THE FOOL’S GAME – BUYING CALLS AND PUTS
On the $10K day trade, the weekly SPY in-the-money put, expiring today.
See buy and sell (the yellow vertical line) on the chart below.
The profit was 31%. It is now, at the moment, up 38% for the day. No telling where it will be at the end of the day (will update) but on the last day of a weekly option, the play is take profits quickly when one has them.
(click on the chart for a larger view)
Call is bottom picking as the tax-selling season ends – GE look like a prime candidate for a bounce.
Although depressed all year and in some kind of fundamental trouble (not my concern), GE remains a big name and, technically speaking, it has tested its recent lows and so far is surviving the test.
So…
It’s probably worth a gamble, with the recent lows as a stop loss. This is a play I want to go my way right away or I’m going away.
For a quick, cheap scalp, at the moment, the Jan 17 call, which gave a buy signal today at 64 cents (see the 10-minute chart on the right of the chart panel below) is at 68-cent ask with the stock at $17.46. For what it’s worth that is in-the-money option. A bounce is going to make some money, and a rally is likely to make a decent profit.
Ignoring the chart, the better buy may be at the end of the day for the option play, and next year’s open for the stock itself.
(click on the chart for a larger view)
With the last stimulus signed (the tax cut), Santa heading home (his job done), and the general market in a slight, slow sideways slide (at a time it usually is rallying), the new year may be coming early this year.
Hate to be bearish while the bull market continues, so far, unabated, but it can’t go up forever and at this time it appears most everyone is believing it can. The wackiness that often appears at tops has begun (bitcoin and its cousins), stocks tripling on name changes… If AMZN or GOOGL or TSLA or even AAPL were to split the stock now and scream up on the “fundamental” of the split alone, I’d say we are in 1999. They haven’t split of course…but what the hell, we are in 1999 and I suspect 2000 is right around the corner.
That said, and maybe meaning nothing since the bull continues to fly, all three of my daily swing signal enter today on sells. One of these days this is going to matter and this flying bull could drop out of the sky (do bulls actually fly?).
However, long-term breadth remains on a buy. Which at worse means a falling bull will bounce before it dies.
SWING TRADING SIGNALS:
LONG-TERM BREADTH: Buy (Day 6).
PRICE: Sell. (Day 1).
SHORT-TERM BREADTH: Sell. (Day 1).
VOLATILITY: Sell, (Day 1).
CONTEXT:
SPY CLOSE – 267.57
QQQ CLOSE – 157.37
CNN MONEY’S FEAR AND GREED INDEX: (66, falling, greed level).
NIFTY-50 STOCK LIST: 16 Buys; 9 Overbought, 3 Oversold, 2 new buys today, 8 new sells.
(click on the chart for a larger view)
LAST TRADE – STOP AND REVERSE TO A LONG
Coffee ended its most recent trade, a long at 120.10, on the close yesterday for a 34% gain on a margin of $2310.
It is now a short from 122.25.
(click on the chart for a larger view)
THE FOOL’S GAME – BUYING CALLS AND PUTS
This is an end of the day update and an updated chart for this:
$SPY – playing puts in the fool’s game for 52% so far https://t.co/HUq6P4UjNS pic.twitter.com/yjkeO4L98O
— The God of Trading (@TheGodOfTrading) December 20, 2017
Today is a perfect example of following the previous day’s action for follow through on the open in buying puts or calls.
Today – the day trade is in weekly at-the-money puts (see chart below).
All of my short-term swing signals – based on price, breadth and volatility – registered sell signals on Tuesday’s close. In addition SPY, at the close, was below both its moving average and its open on Tuesday. In other words, everything at the end of the day yesterday was negative.
So the buy for the day trade in options was puts on the open. In the face of the gap up on SPY (and virtually everything else) that put buy would take a lot of discipline for a trader.
And discipline is more than its own reward – at least at the moment, the weekly SPY at the money 268 put is up 52% for the day trade, $5200 for a $10K buy-in (and at a good level to take some off the table).
NOTE: Will update at the end of the day for the entire day trade.
UPDATE:
The trade closed the day with an 60% gain, $6000 on a 10K buy-in.
(click on the UPDATED chart below for a larger view – profits per $10K in rectangle on lower right)
A DECEMBER RALLY WORTH HATING PART ONE
The market was up to its current tricks again Tuesday. Came into the day with a signals blaring buys and the market sold off.
As noted in the link above this has been going on pretty much all month. One day a buy, the next day a sell…hasn’t mattered much except as a fade. But one can’t fade signals developed over years of experience in the market or the signals won’t matter anymore, nor will the years of experience. Finally, when a11 is in doubt, there is a moment of obvious follow through that may indicate all is back on track.
That may be today.
Yesterday, all my swing signals turned again to sells (see table below). Long-term breadth was still moving up for the third day in a row, but limping. Still, if all was right in stock-market world, today should go down on the short-term signals, even gap down. Instead, tricky as its been, it gaped up…
Then sold down fast. …Hmm, that may be the indication all is back on track. If so, it could be the passage of the Republican tax plan, as many have suspected, might be the hammer that breaks the bulls back – a classic sell-the-news event.
