JanWk1 - SPY Fiscal Cliff?

My Chartnexus is working again. ;) So I thought I would post this as well. It shows all my favourite indicators. Firstly, the ichimoku kinko hyo is represented here. Then the volume traded, plus the moving averages - 50 day, 200 day respectively in blue and red. And pivot numbers showing all the supports - S1, S2, S3 as well as resistance - R1, R2, R3.

So you may ask, what does this all mean? To be honest, I am not too sure either. I just know that the S1 support line at 1396.640 might offer some resistance, and in this sense, it is good because the ichimoku indicator doesn't show the supports within the Kumo (Cloud) itself.

But the top of the cloud is also a resistance line, and that is measured by the pivot 1407.370. So my take for this week leading up to JanWk1, the SPY is most likely to be trending sideways. Anyway, let's see what the market offers us tonight. My feeling is it is likely to be trending sideways, so it will move in between 1407.370 and 1396.640.

I know it is a tight little window, but I have a feeling the opening and closing price tonight will be in between this range. :) Otherwise, happy trading people! ;)

Invest in Financial Education

Financial literacy is something that should be emphasized time and again. There is nothing sadder than not having the necessary financial information or knowledge and making a bad financial investment decision that cost you an arm or a leg.

As it is, financial geniuses are already making broad stroke mistakes in their trading strategy, so what makes the novice trader any less susceptible to financial losses in the stock market? It is more likely than not that the novice trader is likely to make small returns and incur huge losses.

But just imagine if you know what is happening in the market, and you're ready and geared up for the opportunity? Wouldn't that be better? I think that is a smarter thing to do. To be financially in the know as to the instruments of investments. Never mind if the financial literacy course is expensive. If you think about it, the losses that you have to stomach is probably worth the course itself.

DecWk4 - SPY Market Summary

As predicted (I know I am using that word a lot!), the SPY entered into another bloodbath last night. The ichimoku charts this morning showed a huge bearish candlestick. OMG (oh my gosh). Sorry, I had to say that.

It is now officially into bear territory. The closing price for the SPY has pierced below the support that I was talking about the other day. I was hoping that the price will not cross below 1410 but unfortunately the terrible has happened, and it is now officially into the Kumo (Cloud). The Kijun Sen and the Tenkan Sen is trending towards convergence, and if it does indeed converge, then it is a strong bearish movement, and could possibly pierce below the cloud.

However, historically, it hasn't drop in this manner all the way, so in a sense, I have a strong feeling that come next week, it is likely to be a sideways movement, at least until JanWk1. The SPY closed at 140.03 with a drop of $1.532 USD. Hope nobody got assigned this week. :)

Blessed New Year! Let's look forward to a profitable 2013! :)

DecWk4 - SPY Bloodbath!

Well the SPY's performance last night shows that it is really going to go for a final bloodbath to end the year with. As predicted, the SPY opened and closed very near with less than ten cents as the difference.

This is marred by a huge dip piercing into the Kumo (Cloud) and then it recovered. This is just indicative of a huge indecision, and from the looks of it, it looks like it is gonna go down tonight. Possibly so far down that the Kijun Sen might cross the Tenkan Sen and predict a huge downward trend for 2013!

It doesn't look good from where I am sitting. Sit tight and cut loss if you sold put spreads! If you're not invested, good for you, and enjoy the bloodbath tonight! :)

DecWk4 - SPY Flat?

Last night's SPY performance is as expected. The indicators have been pointing downwards. There is a relatively strong support at 1410 for the S&P500. Which means if it crosses below that price tonight, it will spark another round of fresh selling.

As it is, the Kijun Sen is rising, and that is not a good sign considering that the Tenkan Sen is likely to converge as well if the current price continues to dip. The price last night is at the threshold of dipping below the Kijun Sen. While it is generally bullish, it is now in bearish territory again.

However, I expected it to be bearish for this week. It should ideally touch the top of the Kumo (Cloud) tonight and then rebound. I expect to see a star formation appearing with the opening and closing prices to be very near to each other.

Well, let's see what happens tonight, if it closes below 1410, then the SPY is going for another bloodbath on Friday. :) Happy new year people. May it be a better 2013!

DecWk4 - SPY Bearish Sentiments

Monday's half day trading day in lieu of the fact that it is Christmas Day! Blessed Christmas folks!

As predicted, it's a downward trend on Monday, so does this in effect mean that it will be a further downward trend when markets open on Wednesday? I think there is likely to be more downside for this week. The SPY will probably try to test the support which is the top of the Kumo (Cloud) and then it will bounce upwards.

This bouncing upwards is likely to be over the next week. But whether that happens or not, it will depend on the performance of the market this week starting from Wednesday till Friday. I am looking to sell a Call Spread, but that might be an unwise decision considering that the market can throw a curve ball at you.

The better thing to do is to sell a Put Spread as the support might hold it at bay. How was this all pan out, will depend on tomorrow's market performance. :)

DecWk3 - SPY Bloodbath

If anything, last night's SPY Ex-Dividend action was a bloodbath for many Put Spread sellers. Look at the thickness of that candlestick? Just as I suspected something was amiss, this has to happen. WOW.

I lost money, but thank God, I managed to have the presence of mind to cut loss when the trigger hit my criterion. Sometimes upon hindsight, you just thank God that you made that decision, but just a day before, others could be saying, "why did you do that? it was a safe trade!"

Well, I know this much to know that there is no truly safe trade. Especially in last night's market. It was a can of worms opened, and I am sure a lot of folks couldn't have made it out in time. :(

Market trends is still a strong bull movement. Although the Chikou Span has dipped into the historical green cloud. This is an indication that the market might be heading downwards if on Monday the market dips further. For that, we will have to watch what happens over the weekend.

From the looks of the ichimoku charts, I think it will likely be a downward movement until it touches the support of the Kumo (Cloud). Probably a good time to sell a Call Spread next week Monday maybe?

It may not be the end of the world yesterday, but it was like a near end of the world scenario for those who are heavily invested and had to cut loss. Again, Warren Buffett's two golden rules of investments. Rule number 1 capital preservation is most important. And Rule number two is don't forget rule number 1. I suggest we do likewise in a volatile market such as this.

Blessed Christmas and see you all next week! :)

DecWk3 - Cut Loss!

Last night's market performance by the SPY was indeed a uncertain one. It dipped further, and it hit my 4 times of premium sold criterion and I decided there and then to cut loss for peace of mind. :)

ROI for my loss is -18.12%. Ouch!

It amazing how once you have cut loss, you feel much much happier. I felt that last night. I know this week's trade is a little tricky just simply based on the way the premiums shot up and downwards. It's a sign that there is something special that is going to happen for this week's trade. I am not entirely sure what though.

In any case, I can enjoy my Christmas celebrations and I don't have to worry about/or whether if I will be assigned come Friday because of sudden gaps upwards or downwards. :)

As Warren Buffett once said, "I don't trade what I don't know". I think that's good advice, and especially if the market movements are so erratic, I won't want anything silly to happen and destroy my Christmas moods. :)

I woke up this morning, and guess what? The SPY after dipping and triggering my cut loss criterion, has gracefully increased and went up $0.83 to close at $145.12. Upon hindsight, it kind of matches my earlier prediction that it might burst the $147 trend line. I was looking at selling the $147/148 spread earlier this week.

