Qualcomm (QCOM) but purchasing longer dated call spreads... I purchased the October $37 call options for $1.19 before they reported earnings and popped. I am not looking at closing all of the contracts for a slight premium and rolling into January 41 strike calls but on half of the contracts writing the January 47.50 strike calls against them. This was I have some serious upside potential but I am taking all of my money off the table plus a couple hundred bucks. I still see some room to the upside on Qualcomm which is why I am choosing to create spreads on only half of my January option position, the other half I will either take profits or convert into either diagonal call spreads or vertical call spreads on continued strength in the underlying. To read more about these types of spreads check out my option ebooks here.

An Alternate Investment: Domain Name Investing

noreply@blogger.com (Option Maestro) — Wed, 01 Sep 2010 23:56:00 +0000

I am just writing a quick post to inform everybody on domain name investing. If you have a catchy name or idea you can register a .com name for $11 a year. I just purchased the domain name BetterCheddar.com for my cheese company and I plan on having it forward directly to my site shortly. I paid a nice premium for this domain so you never know who will want to buy your domain names or ideas if you register them today! I registered a catchy name in 2008, BellaMozzarella.com which is Italian for beautiful Mozzarella. This page forwards directly to our Mozzarella Cheese page and I am still very happy with the purchase. If you ever have a good idea I encourage you to spend the $11 to register the domain name, because thousands of companies and individuals search catchy domain names for their business or if you happen to register someones business name before it is their name you could really hit a home run. I just thought I know this is a blog for stock, futures, and options but I figured I would throw a curve ball in to my redaers and inform them of an alternate investment.

Anticipating Another BIG Move - A Look at Doji Candlesticks

noreply@blogger.com (Option Maestro) — Fri, 06 Aug 2010 02:42:00 +0000

Once again I find myself writing about another anticipated big move. Once again we Doji'd on the S&P 500 index, this one being the highest quality Doji we've seen in a long time. The S&P 500 traded in a decent range Thursday, but managed to close just 3 hundredths of a point or 0.03 points above the open. This price action means a big move is expected and likely. The bad thing about doji's is that we cannot predict which way the move will be (bullish or bearish). I am guessing the way we move depends on the unemployment number released at 8:30 AM EST Friday. I would assume, if we get a better than expected unemployment situation number Friday it will be bullish, and the opposite holds true (bearish move) if we get a worse than expected unemployment number... However crazier things have happened. The chart below is a prime example of a doji on the S&p 500 index.

Yea so, what's the big deal if we don't know which way it is going to move? This is true, however this is ideal for an option strangle or straddle position which is exactly what I was opening near the close of trade Thursday. Using the weekly options (newer and still testing) I purchased both the 113 strike call and put options on the S&P 500 SPDR (SPY). Each straddle ran me about $130 which means a move of 1% or greater in the S&P 500 index should make this position profitable. The worst case is if the SPY closes at exactly 113 (unlikely) I would lose 100% of the premium paid or $130 for each straddle I opened. If the market opens up flat I may decide to add to this straddle as the market should have a large swing based on Thursday's price action. If you would like to learn more about trading stock options and different strategies used to make money in any market check out my stock option trading ebooks here.

How I'm Playing the Risk Trade

noreply@blogger.com (Option Maestro) — Sat, 24 Jul 2010 14:32:00 +0000

Three stocks which did very well for my portfolio this past week were: Qualcomm (QCOM), American Express (AXP), and Trina Solar (TSL). I will continue to hold the majority of my long positions (as this entire market moves as a whole these days) until I see the risk trade come off the table. Copper trading above $3.10 and holding is a signal that the risk trade is coming back for the time being. I'd like to see copper futures settle above $3.22 and then $3.40. I've moved my stops to $3.08 now and this position has been working very well for me! For a less risky investor or someone who cannot trade futures check out Freeport-Mcmoran (FCX), Cliffs Natural Resources (CLF), and the most diversified way to play the Metals & Mining SPDR (XME).

I have purchased December 50 strike call options and will look to turn the position into a vertical call spread. I will decide to write upper calls against my lower calls as I'll be watching the ETF near close everyday and monitor the price action. It is also worth noting I may look to write nearer term strikes out on strength; such as the August 56 or September 58, etc... on strength in the XME. To learn how to create similar option strategies and for information on options in general check out my Options Trading Books.

