#ShortStrangles on #Stocks – 10/14-10/18

THIS WEEKS SHORT STRANGLES:

LAST WEEKS RESULTS:

A PERTINENT QUESTION ON TWITTER:

#ShortStrangles on Stocks 10/07 – 10/11

This week’s strangles:

Last week’s results:

(Percentage gains and losses reflect returns on cost of strangles, not margin needed for the trade.)

#ShortStrangles on Stocks 9/30 – 10/04

This week’s setups:

Last week’s results:

#ShortStrangles on Stocks – 9/20 to 9/27



See chart panel below.

(click on chart for a larger view)

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)

#OptionsStrategy – Stealing money with short strangles on stocks

If there is any way to consistently steal money in the market it might be short strangles on stocks.

That is: with persistence, experience and discipline.

For example last week’s strangles as posted on twitter:

The key is to select the price spreads between the puts and calls for the near Friday’s expiration at a measured distance. There are all kinds of number-crunching strategies for determining the options spread below and above the stock price (Tasty Trade Network is a good reference), but since I believe it is best to keep it simple, and since it’s only for a week, I just eyeball it.

If the stock closes the week between the price of the short put and the short call the short strangle expires worthless, basically a 100% gain.

Those gains stated in the tweet above are for the strangle change itself on the each stock with no consideration for the margin requirements on selling naked options. Needless to say the margins are high and may be prohibitive for most but, even with the high margins, there is three to five percent per week possible on short stock strangle trades and, also needless to say, three to five percent per week adds up over a year’s time.

This week’s strangles:

$SPY – dead cat or not, the open always matters…

MARKET TIMING SIGNALS FOR 7/18/2019.

Long-Term Breadth (the NYSI): Sell DAY 2
Short-Term Breadth (the NYMO): Buy DAY 1
Price: Buy DAY 1
Nifty-50-Stock-List: 17 BUYS, 9 NEW BUYS, 8 OVERBOUGHT; 32 SELLS, 2 NEW SELLS, 8 OVERSOLD.
CNN MONEY’S “Fear and Greed” Index: 47, rising, NEUTRAL LEVEL.
Bellwether Stocks: 7 UP, 8 DOWN.

WHAT?

In yesterday’s post it was noted that:

“The market will go down until it doesn’t, and granted, that could be even as early as tomorrow. The VIX remains below 15, which is a bullish level indicating this is likely a pullback and not a serious correction.”

The is pretty much what happened with a gap down before recovering.

While all three of my end-of-the-day signals were on or went to sells on today’s open in options trading and day trading the open always matters.

See the charts below. Color-coding on the these TradeStation charts has been getting simpler and simpler.

Those trades were triggered by the open for each option. They are set for $10K in each trade (what I call the “10KDayTrade” on Twitter) only to make calculating the percentage gains and losses easier. So $10K in 296 call for Friday’s expiration made about $5,900 into the close on the black chart on the left and the brief trade in Friday’s 298 put on the blue chart to the right lost about $900 so the net today across both trades was about 50%.

WHAT NEXT?

Today’s recovery was enough to turn up the NYMO which is a cautious buy signal. I say “cautious” because long-term breadth is declining. Consequently, today’s turn could be a dead-cat bounce with the downward slide resuming in short order. It’s a trade worth taking with a tight, impatient stop — in other words for me it better go my way right away or I’m going away.

At same time, tomorrow’s open, like today’s, is going to matter in both options and day trading. As far as I’m concerned SPY options are always a day trade. Stocks are a different game. Based on today’s close, stocks on my bellwether list to watch for longs tomorrow are AAPL, FSLR, SHOP, TWLO, and NVDA while BABA, WYNN and QCOM may be shorts.

The open for each will tell the story.

(click on the charts below for a larger view)

#MarketTiming – Long-term breadth says sell the rally

MARKET TIMING SIGNALS FOR 7/18/2019.