So did I cut loss for nothing? *LOL* Well I try not to second guess my cut loss criterion. I put it in place for a reason, and if it triggers it, then so be it. I will cut loss, because the last thing I want is to worry about some kind of massive gap down on Friday market opening. Which could possibly happen since the candlesticks for the last 4 trading days have been rather long. :)

Looking at the SPY futures now, it looks like the SPY is gonna gap down at least $2.5+ which means it would probably trigger my strike price for the Put Spread $141.5/142.5!! Oh My Gosh. I can't imagine the horror of that happening tonight at market opening when my trade get assigned or if the buyer decides to exercise the option and I have to buy it back! I would probably incur a huge loss. :( 

This just solidifies my trading methodology and my firm belief that if you sense something amiss, cut loss and then come back another day. There are 51 weeks left to trade. :) 

Blessed Christmas people, see you next week. :)

DecWk3 - Wednesday's Performance

Wednesday's performance was exactly what I had thought it would be! The SPY dropped, and for the earlier part of the night, it dropped till the first threshold that I set for it, and that's $0.54 down. I decided then that I would sell a Put Spread $141.5/142.5 at $0.08 cents premium.

It was a rather risky trade because any dip on Thursday could result in a cut loss situation. I should have sold a spread that was a dollar lower, $141/142. That would have been a more sensible trade, and that would have allowed me more peace of mind.

The closing performance for Wednesday's trading day was an even lower $144.29 which was a $1.08 drop!  That dropped basically stressed all the premiums and the $141.5/142.5 spread showed $0.17 cents premiums! Imagine if I sold that spread?! It would have been a huge gain.

It's a worrying drop, which means when market opens on Thursday, it could be a potential cut loss situation if the market were to drop. I have decided that whichever the case, if it triggers my cut loss criterion, I will cut loss.

Psychology of Investing

I thought I would quickly pen down my thoughts on this topic since it is essentially a large part of my trading/investment strategy, and it is one that is hardly talked about by those fly-by-night trader teachers. Of course there are many reputable "teachers/gurus" out there that teaches you to have a proper trading strategy, but I think people prefer to hear it from a novice trader sometimes.

I don't know about you, but I tend to prefer to hear it from retail investors and their first hand experiences and emotional turmoil that they have to go through whenever they are out there in the market trading for themselves. I have always wished for some kind of emotional social support group that can offer good advice in times of need.

When I saw that the SPY dipped at closing this morning, it affected me emotionally. I know this is a bad sign, because I shouldn't be feeling that way, but I guess I do. I know what I should do in this event, and that is to monitor the SPY tonight and then cut loss once it triggers my cut loss criterion. My writing of this note is to also remind me that I should be aware that these are the measures that I should take tonight should the SPY continue to dip and trigger my cut loss criterion.

I have decided to make my cut loss mechanism to 3 times of premium sold. The reason why I am doing this is because I don't want to waste time eye-baling the market again tonight. Also, I am assuming that if the SPY were to go down tonight, I will lose less since I will be cutting losses earlier.

The SPY futures looks like they are retreating to positive territory. I hope I am right! :)

DecWk3 - Morning After Update

The SPY has decided to take a hard tumble and it dipped over the night to the second threshold that I thought it would (if it decided to tumble). I basically made some assumptions based on Tuesday's data for Wednesday's performance.

I thought that if the price were to drop on Wednesday, it would be a selling opportunity for a Put Spread. It did drop last night, and true enough, it was a selling opportunity. The question now was till which threshold would the price drop to? I have set two price benchmarks for it to drop to and then I would consider an entry into the market.

I was looking at $144.83 as the first benchmark, and if it didn't cross over, it would mean that the support was there. It barely touched that line and bounced back up. I decided that it was a good opportunity to sell that trade and only managed to get the pair 141.5/142.5 at $0.08 premium.

It was a good trade. Ceteris paribus of course. All things must remain constant, that is, price must continue to climb and return at least to normal ranges.

Unfortunately the SPY has dropped to my second threshold for the night and it is at $144.29 with a drop of $1.08. You may be wondering how I came about with this magic number. It is quite simple really. I merely divided the candlestick from the previous day into three parts.

So if the SPY were to drop $0.54 cents to the first threshold, I would sell an "easy-way-out" trade. If it continued to drop, to double that at $1.08, I would also want to sell an even lower and perhaps safer spread, with the same premium of 0.08 cents. But as I am in Singapore, and as it was already past midnight, there was no way I am going to sit through the entire night eyeballing the market. I still have a day job. :)

So I made a choice and took the dive at 12.11am Thursday morning. Admittedly I took more risk than needed when I sold the trade. I had an almost blind kind of faith in the fact that it would actually bull doze upwards towards the end of market trading day. I entered the market when the price dropped recovered to -0.09 cents.

Of course, I went to bed, and the SPY proved to me that my thoughts and assumptions were all wrong. Haha.

So now that the trade has gone south, what's left for me to do is to monitor the premiums further and to hope that it doesn't cross my conservative 4 times of the premium sold. Basically looking at the trade this morning, it says that my trade is valued at 0.19 cents. This refers to the current premium that my spread is worth. If I were to divide this by 0.08 cents premium sold, I will get a ratio of 2.375 times of premium sold.

That's an indication that I should be prepared for a situation of cut loss tonight when the market opens. Cut loss here mean "close-my-eyes" and get out of the trade (also have to mentally cut off my emotions as well). As it is still within the thresholds of my cut loss strategy, and coupled with the fact that there is still time decay working in my favour, I am hoping for a reversal tonight and a confirmation that my theory is proven correct.

My theory is, if price were to drop more then two thirds of the candlestick the day before, it is likely to continue to go downwards the next day. It did an day low of $144.24 which was enough in my opinion, but because I was sleeping at that time, I could do nothing. Not that I would be doing anything either. There is still a buffer of $1.79 before it breaches the $142.5 strike price, assuming that the SPY is to continue to dip tonight.

Let's keep our fingers cross and hope for a reversal tonight. :) Otherwise, it might be safer to cut loss and come back again the next trading week.

DecWk3 - SPY Sold!

Trade:
Sell: SPY DecWk3 PS 141.5/142.5 $0.08
Status: Filled on Wednesday 12 Dec 12.11am (SG time)
Expiry: 21 Dec (US time)
Contracts: 5
ROI: 5.94%

Analysis:

In my previous post I mentioned that this week is a major bull run week, and it is with good reason I am generally avoiding a Call Spread trade. Instead as you can see I have decided to opt for a Put Spread trade, and it is filled at a premium of $0.08. Woohoo!

Again, I am using my "easy-way-out" strategy and opting to choose the trade that is nearer to the current price. I am predicting that this is only a temporary pull back, but tomorrow the SPY is likely to continue its upward climb. Either that, or I will have to cut loss. :)

For the looks of it, I think I should have a pretty decent buffer at $142.5. I highly doubt that it is going to go down $3+ especially since the bullish sentiment signal has been triggered already. Just simply based on historical readings of the ichimoku charts, it is highly unlikely that it will crash. Unless something happens, like maybe the end of the world? In which case it won't really matter either.