Risk Trade Coming Back

noreply@blogger.com (Option Maestro) — Wed, 21 Jul 2010 11:56:00 +0000

That inverted hammer pattern on copper futures worked like a charm. However we must break through the $3.10 resistance level with two consecutive closes above it. If it does I'm watching material stock names including Cliffs Natural Resources (CLF), Freeport-Mcmoran (FCX) and the the metal and mining SPDR ETF (XME). Stops in on copper futures at $2.99

Big Call Option Bet on Telecommunications Sector Index Fund (IYZ)

noreply@blogger.com (Option Maestro) — Wed, 21 Jul 2010 03:39:00 +0000

Tuesday, very heavy volume traded for the September 20 calls on (IYZ). Most traded near the bid price of $35 (0.35) so it could be slightly more bearish. 15,000 contracts traded on an open interest of zero. I actually liked the price-action on Sprint (S), so I will be watching that out of the group. I also will be watching price-action on AT&T (T) and Verizon (VZ) the next few days.

Expecting an Above Average Move Part 2

noreply@blogger.com (Option Maestro) — Thu, 15 Jul 2010 12:03:00 +0000

Last week I wrote about an expected above average move on the S&P 500 index. The open and close price were different by just 3 pennies which indicated a very strong doji. Yesterday the S&P 500 index opened and closed within 44 cents which is still considered a doji, just not as strong. I am expecting an above average move today (>1%). I may take a shot at strangling the S&P 500 ETF (SPY) at open. I would look at purchasing the 110 calls and the 109 puts, or if it opens near 110 I may take a shot at a straddle.

Time for Another Bounce? Three Stocks I'll Be Watching Today

noreply@blogger.com (Option Maestro) — Thu, 08 Jul 2010 11:45:00 +0000

Morning traders, I'd like to see a follow through of yesterday's price-action. If we get a move higher today, I think we could bounce back as high as 1150 on the S&P 500. Watch 106.77 on the SPY as it is a gap we need to fill. If we fill it and start heading lower, I think we could sell off. However if we fill it and keep rallying we could be heading as high as 1100 very short term. Three stocks on my watch list today are: Teva Pharmaceutical (TEVA) which put in a nice doji, Sourcefire (FIRE) which put in a very nice hammer, and Gafisa (GFA) which broke out yesterday and the chart predicts it back as high as 16 a share.

Doji Confirmed! SPY Option Straddles Paid Off Big!

noreply@blogger.com (Option Maestro) — Thu, 08 Jul 2010 00:32:00 +0000

As stated this morning I expected a major move in the equity markets based on Tuesday's price action - I just didn't know the direction. As stated I was looking at opening option straddle positions on the widely traded S&P 500 SPDR (SPY). An option straddle is ideal for this type of situation.

Many use straddles before big events such as earnings, but be careful as the volatility will collapse following earnings and if the stock moves less than the derivative market is anticipating (which happens more times than you may think) you could lose much of the premium paid. To learn about straddles check out my Advanced Option E-book! But getting back to today's trade, once the market volatility came in from the initial spike at open, I took a slightly bullish bias and straddled the SPY by purchasing the 104 weekly put options and the 104 weekly call options. These new weekly options are ideal for this type of trade (closed at the end of day) as the premiums paid are very small. I am glad to say I closed my position at roughly 3:55 PM banking a very nice one day gain! Happy trading!

S&P 500 Chart Predicts a Major Move

noreply@blogger.com (Option Maestro) — Wed, 07 Jul 2010 11:36:00 +0000

Happy lucky 7's day (7/7)! I'm expecting a big move in the major indices today as the S&P 500 had a doji candle pattern yesterday. Doji candle patterns do not predict the direction of the move, they just predict the magnitude. The S&P 500 index closed 0.03 below the open price which is a major doji on an index of 1,000 plus! Last time I noticed a doji was on the S&P 500 ETF (SPY) was on May 19 and that was followed with a huge move the following day. I now see a major doji on the actual index so time will tell if it works again. I'll look at opening straddles on both the S&P 500 and the Powershares QQQ at open today. The chart below is the of the S&P 500 and you can see the doji candle pattern we had on July 6, 2010.

Click chart to enlarge

Held Some Major Support on the S&P 500

noreply@blogger.com (Option Maestro) — Wed, 30 Jun 2010 04:51:00 +0000

Traders, we held 1040 as you probably know from all of the talking heads on TV. Tomorrow should be interesting and should let us know if we will get any bounce higher. I believe we can bounce as high as 1130-1150 on the S&P 500 before we know where we could be going. A break and close on heavier volume below 1040 is bearish, and a break and close above 1130 on heavier volume is bullish.