Hard to know that for sure, but the market has been too tricky lately — too tricky — and that too may mean something. Trader Vic Sperandeo once said if the market doesn’t do what it’s expected to do, it will do the opposite twice as much. Of late, there has been an awful lot of bullish belief out there. Sentiment turns slowly and often too late, often not until it’s obvious the market is not doing what it is supposed to do.
Is this the day? As with everything in the market, we will, as the great Ed Hart of the old Financial News Network used say, “know in the fullness of time.”
P.S. Didn’t get a chance to post this Tuesday because of other pressing matters, and wouldn’t you know it on a day like today I overslept (I live on the West Coast).
SWING TRADING SIGNALS:
LONG-TERM BREADTH: Buy (Day 3).
PRICE: Sell. (Day 1).
SHORT-TERM BREADTH: Sell. (Day 1).
VOLATILITY: Sell, (Day 1).
CONTEXT:
SPY CLOSE – 267.17
QQQ CLOSE – 157.7
CNN MONEY’S FEAR AND GREED INDEX: (73, falling, greed level).
NIFTY-50 STOCK LIST: 35 Buys; 22 Overbought, 3 Oversold, 1 new buys today, 6 new sells.
Had buys signals across the board from Friday so the entry in the SPY options was at the open on a gap that proved to be frustrating by the end of the day.
The weekly in-the-money SPY call (267 strike) on the opening buy instantly surged in the first ten minutes to up 40% (a fast market move), but then came off immediately and ground down steadily all day to the close (see chart below). It was up 6.6% on a $10K buy-in at the close. A profit is a profit, but that 40% back at the open gnaws on the mind all day as to what might have been. Needless to say, there were plenty of opportunities to take a higher profit on one of the intraday bounces but that too can lead to sloppy trading. Up to the individual trader how the day, during the day, is played.
Didn’t quite get with the weekly QQQ calls (157) which were a much better trade today, up 21% at the close on a $10K buy.
(click on the charts for a larger view)
Granted the general market has rallied this month fairly steadily. Great for buy-and-hold investors, who don’t plan to sell even if it doesn’t, but not so great for swing traders like me.
My swing signals, usually so reliable, have been all over the place. Last Monday buys across the board, market tanks. Tuesday sells, market rallies. Wednesday mixed. Thursday sells across the board, market rallies Friday. Friday buys across the board, Monday…uh, market follows through to the upside…
But follows through in the worst possible way. My signals are for the open the day following the day they trigger. So today’s open gapes up big…then backs off and goes sideways all day for little or no gain from the open. That’s pretty much the way it’s gone on all month.
I do recognize these are swing signals, meant to capture individual moves, and they by their nature can be problematic in a strongly trending market like this one.
The main ETFs I trade, TQQQ and XIV, are up roughly six to eight percent each on the several swing trades this month. Nothing to cry over but those guys are 3x-leveraged so those gain are not much to sneeze at either.
What now?
Everything is up at least for a second day and have entered the first stage of too much too soon. Thirty-nine of my nifty-50 stocks are on buys with 24 overbought (a lot), and CNN Money’s Fear and Greed Index is at a greed level but still a potential divergence if it turns now(see table below). The market can go higher of course, and probably will given the season and given it’s a bull market, but the imminent passage of the Republican tax bill may turn out to be a sell-the-news event so caution as always is warranted here.
SWING TRADING SIGNALS:
LONG-TERM BREADTH: Buy (Day 2).
PRICE: Buy. (Day 2).
SHORT-TERM BREADTH: Buy. (Day 2).
VOLATILITY: Buy, (Day 2).
CONTEXT:
SPY CLOSE – 268.20
QQQ CLOSE – 158.64
CNN MONEY’S FEAR AND GREED INDEX: (74, rising, greed level).
NIFTY-50 STOCK LIST: 39 Buys; 24 Overbought, 3 Oversold, 10 new buys today, 1 new sells.
Day 1: Came public at 6 dollars.
Day 2: Dipped into the $5 range.
Day 3: Wandered up to $20.
Day 4 (today): Opened at 39, ran up to 140, halted by Nasdaq at 126, reopened at 59, ran up again to 96, halted again at 75, reopened again 69, halted again at 62, dropped to 43, popped to 87, closed at 72, up 228% for the day.
Up 11 times its IPO four days ago.
(See the crazy 10-MINUTE chart below.)
How does this happen?
In a word — BLOCKCHAIN.
LFIN, LongFin Corp, came public four days ago and bought a blockchain company, Ziddu.com, and the stock went nuts. Wrote recently about RIOT, a biotech, which doubled on changing its name to Riot Blockchain. And already, according the MarketWatch, this latest blockchain jackrabbit is being investigated for securities fraud.
Likely this is another mania, to go along with bitcoin, that is just beginning. And it will all be insane if it goes on long enough, and in the end if it gets big enough it will kill the bull.
(click on the chart for a larger view)
As the great market guru, Henry David Thoreau would say – “simplify, simplify, simlify”. In other word, if the market’s up, buy the calls.
Here’s what that looks like at the moment for a $10K buy in the in-the-money SPY weekly call for next week’s Friday expiration (the profit is in the white rectangle on the lower right of the chart):