I calculated that the intra-day low should be at about $144.83. So far it has only managed to touch $144.86 which is a good sign. Of course I hope that the SPY will not drop further tomorrow or Friday. Whichever happens, it will be an interesting journey as I will know if this theory really works or not.

DecWk3 - SPY: Bullish Uptrend Confirmed!

WOW. I am speechless. The ichimoku charts have spoken again. I am still a novice, but the little that I know of the charts are making me excited just looking at it. :)

In short, I missed a perfect selling opportunity for a Put Spread. I had predicted based on the charts that it would go up at least $1.50, but the SPY outperformed my expectations and went up by $1.62! WOW. Did I already say that just now? ;)

Why is this a MAJOR indication that it is a big bull run from here onwards?

1. Firstly, there is no dip, the low of the day is very close to the opening.

2. The closing price is also very near to the intra-day high.

3. The chikou span (26 day lagging moving average) has pierced through the green cloud!

4. The senkou span A has crossed over the senkou span B as is evident in the future (count 26 days ahead).

5. If you look at the historical charts 6 months or more, you will realise that this is going to be a big bull run (ceteris paribus) that's if there is no more bad news coming out of anywhere. :)

Hold on tight folks, it's going to be a smooth sailing flight UP! :) if you sold the SPY DecWk3 Call Spread 147/148 spread this week, I would suggest keeping your eyes peeled and hope that the SPY retraces a lot tonight. That said, if the SPY retraces a lot tonight, I will be hunting for a Put Spread.

DecWk3 - Bullish Uptrend!

Wow, look at the ichimoku charts! They are spoken, and spoken volumes at that. The SPY has literally shot up to the sky and this is evident in the huge candlestick as shown in the chart above. The SPY closed at $143.79 up 1.18% or $1.67.

The market tested the resistance level provided by the Kumo (Cloud) and since this is the third time, it finally broke through the cloud! The SPY closed just above the cloud, and this is otherwise known as a Kumo Breakout scenario. The SPY has managed to retain its buying fever, and I am expecting more tonight.

If you take a look at the Chikou Span (or the lagging 26 day indicator), it shows a crossover both the historical Tenkan Sen and Kijun Sen moving averages. This is a bullish indicator to suggest that there is a great bullish movement.

Will the SPY continue its upswing and test the upper limits of $147 by Friday? It's anyone's guess. If it does, then perhaps it would be a good time to consider buying a Put Spread and let it naturally build the buffer. I personally think that the SPY is going to touch or maybe even expire at $147. So selling a Call Spread while it may have some advantages, may not be such a wise move considering that this is possibly the last trading week with any meaningful premium available.

Anyway, better to eagle the SPY tonight. It is definitely very very exciting! :) 

DecWk2 - Market Update

It was a beautiful SPY movement last Friday and it ended with the SPY trending lower. It was a strong bearish movement, even though it had tested the Kumo (Cloud) for the second time. Usually if it tests for the third time, it is indicative of a breakthrough or if it fails again, then it will reach new bearish limits.

My trade expired worthless and I bagged a 5.94% ROI. It was one of the mor successful trades as I combined both the "easy-way-out" strategy and the ichimoku charts.

The charts shows the general bearish closing and my Call Spread of 146/147 was safe!

This is the last week DecWk3 before the markets ends for the new year. Should be exciting!

Quote of the Day

While optimism is good, misplaced optimism is bad indeed.

DecWk2 - Expiring Options

The SPY's lackluster performance last night has yet again proven the ichimoku charts are true. Last night's price movements show that there is a Kumo (Cloud) breakout, but downwards. Unfortunately there wasn't enough power to get it going upwards or even into the cloud itself. 

The Chikou Span which is a 26 day lagging moving average, actually shows that it has triggered historical price, and that is a strong bearish signal. This just means that when market opens later, it is likely to be a bearish downward movement. 

The only chance is if buyers were to come back into the market to push prices upwards, in which case it would need to test the resistance which is the bottom line of the cloud itself. Whichever the case, it is unlikely that the SPY being in bearish territory is going to have a huge spike, not especially on e Friday when options are expiring. At $142.66 (closing price last night) there is a buffer of at least USD $3 before it hits the strike price of the pair that I sold for.

In other words, if the market were to trend upwards tonight, I doubt it will have the muscle to move up $3. If the market were to trend downwards instead, I will definitely be looking for a trade to sell. Exciting times! :) Let's see what the market brings to us tonight! 

DecWk2 - Friday (SG time) Morning Update

The SPY's performance last night was predictable to say the least. It hit the resistance level that was the Kumo (Cloud) and decided that it was too much to push through into the unknown.

So instead of pushing through, it decided to pare off gains from the previous trading days and sellers came in. The performance was a straight bear. At first it was on a slight upwards movement, but it was short-lived as sellers brought the price tumbling downwards.

It was tumbling downwards so much that I even got hopeful of a Put Spread trade that I could sell. That would be sweet. But I decided that I will sit this one out and relax.

True enough, it dipped further. I think if it continues to dip downwards, there could be a strong case for a Put Spread tonight when DecWk2 will be expiring. Sounds exciting people.

DecWk2 - Flat Performance

Last night's performance was indeed an indication that the resistance of the Kumo (Cloud) should not be ignored. The spike in the SPY was indeed impressive. It shot up towards the sky and out of the top of the cloud, but eventually the price came down to where it should be, and that is just below the resistance line.

This is important because this just means the market is entering into another session of indecision. This indecision in the market is good because expiry of the DecWk2 options for the SPY is Friday. All this time even as I speak, time decay is setting in, and already my trade is "safe". I hope that it stays that way.

The pre-market futures for the SPY shows a lackluster uncertainty, I sure hope that it stays that way till expiry. Well, let's see what the market has in store for us! :) 

DecWk2 - Bullish Uptrend Confirmed?

Last night was a really bullish uptrend! Not bad actually. In fact, there is an indicator that kind of showed up. If you look at the Chikou Span, you would notice that it crosses historical price, and that's an indicator that there is a weak bullish trend. True enough there was one last night.

So where do we go from here you may ask, well, honestly I don't know, and I pretty much don't care. I am only hoping that the SPY will correct itself the way it did after I sold my trade, and hopefully it goes down, down, DOWN!

My assessment for tonight is that it will try to pierce the Kumo (Cloud) and the base of the Kumo is actually the resistance line, in order for the SPY to break through the Kumo, there must be a huge buying frenzy, and the closing price must be within the cloud, or out of the top of the cloud. That would be disastrous because that would mean I would have to cut loss.

The current pre-market prices are now quite iffy, or undecided, which is good because that just means if the market were to come crashing down, then my trade would be very safe. I am hoping for that. Let's see what happens tonight. :)

DecWk2 - SPY Sold!

Trade:
Sell: SPY DecWk2 CS 146/147 $0.08
Status: Filled on Wednesday 12 Dec 12.53am (SG time)
Expiry: 14 Dec (US time)
Contracts: 5
ROI: 5.94%

Analysis:

I am testing out my strategy and that is to take the "easy way out" trade. I am thinking that I should be able to get at least an 8 cents premium at the high of the market spike. I managed to sell a trade for that premium! The strategy seems to be working. At least I managed to get the 8 cents premium for the "easy way out" trade.

Now the challenge is to patiently wait till it expires worthless on Friday evening (US time), and hopefully the bullish trend will actually enter into the Kumo (Cloud) and then become a sideways trend for at least until this week is over.

As it is, the SPY has since dropped, and the premiums are slowly diminishing. All I got to do now is wait for the power of time decay to set in and then we can call it a day. :)

DecWk2 - SPY Spike

The SPY has finally spiked up as I expected! So exciting. I am looking for a trade to sell, but so far the premiums are less than luxurious. I am looking at the following trade:

Sell SPY Call Spread $148/149 $0.05

But realistically speaking, that is almost an impossible trade now unless the SPY continues its upward bullish trend. The question here would be, is there enough buying power to push the SPY further upwards tonight so that we can find the right premiums for the trade?

It's anyone's guess really. So we are at the crossroads of a trade, and potentially for those that entered into the market when there was an earlier spike or gap up, they could have already sold the call spread for their desired premium.

My instincts tell me that I should sell Call Spread $146/147 $0.07.

Shall I take the risk or not? :)

DecWk2 - Monday's Performance

Monday's performance on the SPY is not exactly what one would call exciting, and in a sense, it is pretty sad to say the least. Why would I say that? Well, here we have a perfect opportunity for the SPY to burst out of the dole-drums that it seems to be experiencing, and pierce itself through the Kumo (Cloud) but that has not yet happen. In fact if last night was the bull run of 2012, then it would suitably be an apt finish to the rather down market action year.

Okay, so maybe I am exaggerating a little. It isn't all that bad considering that the market was climbing all the way up since leading to the US Elections. But now post Elections, it seems there was a slight correction with news of the impending fiscal cliff a couple of months ago and Europe's worrisome worries. Of course they all knew that, or is it as a result of finding nothing worthy to report after the biggest event of the year is over? Maybe. 

Anyway, who cares really?! Obama has won, and the other guy has lost. That's the nature of the game. One winner, and the other did not win. So what now? What do we expect from the markets? Are we on the slow road to recovery now that the working class has spoken with their voting slips? Or are we in for another shaky ride? Well from the look at the ichinoku indicator above of last night's performance. I am quite pleased to say the least.

The SPY is on a slow uptrend climb. It only managed a fractional increase last night (or evening, depending on where you're located). That might spell some bearish sentiments for tonight though. The Tenkan Sen and the Kijun Sen are now moving in parallel to each other. It's a sideways trending pattern if you ask me. Still bullish, but weak, so maybe as it approaches the Kumo (Cloud) we might begin to see a trend breaker, maybe, it might burst into life and become a shooting star.

Get ready folks, it's time. :)

DecWk2 - Pre-Market Anticipation

It's definitely gonna be an interesting night for me. When the US market opens later at 10.30pm SG time. I am hoping for a good run up tonight. :)

The ichimoku indicators have shown the trends and it is going up. It is a good sign. There is definitely gonna be a huge candlestick for sure. I am just waiting for the bullish signal to be stronger.

That said, I am going to take my "easy way out" strategy and sell one spread nearer to the current price. I realise that this strategy can only apply if there is a consecutive bull run of at least two trading days and at least a buffer or spike of at least +4-5 USD.

If you are following my trades, you will realise that my strategy is roughly very simplistic and amateurish. The important thing for me is a safe trade. Capital preservation is most important. Everything else is just persuasive.

Monday market opens in 30 minutes folks! Get ready.

DecWk1 - SPY Market Roundup

The market on 6 December 2012 has spoken. It looks like the Tenkan Sen crossover is true. The SPY is on a bullish trend pattern upwards, and it looks good from last Friday's trading day. The SPY closed trading day at USD $142.415 +0.435 cents from the previous day. 

This is definitely indicative of a weak bullish behavior, as the current price is under the candlestick, and although the Tenkan Sen seems to be moving sideways at the moment, it should eventually move upwards as it breaks out of the Kumo (Cloud).

There should be a huge upswing soon, maybe we will see it this week DecWk2. Let's hope for the best! :)

Options Trading Platforms

There are many types of options trading platforms in the market out there. Just google the results and you can cherry pick the ones that you like. I have decided that I want to keep things simple and my options trading strategy simpler. So options xpress works well for me at the moment.

They may not be the cheapest in terms of trading commissions, but the platform is quite simple to use, and relatively idiot-proof, so it is good for idiots like me. At least I can focus on the basics of investing and I am quite happy with the tools offered. There is some educational videos that they offer as well, and there is a virtual trading platform for those wanting some extra training.

I guess these are common generic features that all trading platforms should have and offer their clients. I prefer www.optionsxpress.com because it works for me. You may try other platforms like Think or Swim, or whichever trading platform you want. The rules of the game are the same, just that maybe the other platforms offer better commission models for trades.

So best advice is to get a platform that you feel comfortable with. One that had a local representative where you are so that you can ask questions, and learn how to use the system. Once you have the necessary tools on hand, and you have credited money into your account, you are basically ready to rule the world.

Of course keep your eyes open, and read the market reports before taking a quantum leap of faith into the trade. That's all for now!

DecWk1 - No Trades

Looks like there is no trade for DecWk1 tonight. The results of the non-farm payrolls was not too bad considering, but somehow the market just doesn't show the price movements. It's frustrating especially since having just recovered "emotionally" from a technical cut loss.

I reckon I could still put in a trade, but I am too tired. To eye-ball the market till the wee hours of the morning, is just not happening for me in my humble opinion. Of course if you have the energy, then do it. But as for me, I am gonna hit the sack.

Now coming to think of it. There were definitely selling opportunities which I could have leveraged on this week. But the reality was I didn't have the guts to do it. One critical reason was that there wasn't enough buffer from the current strike price. Secondly, in a flat market, the price movements can be going in any one direction. Which makes it all the more risky and exciting.

But thank goodness, I decided to sit out this trade. Nevertheless, it is always good to monitor.

DecWk1 - Bullish?

Based on last night's performance, the SPY looks like it is going upwards. :) This is because if it went downwards, price would have cut across the candlestick and that would have mean a reversal of sorts. The fact that it didn't happen, is a good indication that come Thursday night, or (Thursday morning US time), the SPY is likely to shoot upwards.

That would in a way make sense for me, but it must stay up of course. ;) Let's see what the market offers tonight. 

DecWk1 - Still Bullish?

The Ichimoku Charts are still quite uncertain as the market tries to sort itself out. Well, from the looks of it, if it doesn't do a bull-run upwards tonight, then we might be looking at another downward trend as by tonight the price will intersect with the candlestick if it is bearish.

The only way is if the candlestick tonight opens with a huge bullish gap upwards. That would be the best indication that this weak bullish signal will become a major bullish signal. I am hoping that it will be. It's already Wednesday, and if anything, it better be tonight.

