$SPY – Three days in the “fool’s game” for 100%

I have been posting these BUYING SPY options trades for three days now, Friday, Monday and Today, buying against the common wisdom that buying options is essentially a fool’s game.



Friday and Monday were “call” days, today was a put day. These are the weekly in-the-money options expiring each Friday. Each buy signal is a $5000 buy-in with up to five trades a day for no more in on any day than $25,000 at once (there were only four signals today). These are all day trades, which is the point.

As I proposed in the link: SPY options are ideal for day trading — 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 trend for the day, can be substantial, even rather astounding.

I suppose “astounding” is a relative term and every person defines it differently but…

This is how I’m defining it today — these trades in these three days are now up a shade more than 100%.

That’s largely thanks to the “astounding” 80% move on last Friday’s expiring call. And I suppose the last two days for 12% each are more typical.

But there’s more to this if one takes a look inside the trade (without going crazy — easy to do…). For instance, today first three signals were up $8000 at their peak and there was a possible and reasonable sell at up $6000 as opposed to the mechanical close at $2450. There were moments like that every one of the days. Options after all as volatile trading products. Could have been much more than 100% on any one of them…and of course there buying out-of-the-money instead of in-the-money for more bang for the buck but this is when option trading begins to go insane so I’ll just quit talking about the might-have-beens. The what-is remains north of 100% in three days.

As I’ve said in the links above the key is any entry signal with which a trader is comfortable (see the chart below or those in the links above).

By the way, I’ve had discussions on a couple of forums in which it has been suggested that ES futures would be a more efficient and much better way to take these day trades, give the futures’ liquidity, tight spreads and lack of time decay. While that seems logical and even appears to be obvious, as far as day trading goes that is, so far, simply not true. ES futures have under-performed the weekly SPY options on these day trades. For one example the SPY Puts today netted 12% while the ES futures, at an equal level of commitment using day-trading margin, were flat on the same signals.

(click on the chart for a larger view)

A REMINDER: These posts are solely for entertainment purposes. They are a journal of my thoughts on the market and should not be construed in any way as direct or indirect investment or trading advice.

$QQQ – Ain’t got nothing but love, babe, eight days a week…

The Nasdaq Composite and its relevant ETFs – QQQ and the 3x-leveraged TQQQ – are now up eight days in a row.

Said in yesterday’s entry here that the momentum in an index that can rise seven consecutive days often only allows a one-day dip before resuming its rally. This time is appears the gap down on the open today, as small as it was, may have been all the dip allowed in this advance.

With long-term breadth positive, my guess is the market goes up another couple of days, and any dip, whenever, remains a dip to buy.

At the same time there are more and more signs that it is running on fumes.

This advance on TQQQ is up three standard deviations of an average advance. That is rare and not sustainable for long. The stocks in my nifty-fifty list continue to roll over. While the price buy signal remains in place, today’s up move could turn neither short-term breadth nor volatility back to buys.

Also, with long-term breadth positive there is no reason to short anything.


PRICE: Positive. Long (Day 8).
SHORT-TERM BREADTH: Negative. Flat (Day 2).
VOLATILITY: Negative, Flat (Day 2).


LONG-TERM BREADTH: Positive (Day 5).
FEAR AND GREED INDEX: (62, pulling back but still at the greed level).
NIFTY-50 STOCK LIST: 16 Buys, falling; 10 Overbought,5 Oversold, 2 buys today, 8 new sells.

The rally results so far (seven full days):

TQQQ up 11.4 percent.
XIV up 12.5 percent.
UPRO up 4.2 percent.
TNA up 3.4 percent.

The net gain for a basket of the above leveraged ETFs for the trade is 7.8 percent.

Some notable stocks from my lists for the past week: