Category: Finance

This rally that started at 1:00 yesterday has been very good for me.  I’ve cut my paper losses for the month in half in the past six trading hours.  Among the many gainers, Chesapeake Energy CP (CHK) is up into the $40s from its near-term low on Tuesday morning just above $35.  I am long 200 shares and expected to be assigned another 200 shares from my September naked puts.  Everything I own is up today and CHK is the only trade I’ve made so far.

While trading at $40.40 my limit order at hit a few minutes after I entered it and I bought to close my two CHK September 42.50 naked puts (CHKUT) for $2.20 each and I paid $451.49 with commissions.   This buy back comes after selling the naked puts on August 4, 2008, and taking in $488.50 in after commission premiums.  That’s a realized gain of $37.01 for a position I had a $500+ paper loss on just a few days ago. 

I might have held on and taken the option assignment on those naked puts if I wasn’t about to go on margin with my account Monday morning.  I decided I could come out better by selling naked puts than covered calls considering I’d be paying interest to own those extra shares.  I didn’t wait until the end of the day because I didn’t think the …

I’ve been waiting for the CBOE VIX (volatility index) to spike.  Well, it spiked all the way up to 42.16 earlier today.  This took out the last high of 39 in September 2002 and was just shy of the August 1998 high of 44.28.  You can check out Yahoo! for the historical price range since January 1990.  We are in rare times here for sure.

In the past, these spikes have come in line with near term bottoms in the markets.  What is never known until after the fact is the jump to the new highs is as high as it’ll go or if it has more room to run.  A few months ago we would’ve thought anything over 30 would be a good indicator.  Now we’ve seen 40+, although briefly.

My account serves as testimony to the volatility in the market.  Just today I’ve bounced up $2,200 before 10:00 am and then after lunch was down $2,500.  At 3:45 pm I’m up over $3,400.  That’s nearly a $6,000 change ($78,500-84,500) in less than three hours.

So far, with one day remaining before my September options expire, I think the few naked call trades I made this week to bring in more premiums (approx. $500) were good trades.  AA, CMI and VIP are all below the new strikes.  I will have to do some serious thinking to …

I received an sponsored post request through ReviewMe for Eminiforecaster.com.  I think this site is worth checking out.  Here’s a summary of some of the information I found on their site.

Eminiforecaster uses what is called G-Lines to predict the direction, swings, pivot points, highs and lows of the stock market one week in advance. They post their forecasts every Sunday so you can get prepared for the week ahead.

Swing Trading is the name of the game according them, whether you are trading SP500 Emini Futures, DOW, Nasdaq or SPY (spiders) you predict you will benefit from their weekly forecasts.

Their method of forecasting system is very complex, but in a nutshell they calculate different cycles in the market and our computers spit out the forecast for the following week. These forecasts are best suited for swing trading and even daytrading. 

They post a good track record (I haven’t audited it). On a week to week basis they predict the direction of the trading week with nearly 85% accuracy. Open to close on each day is about 80% as long as they get the direction of the week correctly. 

The service is really about three things: Pivots, Direction and Absolute levels (amplitude). Therefore, it is really important to identify the high and low pivots (in time, not price) to see where the trends will change. Their forecast will show you the high or low pivot point.  You …

As I mentioned in my previous post I had an order on CMI.  While CMI was trading at $55.50, I sold two CMI September Naked Calls (CDMIL) for $0.55 each and received $98.50 after commissions.  CMI closed the day at $57.36, so clearly I didn’t sell my new options at the high of the day.  If the powers-that-be favor me this week, CMI will close very close to $60 and I’ll profit on both these calls and the naked puts I sold earlier.

I ended up taking in nearly $500 in premiums today from my three trades and have three days to wait to see if those were foolish moves in an effort to save some losses.  I finished the day up $267.50 for the day, up about $4500 from my intraday low.

After saying in my earlier post that I wouldn’t make any trades this morning I opened my account to see I was down another $4,000 by 10:00 am.  I decided I had to save something, but knew better than to go all in during one morning.  I checked my spreadsheet to see what I was likely to own after Friday’s option expiration and saw that I would probably have $30,000+ on margin the way things were looking.  In a bull market I’d risk that, but at this point I think I should cut back on my risk and ease my margin exposure by exiting some positions, even if for a loss.