Actually, if it is bearish tonight, I am also happy because that would mean the market is towards a downward trend! Monday was a down, Tuesday a slight down, if Wednesday is also a down, then Thursday we will see a huge down! Hmmm.. very interesting indeed! 

Let's see what the market offers us tonight. :)

Quote of the Day

What goes up, must come down. But what goes down, must eventually make its way up as well.

DecWk1 - Weak Bullish Signal?

The SPY it seems is going to shoot up tonight. The Tenkan Sen has officially crossed over the Kijun Sen! Look at the charts. It's a weak crossover though, so don't expect too many fireworks, but nevertheless, I am still expecting a gap up when market opens tonight (Tuesday 4 December 2012 US time).

As it is, there was already a gap up last night, and even though it closes downwards, there is hope that there are buyers willing to drive the SPY closer to the bottom of the thinning cloud (Kumo).

It looks exciting, and maybe tonight we will be able to find something to sell. Hopefully there will be some good premiums. Get ready. ;)

Quote of the Day

Strike while the iron's hot.

DecWk1 - Bullish?

Welcome to December folks! I am optimistic about December for some reason. Maybe it is due to the fact that the Ichimoku charts gave me an indication that it might be bullish tonight. The indicator shows that the Tenkan Sen is cutting from below the Kijun Sen. This is a crossover signal and that it might become bullish.

I can't wait for when markets open, and the SPY shoots up to the stars. I am sure everyone who knows technical analysis would also be looking forward to that event. Maybe I should try my "easy-way-out" strategy for a $0.08 premium. I am sure that premiums tonight will be unusually higher.

Well if the SPY gaps up by USD 2.00 and if i am able to sell a premium that is at least USD 7.00 away, I think it might be safe in these ever changing times. It seems the market might be sorting itself out since last week's roller coaster trading days.

Where will the SPY go tonight (SG Time)? Well, only time will tell, and I can't wait to sell some options. :)

That's all for now!

Quote of the Day

It's ain't over till the fat lady sings.

NovWk5 - Options Expiry

Last night was a close shave as usual. The market was indecisive, and that's a clear indication that there is a selling opportunity, but a risky one. That's because you never know where the market is heading towards, it can be a roller-coaster up and down price fluctuation the entire night without any conclusive result.

I nearly eye-balled the market again, but decided that the buffer was safe enough and went to sleep, albeit with an uneasy gut feel. I knew my trade was safe, but I can never be truly safe. Just had to take a risk.

The trade summary again:

Trade: Sell SPY NovWk5 PS 140/141 $0.05
Entered: Friday 30 Nov (US time)
Expired: Friday 30 Nov (US time)
Contracts size: 5
ROI: 2.95%
Status: Options Expired Worthless!

Analysis:

Looking at the chart for last night, my prediction that the two moving averages would finally meet is now true. The tenkan sen and kijun sen has met! When the tenkan sen crosses the kijen sen from below, it is a very bullish signal.

Looking at the candlestick for yesterday, it looks undecided, and that just means that the market is going to shoot up above the clouds. The question here is, would there be enough buying power in the market to allow that to happen? It's anyone's guess, but from here, it looks good!

My decision to enter the market on Friday is both a safe and risky one. It is safe because Friday is the expiry day when market closes, so technically due to time decay, there is very little risk if I were to buy anything after the market has "spoken" in the early hours of trading.

However, since there was no definite answer last night, it was also risky to sell anything because the market could possibly expire against your favor, in which case, you would be caught with your pants down. Furthermore, this was compounded with the fact that there is very little premium generally all around weekly options on the day of expiry, that you simply just have to take a risk.

Thank goodness, there was one opportunity that was relatively safe. Price was $142+/- thereabouts, and there was a spread $140/$141 that offers a $0.05 premium. Of course I know later that it actually offered $0.08 premium because the market started dropping (de ja vu). But if I wasn't in, I would probably not be selling anything thereafter, so it was an overall good decision to enter when I did.

Greed, I realise will make you linger and want the higher premium, but in reality, your soundness of mind would prevent you from entering into a trade with a higher premium especially when you consider that the buffer is so tiny. The market went to a low of $141.66 (presumably that this was when the market offered a $0.08 premium) under these circumstances, would anyone in their right minds sell a trade? Not likely.

Anyway, I just got up, and the options has successfully expired worthless! Another 2.95% ROI on the road to recovery! Next week is going to be exciting!

That's all for now!

NovWk5 - SPY - Sold!

Trade:
Sell: SPY NovWk5 PS 140/141 $0.05
Status: Filled on Saturday 12.07am (SG time)
Expiry: 30 Nov (US time)
Contracts: 5
ROI: 2.95%

Analysis:

The market is sideways tonight, but I decided to take a risk and sell a trade. I know it is pretty dumb to do that, but it looks relatively safe, and honestly, that's good enough for me.

So I just sold a put spread for $0.05, which is a decent premium. I think tonight it will expire worthless, but in any case, I have placed my contingent order (for cut loss) and at least I can now go to bed.

Hopefully I can make something back tonight. :)

NovWk5 - SPY: Bullish Signal?

Nothing says it better than the charts! Look at the ichimoku indicators. They are converging and if the market's performance tonight goes upwards, then we are in for something really interesting tonight. :)

I am not vested this week, yet, but nevertheless, I am still hopeful for an opportunity, maybe it might be the SPY, maybe it might be GLD, let's take a look and see what is in store for me. The kijun sen and the tenkan sen are about to meet, and once they cross over, then that would officially be a very bullish signal.

Interesting that it would actually be so bullish all of a sudden. Admittedly, I am surprised. Stay tuned people. Let's see what can we draw out from the market tonight.

NovWk5 - Sideways

Just a quick update on the SPY's performance last night. Interestingly, I was right about the strong gap down. But save the applause folks, because before mid-market, the SPY crept up and finally ended up in positive territory.

As if to add insult to injury, the SPY became bullish?! It's a large sideways market it seems. There doesn't seem to be a strong indication of a proper direction which makes retail investors like myself a little anxious and somewhat concerned.

I want to trade this week, but I should be a little more cautious because it doesn't seem like the market is offering any real indication of a proper safe trade.

Well let's see what the market has in store for gold tonight. Hopefully I can find something suitable to sell. That's all for now!

NovWk5 - Wednesday: SPY: Gap Down?!

Ironically just two trading days ago the ichimoku indicators say that when price crosses the kijun sen from below, it is a bullish signal, and now it says a different story. Now the price is seen to cross from above the kijun sen and it is a strong bearish signal. 

So the strategy for me this week is simple, tonight will be a strategic moment for all of us when the market opens. I am expecting a strong gap down simply because thanksgiving is over and the market is reflecting a true sentiment.

Happy trading folks! :)

Quote of the Day

If you lost money last week, don't worry, there is 51 weeks more to go.

NovWk4 - Analysis: The Bulls are Back!

The market makers (you know who you are) took opportunity to push the market higher than expected simply for the reason that most traders are away for the thanksgiving holidays. Good thing we Asians like to eye-ball the market. :)

I am sure many folks last Saturday morning woke up to the terrible news that their trades got assigned. If you don't know what "assignment" means, I would strongly suggest that you take some time to find out what that term means for sellers. I don't really care about buyers, but if you're selling options, this is an important piece of education that you need to familiarize yourself with before you get caught in a situation that could potentially result in losses.

