Short Strangles on Stocks 9/16 -9/20

Short Strangles on Stocks 9/9 – 9/13

This week’s short strangles (see chart panel below):

Last week’s short strangles:

Results were for the week but during the week (and FB stopped out at breakeven):

CHART KEY: The number in the yellow flag on the lower right is the cost of the strangle. The number in the white flag on the lower right is the price gain on the position (a negative number on the shorts is a gain). The number in the green flag on the lower left of each chart in the panel is the percentage gain or loss on the price of the strangle (not accounting for margin needed for the position).

(click on chart for a larger view)

Short Strangles on Stocks 9/03-9/O6

LAST WEEK’S SHORT STRANGLES:

THIS WEEK’S SHORT STRANGLES:

CHART KEY: The number in the yellow flag on the lower right is the cost of the strangle. The number in the white flag on the lower right is the price gain on the position (a negative number on the shorts is a gain). The number in the green flag on the lower left of each chart in the panel is the percentage gain or loss on the price of the strangle (not accounting for margin needed for the position).

(Click on Chart for a Larger View)

$SPY – Runs up on a tweet into the FED…

MARKET TIMING SIGNALS FOR 6/19/2019.

Long-Term Breadth (NYSI): BUY DAY 11
Short-Term Breadth (NYMO): BUY DAY 2
Price: BUY DAY 2
Nifty-50-Stock-List: 34 BUYS, 14 NEW BUYS, 26 OVERBOUGHT; 16 SELLS, 1 NEW SELLS, 1 OVERSOLD.
CNN MONEY’S “Fear and Greed” Index: 44, Rising, FEAR LEVEL.
Bellwether Stocks: 13 UP, 2 DOWN.

WHAT?

The Market ran up today when President Trump tweeted that he and President XI would be meeting at the G-20 conference (like they weren’t going to?) and would discuss the tariff tensions between the US and China. Then it stopped for the day when a Chinese spokesman shortly after basically declared the victory and planned to have no more than lunch with Ding-Dong.

Now there’s a fundamental for you?!

Oh, and it also came out that Trump wanted to fire the head of the Federal Reserve. On the first day of the FOMC meeting that news breaks!

Used to be this kind of uncertainty and instability would tank the market but evidently not now, or at least not yet.

OF PARTICULAR NOTE TODAY:

Stocks followed through another day with more strength to the upside – 26 of the nifty-50 list are now overbought, and 12 of the bellwether stocks up on the day.

NVDA calls led the options day trade with an 82% gain, AAPL ITM calls were up 38%, BABA ITM calls up 26%, and finally the SPY calls also joined the rise, up 52%.

WHAT NEXT?

Tomorrow is a FED day, with the Federal Reserve Open Market Committee making known its policy on interest rates. Any thing can happen in reaction to the FED decision, but given the market is in a positive upswing, tomorrow should be more of the same bullishness no matter what the FED does.

Unless one is an investor, this is a day to sell into the FED if the market’s rising and buy if it is falling. The aftermath for the rest of the week will matter more.

#MarketTiming -Stock options rule the day

MARKET TIMING SIGNALS FOR 6/18/2019.

Long-Term Breadth (NYSI): BUY DAY 10
Short-Term Breadth (NYMO): BUY DAY 1
Price: BUY DAY 1
Nifty-50-Stock-List: 22 BUYS, 9 NEW BUYS, 12 OVERBOUGHT; 28 SELLS, 1 NEW SELLS, 5 OVERSOLD.
CNN MONEY’S “Fear and Greed” Index: 37, Falling FEAR LEVEL.
Bellwether Stocks: 12 UP, 3 DOWN.

OF PARTICULAR NOTE TODAY:

While the SPY options slopped around all day despite the fact SPY itself was up on the open stayed above the open all day long, the real play today in options was in the key stocks.

TSLA’s at the money call gained 87%, NFLX’ in the money call gained 30%, FB’s in the money call gained 92% (see the 5-minute charts below). AAPL’S in the money call chopped to a 12.6% loss.

WHAT NEXT?

The market is consolidating the gains of the past two weeks, which explains the choppy action during the day. Given there were renewed buy signals in short-term breadth (NYMO) and price while long-term breadth (NYSI) continues to rise one can only assume, the advance will resume any day now

If it doesn’t, there could a quick drop before the advance continues. That would be a buy-the-dip opportunity.

(CLICK ON THE CHART PANEL FOR A LARGER VIEW)

#MarketTiming – Oversold and very close to a bounce…

MARKET TIMING SIGNALS FOR 5/13/2019.

Long-Term Breadth (NYSI): SELL FROM 5/6.
Short-Term Breadth (NYMO): SELL FROM 5/13.
Price: SELL FROM 5/13.
Nifty-50-Stock-List: 9 BUYS, 0 NEW BUYS, 2 OVERBOUGHT; 41 SELLS, 14 NEW SELLS, 30 OVERSOLD.
CNN MONEY’S “Fear and Greed” Index: 32, FALLING, FEAR LEVEL.
Bellwether Stocks: 0 UP, 15 DOWN.