I put three limit orders in on VIP, AA and CMI, all for September strikes (this coming Friday).  I figured if they hit, I’d be forced out of the losing positions I have, but at higher prices than they are currently trading and with a decent premium considering they only have three and half days left to trade.  I priced them all out of the money.

CMI is still waiting to hit and will be at the same strike as my naked put if it hits.  If it doesn’t rise $5 in the next few days, I’ll probably sell at the money …

Marketwatch posted a good article this morning explaining the situation the Federal Reserve is in.  The first thought for many would be for the Fed to cut rates again since the economy seems to be in dire straights.  That’s what they do, cut the cost of borrowing and stimulate the economy, right? 

Well, maybe rates are low enough already.  Thinking more than on the surface makes me wonder if any more of a cut would benefit us.  If the current, historically low, rates don’t act as a stimulus, how much will another 1/2 point do?  Will the risk of greater harm by going too low again outweigh the risk of some help?  I’m certain nobody knows that answer and that explains the big volatility in the markets lately. 

VIX broke above 30 yesterday and that’s a bullish sign that fear has finally re-entered the markets.  That might be the only bullish sign right now, but it has a good track record.

I went to bed last night, after losing $6500 on paper yesterday, thinking that I should go ahead and sell calls on my naked puts that will be assigned soon.  I could cut my losses some before I take those losses.  I didn’t do that in the beating I took last week and by the end of the week I made back the $7500 I …

The S&P 500 ($SPX.X) started last year with a blink by dipping below its few months of an upward trend.  That dip shows on my weekly price chart for the past three years of SPX.  That blink turned into a tick that kept coming back throughout the past year.  Finally, when we feel like shutting our eyes and just waiting until it’s all over there might be hope, at least in the short term again.  I have a few reasons to feel kind of bullish on the broader markets finally.

The SPX is near the bottom of its trend line of lower lows that started nearly two years ago which happens to be just barely above the low of July. 
Williams %R for the past 14 and 28 weeks is starting to move out of the oversold region.  That typically means a few good weeks ahead of us.
VIX is up to the mid-20s again.  I’d like it to be above 30 for some real fear, but its better in the mid-20s than the sagging teens that it saw a few times in August.
Unemployment hit 6.1% - Yes, that is higher than we’ve seen in a while, but keep in mind that the unemployment benefits period has been extended.  That means people who previously dropped off are still on there, inflating numbers slightly.  Making too much of a bullish argument …

Today (even the past few days) has been interesting to watch how oil reacts to Ike, the hurricane, not Turner.

The AMEX Oil Index (XOI) is up almost 2%, but oil ETF USO is down a half percent.  I recognize they aren’t tracking the exact same underlying issues, but that’s a big difference when both are tracking oil.  INO has an interesting take on it.  Check out the video they posted yesterday:

Crude, wasn’t it supposed to hit 200 dollars a barrell?

I’m sitting tight on my USO position for now.  I want to see how next week rolls out and then I’ll sell covered calls on it.  Based on their commentary, I should probably sell in the money calls on it now.  It’ll be interesting to watch.  At the least, expect gas prices to go up on local shortages from refineries being down and pipelines shut down too.

Freeport-McMoRan Copper & Gold Inc (FCX) has been getting spanked and I’ve been along for the ride for most of the $60 decline.  I got out with a full profit with shear luck when FCX spiked briefly after 100 shares were assigned to me at $105 with July options’ expiration.  I paused and got back in with an FCX September 85 naked put that is now deep in the money.  Using options, I was in on FCX as it declined, but didn’t come close to losing as much as I would have if I had bought the stock instead of sold the put option.

I put a limit order in on FCX to sell a call and it hit this morning.  While FCX was trading at 67.30, up for the day by $2.00+, I sold one September 75 call (FCXIO) for $1.50 and received $139.25 after commissions.  That turns my position into a strangle.  I have two options (a call option and a put option) expiring on the same day at different strikes.  I’ve set myself up for a potential loss on options.  If FCX gets above $76.40 I lose on the call option, if it’s below $81.70 I lose on the put option.   Adding both premiums together gives me a little more cushion on each side though.

With …