Alright, perhaps for the benefit of everyone, and also a reminder of myself, I might write a post on being assigned. Okay, more of that later. :)

Someone pushed the SPY upwards, and thank goodness, I managed to cut loss. There is some benefit to eye-balling the market. As much as I would like to say this system is flawless, it is flawed. The flaw here being the fact that I have to eye-ball the market till 4am (usually).

This recent push up has made me think about my strategy and in a sense rethink how I am going to trade for NovWk5.

I am back to my usual trading philosophy. There is 51 weeks left. Trade carefully folks.

That's all for now!

NovWk4 - Post Market Update

All I can say is a big WOW. My geeky eyes have seen what a strange market can do. All the quotes that I have been sprouting so far have been true. Do not think that you are smarter than the stock market.

The SPY closed at 1pm US time and 2am SG time (my time zone). It closed at a high of $141.35, having moved upwards by +1.9 USD. Unprecedented since it looked as if it was going to expire worthless.

Good thing that I have a peculiar habit of eye-balling the market for even the slightest of movements. I decided that since it was a half day, I could probably watch the market a little more intently and see where this will all end.

The SPY was relentless and it shot upwards towards the strike price of $141 and that would definitely trigger the contingent order that I set for the Call Spread 141/142. My problem was, I wasn't sure if the price was strong enough to go over $142. Since the spike came around after 1.30am. Or 30 minutes before market closed.

Those 30 minutes were the longest 30 minutes of my life. LOL.

I quickly initiated a cut loss order and stomached the loss. I decided that I didn't want to see the contingent order triggered or see the results of what was lost the next morning. It was painful, but necessary.

The premium spiked to $0.14 USD and based on that, it went up 2.8 times my original premium of $0.05. Even though it did not contravene my buffer of a 4x premium, the very fact that it expired In The Money is not a good thing as it is. The worst case scenario here is that the trade might be assigned, and I didn't want to take that risk.

Here's the trade summary:

Call Spread SPY NovWk4 141/142 $0.05
Cut Loss initiated at 2.8x premium because current price reached strike price of $141.
ROI -13.08%

Analysis:

The loss brought me back to where I was at OctWk2, in other words, all that I had gained in my trades was lost in this one losing trade.

There are some observations coming out of this episode.

I had thought that the "easy way out" trade would have been safe, but in an uncertain market, anything goes. I should have opted for the safest trade, but in which case, there wasn't a premium to sell. Or perhaps I should not have sold on Monday since I already decided that I would only sell a trade from Tuesday onwards.

These are good questions to ask myself so that I can prepare for the recovery trade next week. There are still 51 weeks to sell a trade, I can still recover from this lost. See you next week.

That's all for now!

NovWk4 - Friday

The price now is $140.75, SPY up +1.30 USD.

WOW.

And this is supposed to be a half day of trading. Imagine if it was a full day trading, we will be in for some trouble. As it is, it is already a iffy situation of it crossing over the $141 strike price, and if that happens, it is going to be a tough situation.

For one thing, the contingent order that I placed on the trade will execute, and only the $142 leg remaining. Hopefully the price will cross over that leg as well, and so the premiums are more depressed.

But for me now all that is just theory.

The reality is happening now and it is scary. ;) Of course, I am keeping my cool and just waiting for premiums to disappear. 2 more hours to go, and soon that will become a reality and my trade will be safe.

Can't wait. ;)

NovWk4 - SPY Spikes!

It's Friday, and while everyone is out celebrating, I am sitting at home, watching the market, eye-balling to be precise, and hoping against hope that the SPY will not contravene the strike price of my call spread of 141/142.

If it does, then the contingent order is likely to kick in, and I am likely to lose my trade. At the moment, the trade is worthless, but if the SPY continues it insatiable onwards ascent to $141, then I will be faced with a very unique position.

I am kind of worried now just looking at it. It is trending very close to my Call Spread of 141/142. The SPY is now $140.43, up +0.98 USD.

Thankfully the premiums are still very depressed, so it still looks safe for now. Time decay, please work your magic for me! Let the trade expire worthless! :)

Happy Easter - no trade!

Happy East - markets are close for the holidays!

NovWk4 - Market Update

So the SPY gave us a conflicted message last night. On the one hand I looked as if ready to burst into an upward trend and then the next, it shuts off quiet into slight negative territory.

Finally it decided to end it at $139.45, up USD 0.26. The high was at $139.57, commendable effort. But it still is not enough. The premiums are mostly competed away by now and even if the price were to go up on Friday, I think it will naturally run out of steam quickly.

One more day to go! That's all for now.

NovWk4 - Happy Thanksgiving!

It's a public holiday in the US, thank goodness for that. I hate selling a trade on Monday because that just means I am more exposed for the trade.

The closer I sell to expiry, the easier for me to win the trade. But the more time in the market there is, the more exposed my trade; the risk increases. As a rule, I don't sell on Monday. But this is an exception.

So here I am faced with half a day of meaningful trading left. When markets reopen on Friday, it will be a hurried half day and it will all be over. The good thing with that is, if there are any attempts at trying to hit the strike price, the markets better get their act together.

Otherwise, forever hold your peace and expire worthless. And hopefully come back again next week for another opportunity. At the moment, premiums are gone. And my trade is safe, for now. There could be a surge on Friday, but unlikely as time decay accelerate by two times on Friday since it is a shorter trading day.

I am still hoping and at the same time vigilant. Prepared for anything. Likewise if you're also vested like me. I wish you all the best as well. Happy Thanksgivings.

NovWk4 - SPY's Flat Opening

I know I can probably say, I told you so, but that wouldn't be a nice thing to do I guess. All I can say though is thank God that my trade is safe. I have been in less than wonderful situations where my trade has gone south, and I had to cut loss. Not nice at all I assure you.

The SPY opens upwards by a little tonight and it reaches an intra-day high of $139.52 but came tumbling downwards to hover about $139.24. Hopefully this will be the continuous market action until the end of trading day and we can all smile our way to the bank.

Despite the seemingly strong opening on Monday, there is basically nothing being offered yesterday and perhaps today also, that we can rave about. I am definitely looking forward to expiry on Friday and hopefully be able to lock the trade with a put spread if possible.

That's all for now!

Quote of the Day

Strike while the iron is hot!

NovWk4 - Mid-Week Update

Last night I was too tired to eye-ball the market effectively. But to sum it up. It was iffy indeed!

There were no major movements except a downward movement, retraction, and then a upward movement, retraction back to almost the same as yesterday's closing.

In short, it looks exactly where I want the SPY to be. Happy. And from the looks of it, tonight is going to be another iffy session. Which just means it was worthwhile to break my routine to accommodate the short trading week.

To be fair, there was a short timeline for a $0.05 premium to be sold, but that wasn't for very long. It was just a small window of opportunity. So whoever got it last night needed to have been staring at the screen full-on.

Alright, I admit, old habits die hard. I was glued to the screen for a good couple of hours. But that's just because I wanted to test my theory that the market was just indecisive. However, this indecision may speak of something else. And that may pan itself out for all to see. So hang on tight folks, one more significant before we can rest our eyes.