OF NOTE SPY OPTIONS:

In a very bearish trading environment, today was a put day (see post below) with the in-the-money at the open 284 put rocketing to a 144% gain at its peak and registering through a chop at the end of the day a 76% gain. That final gain is if one was not paying attention, but obviously there were profit taking points all during the day – as it gained 100%, coming off the top for 121%, selling on the first blue-bar sell signal for 90% (see the chart in the post below).

WHAT:

Today’s market action was again news driven as the US-China trade talks broke off Friday with Trump escalating the pressure with a jump in tariffs on many Chinese imports from 10% to 25%, then tweeting over the weekend several threats to make it worse.

Finally, China retaliated with $60B in tariffs on US products, most farm products in the heart of Trump’s voter support. Sixty billion is not that much on its face but in the scheme of things it was a sign China is not going to, as some Trump supporters were claiming, “bend a knee.”

With an all-out trade war getting closer and closer to a real possibility (don’t these guys ever read history?) it was inevitable the US market was going to take a big rip.

On a technical note, except for a one-day up blip on 5/3, the long-term breadth, as measured by the NYSI, has been been falling since 4/17 (see the red vertical line on the chart below). Since that time, the market managed to trudge higher but the indexes are all now below the level they were at when the NYSI turned down. In other words never bet against the NYSI. It sometimes takes a while but it most often wins in the end.

In a previous post on the this pullback, I said: “If the market focuses more and more on the Trump administration turmoil in Washington, it is likely to unstable for some time.” That still is the what’s what.

WHAT’S NEXT?

However, for now, it is time for a bounce. It may not come Tuesday (a “turnaround Tuesday”?) but it is very close by.

The market can go down as long as it wants but not forever.

At this point SPY is down seven of the past nine trading day, the nasdaq down eight of the last ten. Short-term breadth, the NYMO, is deeply oversold. VIX has moved from the “12s” to 20 in the same amount of time. It’s getting to be too far, too fast, which always leads to a quick bounce. Except for QCOM, all the bellwether stocks are sells and were flushed to oversold with big drops in the indexes today.

In addition, my nifty-50-stock-list has 41 stocks on sells and 30 individual stock on the list oversold. Forty or more on sells is oftentimes the beginning of the end, if not the end, of a downswing.

I’m not one for Fibonacci numbers because like all support and resistance indicators they are notable only as long as the market doesn’t slice right through them (which it often does), but they are sometimes fun to take a look at and right now it appears SPY is sitting on one on a retrace of the rally from December (see the chart below). Supposedly that’s as good a spot as any for a bounce to begin.

(click on the chart for a larger view)

$SPY – engulfed by a bear in a grove of black candles

MARKET TIMING SIGNALS FOR 10/17/19.

Long-Term Breadth (NYSI): SELL FROM 4/17.
Short-Term Breadth (NYMO): SELL FROM 4/15.
Price: SELL FROM 4/17.
Nifty-50-Stock-List: 15 BUYS, 2 NEW BUYS, 7 OVERBOUGHT; 35 SELLS, 6 NEW SELLS, 23 OVERSOLD.
CNN MONEY’S “Fear and Greed” Index: 71, RISING, GREED LEVEL.
Bellwether Stocks: 8 UP, 7 DOWN.

OF NOTE, $10K Swing Trades, SPY OPTIONS:
SPY CALLS, 288, 289 STRIKES FOR MONTHLY 4/18 EXPIRATION, 292, 291 PUTS.

OF NOTE, $10K Swing Trade Stocks:

BLACK CANDLES OF INDECISION ON CLOSE: TAN, SOXL, FNGU, TNA, TQQQ.

WHAT’S NEXT?

The market pulls back based on:

Long-term breadth (NYSI) triggered a sell signal today as the McClellan Oscillator (NYMO) continued to slide and fell through its zero line.

All of the black candles coming at the end of the recent rallies (see the charts below) coupled with the bearish engulfing candle on the SPY (although that was not with a notable increase in volume off the top). Price action during the days this week tended to gap up in the over-night futures market and then sell down steadily during the day session – and that felt like a bearish istribution under the surface.

CNN Money’s Fear and Greed Index remains at a greed level that is unsustainable.

Not much more to say except watch for follow through on the open to the downside.

(click on charts for a larger view)

#MarketTiming Signals – 4/9/19

THE SIGNALS AS OF 4/9/19.
Long-Term Breadth (NYSI): SELL FROM 4/9.
Short-Term Breadth (NYMO): SELL FROM 4/8.
Price: TQQQ SELL 4/9 UP 5.0%; UPRO SELL 4/9 UP 5.0%.3%; TNA SELL 2.7%
Nifty-50-Stock-List: 20 BUYS, 6 NEW BUY, 8 OVERBOUGHT; 30 SELLS, 6 NEW SELLS, 4 OVERSOLD.
CNN MONEY’S “Fear and Greed” Index: 71, DOWN, GREED LEVEL.
Bellwether Stocks: 4 UP, 11 DOWN.

