#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:

#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 -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)

$NFLX drives stock options to a 66.9% daily gain

NFLX’s weekly in-the-money 360 call today rose 213% on its buy signal near the open.

As a result it drove the four stocks in a day-trading basket tracked here – AAPL FB, NFLX, TSLA – to an overall gain of 66.9% for the day.

This is a system that simply day trades the stocks’ weely calls and/or puts on the long side. As per this link:

#DayTrading Stock Options in the Fool’s Game

I’ve been setting the trades at a total of $10K per day — what I call the $10Kdaytrade on Twitter — allocating $2,500 to each of the four stocks. So today that was $6,690 for the $10K committed to the trade. Besides the spectacular NFLX move, the FB call was up 90% with $2,261 gain, the AAPL call was up $442, TSLA was up $415; there were also triggered trades in NFLX, AAPL and TSLA puts with small losses except for TSLA down $968.

I began applying the day-trading buy and sell triggers similar to those I use for day trades in SPY options on February 26th, about a month ago, trading the nearest weekly strike in the current week, and first introduced it here February 27th:


#Stock Options in the Fool’s Game

The system has been volatile (there were 20% and 30% losers on separate days last week) but so far so good overall. It is up 124% on $10K trades opened and closed each day.

So far this is just an experiment to see if day trading options on very liquid and popular stocks is viable. It is an attempt by going long on either the call or the put or sometimes both during the day to eliminate or at least mitigate the “greeks”, the complexity of fills on strategies like iron condors, and the margin requirements needed to short options. Obviously, this is not for those with their own trading rooms nor for hedgers, but for day traders with limited funds to trade, it suggests there are simpler ways to play the options game.

For an illustration of today’s movement in the calls in the stock basket discussed above see the charts below.

(click on the chart for a larger view_

#DayTrading stock options in the “Fool’s Game”

Let’s call this a “Fool’s Game” trilogy.

Three days experimenting with buying calls or puts (calls in this instance) according to the rules of the “Fool’s Game” suggested here for day trading SPY options on a lucky November 13th last year in this link: IS It A FOOL’S GAME?.

The basis of the entire strategy is the simplicity of going long calls or puts (what’s been called the “fool’s game”). The cost is clear since it is simply the cost of the option itself with no shorting margin requirements, no covered stock scenarios, no spreads or complicated attempts to calculate delta and neutralize theta and try to fill the four legs of iron condors both going in and trying to get, and no more god knows what else…

This is this simple: buy calls if you believe it’s going up, puts if you think it’s going down.

The results trading SPY options, either in the money or at the money on the nearest expiration — Monday, Wednesday, Friday. were astounding last year, and earlier this year (that system is currently experiencing its biggest draw down since I began tracking and trading it). Both because of the “astounding” and the “biggest draw down”, I decided to take a look at stocks using the same criteria as outlined in this link: DayTrading Stock Options two days ago.

The criteria for selecting AAPL, FB, BABA, NFLX and TSLA for the trades is noted in that link.

The first day of this experiment, Tuesday this week, netted 13.2% in trades that triggered in all five of those stocks (I highlighted TSLA on a chart in a post below), and netted 37% on trades is four of the stocks yesterday (see charts in the post below). FB options did not trigger a trade that day.

Very fine returns for the system, and much to be learned in its context.

Today (see the muddle of charts below), the trades in calls lost 8% on options traded on four of the stocks.

Still, a good three days overall.

But as I mentioned there was much to learned in context – a logical intraday stop on the NFLX trade (the first blue candle as seen on the NFLX chart below), would have cut the total loss to only 3%. Stops, needless to say, like with all systems, need constant examination and re-examination.

I looked into this because I’d been told day trading stock options can’t be done. This week may be an outlier but as far as this “trilogy” of day trades has gone, it has been done.

(click on the chart for a larger view)