That's all for now!

NovWk4 - Pre-Market Jitters

Well I would only say Pre-market jitters in a scenario where by the market is iffy is only natural. It looks like it is going to open flat. Not that I am complaining just that sometimes, the market can throw a curve ball at out from out of nowhere and that can be quite disconcerting.

Tonight seems like it might be that, of course I am hoping for a reversal from yesterday's mad buying frenzy. But even if that does not occur. I am quite certain that it will be a lacklustre opening coupled with a possibility that it might go down down down.

Ok, market's opening soon. That's all for now!

NovWk4 - Morning After Update

The SPY last night had a strong movement. It kept going upwards with a relentless thirst for more. Buyers who probably sold off in a hurry since last week's woes on the US facing a fiscal cliff and the European Crisis, seems to be a thing of the past.

Buying pressure was heated right up till closing. The SPY finally closed at $137.13, making gains of USD 2.76 and hitting a high of $137.15. Scary scary! Premiums interestingly was muted at $0.08 and it represented a 1.6 times increased in premiums.

That all sounds good, but what sounds better is that the SPY futures now is trending in negative territory. Which either means flat opening or a reversal. Of course it may be trending upwards, though quite unlikely after yesterday's showing.

Ok that's all for now! Short long week ahead!

NovWk4

Trade:
Sell: SPY NovWk4 CS 141/142 $0.05
Status: Filled on Monday 19 Nov
Expiry: 23 Nov
Contracts: 5
ROI: 2.95%

Analysis:

The SPY has gap up at the opening. A whopping USD 2+. As usual, I have been eye-balling the price movements and decided that tonight was going to be a make or break moment.

The reason is simple. This week is a short trading week. As it is with short trading weeks, there is a lot to do and not many opportunities to do it. Such is life.

Of course the reason is that markets would prepare for the holidays ahead. They might do all their buying and selling on Monday and remain quiet the whole week until expiry.

That may well be the case. It didn't take too long before my lightning fast mind decided to sell a call spread for a premium of $0.05. I decided that my strategy of queuing for a higher premium is not going to happen and I opted for an "easy way out" trade with a realistic premium, and I got it. Yay!

NoWk4 - Sharp Spike Upwards

The SPY is up, and in an unprecedented manner. I am not complaining honestly. The higher it goes, the better it is. Just 45 minutes into the opening, the SPY has literally in the classical sense of the word, gap up.

USD 2+ to an intra-day high of USD 138.6. That is basically good news in my humble opinion.

I am looking for a Call Spread, and the safest spread at the moment is 142/143 at $0.01 premium. So instead of waiting for this safest spread to become reality, I am taking the "easy way out" spread at 141/142.. but instead of the $0.05 premium that is already available, I want to try to see if my theory is correct and go for $0.08.

Let's see how that works out. :)

SPY Ichimoku Charts

I managed to find some really cool Ichimoku Charts (incidentally my favourite type of trending indicator). Anyway, this is a long term view chart, and we can see that the SPY (S&P 500) has been on an uptrend since last year, but more importantly, it is trending below the clouds now. 

This is a bearish signal in Ichimoku terms, and that means there is more downside to be observed. Well, whether it will go up or down will depend on the daily price movements, but for now, it looks bleak to say the least. 

The good thing is, I am happier to know that it is bleak because it just means more selling opportunities! :)

That's all for now!

NovWk4 - Short Trading Week

With thanksgiving on Thursday and a half day trading on Friday itself. It would be good to try to get a trade in on Monday itself, which means tonight (SG time) would be a potentially good time to sell a trade.

That said, it would be prudent to look for a far enough premium just so that we can avoid any nasty surprises. My thinking is this, for Wednesday, trading might be slightly on the quiet side, which means premiums might not be high enough. So it might be good to think about hunting for a suitable premium on Monday itself just so that the range is there.

Otherwise, the best time to enter the market would be on Tuesday itself, and possibly a trade on Wednesday, although personally by Wednesday, I think it might be prudent to sit this one out because premiums might be very near to current price.

And I doubt there will be very much action on Friday since it is a half day, but I might consider GLD on friday since it tends to be more volatile. But with GLD, you will never really know what will happen.

Notice - NovWk4

NovWk4 - Thursday markets close for Thanksgiving, Friday early close at 1pm ET.

Sounds like a plan in my humble opinion.

Cut Loss Mechanisms

This is a topic that is very much undiscussed because in reality, nobody likes to lose money on their trades. So what becomes of the trade if you do lose money? You naturally would have to stomach the loss and cut loss.

This is where the psychology of the trader must be strong. Warren Buffett's number 1 rule must apply! Capital preservation. If you are losing money on your trades, you should quickly cut loss and stay off the markets. The rule I always tell myself is that there are 51 more weeks to make money. Holding on to a losing trade might mean a total departure from the trading desk because the entire capital is now gone.

Nobody wants that and therefore an exit strategy is just as important as a strategy to make money. Knowing when to cut loss requires a longer term perspective to investing. The trader must know and acknowledge that trading is not a one time hit and run, it's a long journey of a thousand miles. And it is a learning process of knowing your limits.

For me I stick to a 4 times the premium that I sold for as a cut loss rule. That will limit my losses and I won't be crying buckets over the loss.

Quote of the Day

At first you don't succeed, try, try again.

Entering Trades

Different investors have different strategies when it comes to entering trades. As a novice investor, I too have my own set of values and criterion that I adhere to. I tend to flaunt my own rules at times, and that's why I am writing down my rules so that I would remember it.

I only trade in the S&P 500 ETF (SPY) and in Gold (GLD). I find these two counters relatively predictable, relatively safe, and in terms of price fluctuations, it can be tamed and controlled somewhat. I am looking at a strategy that can give me a 90% rate of winning. Of course that said, a 10% rate of losing is terrible. In fact it can be quite damaging to my strategy of preservation of capital. Perhaps I might talk about that in another post.

Here are my 5 steps to entering a trade on my favourite two counters options market.

Step 1:

I don't enter the trade when the weekly option appears on Thursday the week before. Neither do I enter in on Friday, nor on the Monday of the following week. This is because I feel that to enter into the trade at these times would be pre-mature because the market needs to react to whatever that is happening in the week.

Step 2: 

I only consider entering the trade from Tuesday onwards. Which leaves me with a tight window of 4 days to the options expiring. I am guessing that all the stronger price movements would have been washed out on Monday, and so if there are any strong movements in the same direction as Monday on Tuesday, then it is a very suitable condition for me to enter into the trade.

Step 3:

A strong movement in my opinion is at least $2. But this also means Monday it must have already moved $2 in the same direction. If the movement on Tuesday is a knee-jerk reaction to Monday, then I will sit out the trade on Tuesday and look for Wednesday.

Step 4:

If the conditions for Tuesday is met, I will look for the safest trade which offers a bid premium of $0.01 or the return % to risk is 3233.33%. I will enter a trade with a fixed contract size, for a premium to sell a pair at $0.04 minimum.