OF NOTE, $10K Swing Trades, SPY OPTIONS:

SPY CLOSE – 287.33.
SOLD ON CLOSE – 282 APRIL IN-THE-MONEY UP 25.7%, 284 APRIL AT-THE-MONEY CALL UP 22.8%.
BUY ON OPEN – 288 APRIL IN-THE-MONEY PUT, 287 AT-THE-MONEY PUT.

OF NOTE, $10K Swing Trade Stocks:
SOLD ON CLOSE – WYNN, 17.6%; FSLR, up 6.6%; GS, UP 4.1%; NVDA UP 5.2%; AMZN UP 2.4%.
BUY ON OPEN – NFLX.

WHAT’S NEXT?
As noted in yesterday’s post, with the SPY is up eight days in a row and the NYMO turning down a profit-taking dip was coming “any day, any hour, any minute.”

Got that dip today causing profits to be taken on five bellwether stocks and SPY options (see table above). With the dip, however, the NYSI turned down – a bit of a surprise. Consequently, this pull back could get carried away to down side. Don’t really expect it after seeing so much momentum on the last bullish surge. Most likely it’s a mere dip to the zero line on the NYMO.

As said in the post below, as long as the NYMO and/or NYSI remain positive overall the usual play is to be long, take profits when the stocks give sell signals, and buy coming out of dips.

Trouble is, as of today, neither of them are positive so we’ll have to wait and see, or be ready to be nimble, playing offense with SPY puts on tomorrow’s open and playing defense immediately thereafter.

CNN MONEY’S “fear and Greed” pulled back, still at a “greed” level,” but it tends to be early at the top of swings. (Actually, the more I consider this, the more I’m beginning to think this dip COULD turn into a decent decline.) See the chart below.

AAPL finally had a reversal day and remains five days, by my measure, in overbought territory. If the market’s going to get carried away to the downside, the market-cap craziness of AAPL is a likely to be an easy down-and-dirty put play, maybe the 200 put for either Friday’s or the 4/18 expiration. The AAPL 190 April at-the-money call on this market rally is up a whopping 144% and has not, as yet, given an actual sell signal.

The banking stocks did today, a day late, what was suggested in this link – $XLF – Fighting an urge to short the bank stocks – so those short scalps are in play.

(click on the charts for a larger view)

$XLF – Fighting an urge to short the bank stocks

The banking stocks appear on their charts ready for a quick flush down.

If anyone ever doubted the birds in a sector fly together, those charts below should relieve the doubts. Again and again, the major bank stocks’ charts look the same as history repeats and repeats, and again it looks like time to tumble.

So why do I say “fighting the urge”?

Simply put, there are extenuating circumstances. While they all stalled together Friday with XLF, the financial sector ETF, even ending the week in a dreaded doji and GS setting up a clear black-candle of indecision, long-term and short-term breadth in the general market, measured by the McClellan Oscillator and Summation Index on the NYSE advance-decline line (the NYMO and NYSI) remain positive.

Note the last time these stocks sold off in mid-March (see the charts below), the NYMO/NYSI was negative. No so this time, which probably means any drop here will be no more than a dip.

However, for nimble traders, scalpers, there could be a shorting opportunity on breaks below Friday’s lows on these stocks with Friday’s highs as an initial stop loss level. It might be easier to to buy puts for the same play. One thing about a trade like this, if it doesn’t do what the setup says, nothing is done. If it does, there could be a quick profits. And sometimes a scalp like this can get carried away into a real decline and a bigger profit.

And after essentially an eight-day rally across the board in the market (SPY is up eight days in a row), there is a chance a surprise could come to the down side.

If so the bank stocks will feel it.

(click on the chart for a larger view)

#DayTrading $SPY and #Stockoptions…

The contents of this blog entry was first posted here last November about trading SPY options on the long side. I have added “stock options” to the title above because the strategy basically works with weekly stock options.

There are so many options strategies in the stock market the head spins – a straddle, a strangle, a naked and/or a covered put and/or call, a calendar, a condor, an iron condor, an iron butterfly (isn’t that a rock band?) and any combination of any of these for hedging purposes, for capital appreciation or preservation, for gambling. Mind boggling.

But buying options… Buying options, just plain buying a call or a put, everyone will say is a “fool’s game.”

Regardless of whether a trader buys calls or puts on index ETFs like SPY or QQQ or IWM, or buys options on stocks, there are only three things that can happen – the option goes the trader’s way (good), or the option goes against the trader (bad), the option goes sideways with price decay over time (also bad).

Two out of the three possibilities for the option buyer are losers. What fool would want to play that game?

But is it really a fool’s game?

Doesn’t have to be. Not for day traders.

Let’s take SPY options as the prime example — very liquid across multiple strikes, tight spreads, hardly any time decay on a trade for only a day, a stop-loss is close by and immediate, and the profits, if there is a trend for the day, can be substantial, even rather astounding.

Also great for scalping on any time frame intraday.

The key, as always, is persistence, discipline, experience, and an entry signal the trader is comfortable with taking.