Long-Term Breadth (NYSI): Sell DAY 1
Short-Term Breadth (NYMO): Sell DAY 3
Price: Sell DAY 2
Nifty-50-Stock-List: 13 BUYS, 1 NEW BUYS, 4 OVERBOUGHT; 37 SELLS, 11 NEW SELLS, 12 OVERSOLD.
CNN MONEY’S “Fear and Greed” Index: 46, falling, NEUTRAL LEVEL.
Bellwether Stocks: 6 UP, 9 DOWN.

WHAT?

The market took the tumble that been brewing for the past couple of days.

First short-term breadth turned down after a sequence of highs below highs, then price triggered a sell on today’s open, and now long-term breadth has given a sell signal for tomorrow’s open.

That last part is the most significant. Long-term breadth (the NYSI) is the primary context behind the entire market. If it is going up the bulls have the ball, if it is going down the market will tumble too. Maybe not right away — it can whipsaw like anything else, but if it keeps going down most stocks will follow.

Technically the sell signals are on tomorrow’s open but at today’s close this upswing, which began on the open of 6/28 (13 trading days ago), took TQQQ up 8.2%, UPRO up 5.1%, FNGU (the FANG ETF) up 12.4% and TNA remarkably was flat. Among notable stocks TSLA advanced 15.1%, SHOP 7.3%, TWLO 6.1%, WYNN 99%, FB 5.9% and AAPL lagged at up 2.3%.

The Nifty-50-stock-list was a mixed bag with as many stock down double digits as those up double digits. In retrospect that was probably a read on the raggedness of the rally.

However, INS, the number-one stock on the list coming into the upswing vaulted a spectacular 49.4%.

Interesting to note the divergence that registered on the overbought Fear-and-Greed Index, kept by CNN Money, called the exact top two days ago in SPY and in QQQ (see the chart below) and was telling across the board.

WHAT NEXT?

With the NYSI declining, one can only assume swing traders will be looking for short entries, options traders playing puts predominantly (see the post below), and long-term investors should tighten stops to their individual risk tolerance or just hold their breath and hope not to die.

Of note: NFLX after the bell reported earnings, a shortfall in expected subscriptions, and is getting clobbered in overnight trading. That may set a tone for trading tomorrow. Intriguing how often news comes along from somewhere to agree with the NYMO/NYSI breadth indicators.

Nothing much more to say. The market will go down until it doesn’t, and granted, that could be even as early as tomorrow. The VIX remains below 15, which is a bullish level indicating this is likely a pullback and not a serious correction.

(click on the Fear-and-Greed chart below for a larger view)

#MarketTiming – a black candles Thursday leading to…

MARKET TIMING SIGNALS FOR 6/21/2019.

Long-Term Breadth (NYSI): BUY DAY 11
Short-Term Breadth (NYMO): BUY DAY 4
Price: BUY DAY 3
Nifty-50-Stock-List: 36 BUYS, 9 NEW BUYS, 28 OVERBOUGHT; 14 SELLS, 6 NEW SELLS, 0 OVERSOLD.
CNN MONEY’S “Fear and Greed” Index: 473, rising, NEUTRAL LEVEL.
Bellwether Stocks: 13 UP, 2 DOWN.

WHAT?

The market gaped higher again Thursday and for the most part finished higher but…

But most indexes, ETFs, stocks closed below their opens creating black candles on their charts (see the charts below). Black candles are obvious times of indecision springing up oftentimes at the end of up swings.

The three major leveraged ETFs – TQQQ, UPRO, TNA – ended the day black. Seventeen of the stocks, more than a third, of the nifty-50 stock list ended in black candles. Thirteen of the 15 bellwether stocks — AAPL, FB, NFLX, GS, AMZN, SHOP, etc. – were up on the day but fourteen of them ended in black candles.

WHAT NEXT?

As noted before black candles create an easy read for traders as the obvious indecisiveness resolves itself- above the high of the candle, the rally resumes, below the low, it falls back. It’s that simple.

With this much indecision going around, and with the current swing up thirteen days old, and with 28 of the nifty-50 stocks overbought, and with all but three of the bellwether stocks overbought (and the other three already on sells), almost needless to say, it could be time for at least a dip, if not a solid drop.

(click on the chart panel for a larger view)