Step 5:

If the trade is executed, I will monitor the premiums over the remaining days before expiry on Friday. The premiums must not exceed 4 times the premium that I sold the trade for, otherwise, I will initiate a cut loss. If it approaches Friday without incident, I will place a contingent order on the price of the leg that is nearest to the current price and keep my fingers cross. At this stage there is nothing more that can be done.

Step 6: (psychological)

I tend to eye-ball the market, and that's good and bad for someone without a strong psychology. I know I said 5 steps, technically it should be that, an unemotional 5 steps to entering the trade, but I am human, and I don't want to lose money. So my step 6 is a psychological one.

That's all for now!

NovWk4 - Options Strategy

I noticed over two week (two trades) that there seems to be a trend. I am not entirely sure if this trend is for real or not, but I am rearing to try out my theory. 

It seems that the best trade and probably the safest spread to trade is when the return % of risk is equals to 3233.33%. That in my observations is the safest trade. It is also usually the trade that offers no meaningful premium for the investor. Nevertheless, it is good to queue for that trade because you just might get it when the market is trending sideways or is in a directional mode.

So since that trade is usually not available, I am inclined to take the easy way out and trade the next pair that is closer to the current price. 

That strategy will ultimately have some implications.

Say for example:

If current price is now 136. Safest Trade for a put spread would be the pair 130/131 at bid $0.01 premium. The next best (not so safe) trade would be the pair that is nearer to the current price at 131/132 at bid $0.05 premium (my criterion for a trade is that it must be at least be at $0.04 premium). 

If I were to take the easy way out and sell that spread at $0.05 premium, I would get it for sure, but if the market is in a directional trending mode, which might mean the safest trade might eventually see a premium of at least $0.04. My easy way out trade would have appreciated in value to perhaps at least $0.08 or more.

If the market price drops drastically in a day by $2 to 134, this is definitely stressful conditions and investors might start to throw their trades. This concerted action might cause more downside and stress the price downwards to 133 with a depreciation of $3.

What this means for me is that my easy way out trade might see an increased in premium to 2 or 3 times the premium that I sold the trade for. In view of that, it might even trigger my cut loss mechanism of 4 times the initial premium sold. Now I don't want that to happen.

So for the easy way out trade to occur, I should have some signal or trigger that must happen, in order for me to enter into this easy way out trade.

1. There must be a strong upward/downward movement in current price. At least $2 would be ideal, but $1 would be a minimum. If the movement is $3, then I will take the safest trade, because that would automatically become available for me.

2. I will queue for the easy way out trade but not at the bid premium offered, but rather at a higher premium. This is because if the $1 movement is observed, there might be a chance that it might move to $2. In which case, premiums would increase, thus resulting in the safest trade becoming accessible.

3. This would also mean the easy way out trade would now have a spike in value, and a higher premium would be secured.

Conditions

I do have some conditions that must be fulfilled before I enter into that trade, so this is just strategy that is swimming around in my mind at the moment. I will talk about trade entering conditions in another blog post. That's all for now!

NovWk3 - Options Expiry

Saturday is my next most favourite day. Why is say this is because I get to wake up and upon checking my account, the options that I sold would have expired worthless. Indeed the trade on Wednesday has paid off, and ROI for this trade is 2.95%.

The trade summary again:

Trade: Sell SPY NovWk3 PS 133/134 $0.05
Entered: Wednesday 14 Nov
Expired: Friday 16 Nov
Contracts size: 5
ROI: 2.95%

Analysis:

Last night the market was turbulent. At opening, it dipped, and then went on a roller coaster that could have popped the heart out of any senior citizen just watching the market price fluctuations. Interestingly, it went down pretty near to the strike price of $134 with only about USD 0.70 cents as a buffer.

And then almost like clockwise, or a stretched rubber band, the SPY bounced all the way upwards to $135.60 and started trending into positive territory. Perhaps this was because of the massive drop of USD 1.86 on Wednesday itself, and that the market was in some kind of auto-recovery mode. Or it's that knee-jerk reaction that I was wondering about. It happened on Friday, not too late, much to my comfort of course.

I noticed something interesting and somewhat similar though, and I am eager to try this out in my strategy for next week. I will blog about this strategy in another post. Meanwhile, the trade's safe! And it's another win!

NovWk3 - Friday

Friday has got to be my most favourite day of the week. It is the day that I get to dress casual, hang out with friends and plan for the long lazy weekend.

It is also the day my weekly options expire as well, and frankly, I can't wait.

Thursday's trading was a roller coaster ride for all who got filled on their trades. The SPY went up and down and up and down and then up and down again. It finally closed at a respectable $135.70. Down a -0.23 cents from yesterday's closing.

I had initially hoped for a better closing price - like maybe $136.00 or higher. But this is expected and good enough for a market that seems to be trending sideways and downwards.

So what to expect for tonight? Well, the short answer to that is to place my contingent order and wait and see. Of course there is nothing more that can be done especially when it is expiry that I am really waiting for, but as they say, when you are vested, there is a natural anticipation that drives you.

I am hoping for a recovery, and that the SPY will actually increase and end off at $137.00. That would so make my Friday night a good and restful one. And who knows, if it goes up high enough, I might even find myself a Call Spread even.

Quote of the Day

Don't buy what you don't understand. Thank Goodness, I only sell!

NovWk3 - SPY Pre-Market Update

The SPY looks like it is on a knee jerk recovery. It looks good from where I am sitting.

Of course it would be fabulous if it can retain the momentum and continue to go upwards.

I have attached a snapshot of the Pre-market action for comfort. Hopefully that will indeed offer some semblance of peace of mind for those already vested.

NovWk3: Morning After Update

Just like a drunken night spent boozing away with friends, the morning after experience is always one of much regret. I too am suffering from the after effects of being too rash in my trades.

Against my better judgement last night, I saw the SPY falling, this reminds me of John Mayer's "Free Falling", but that's besides the point. The SPY had a free fall last night as well. From when I entered the market when it dropped 0.70 cents till the sobering 1.86 dollar drop at closing.

The lowest it dropped to was $135.62. And I bet this must have stressed premiums so much that you could even sell the 132/133 spread for 0.04 cents.

The premium for the 133/134 spread is still available and is at 0.08! How nice if I got this premium instead! That would have made all the difference. Alas, I didn't, and it all hinges upon the performance of the SPY tonight.

Let's hope that all goes well and we can have a smooth expiry come Friday.

Quote of the Day

Don't think you are smarter than the stock market.

NovWk3

Trade:
Sell: SPY NovWk3 PS 133/134 $0.05
Status: Filled on 15 Nov 1:24am SG
Expiry: 16 Nov
Contracts: 5
ROI: TBC

Analysis:

SPY looks like it is going downwards after an iffy opening. I kind of eye-balled the market a little, and time just flew by so quickly. And just as I was going to off the computer and go to bed, the SPY dips and I thought that this might be a good chance to sell some put spreads to catch the premium.

It's quite unlikely that I am going to find a better premium than this for this week since it is technically a sideways trading week. Interestingly, the trade got filled. :) And as they say, panic time.

It's still a risk, but I think it should pay off. Let's see how the market reacts tomorrow. I will be monitoring the premiums closely over the next two days.