Posted on January 15th, 2010 by
Mojo
The airlines in general have been on a tear. United (UAUA) broke out on the daily chart back on Dec 1 at $8 and we are sitting just below resistance at $13.93 right now. Take a look:
We have earnings coming up and IV (implied volatility – think of this like a measure of the buying pressure on the options) is high. Here’s my thinking…
Once the “unknown” of the earnings announcement becomes known (either through the actual announcement, pre-announcement, or another carrier’s information) the IV will deflate out. Short of a big surprise that should happen quickly and without a ton of price movement. So, I’m going to sell an ATM call and an ATM put (short strangle).
Now, the probabilities of all of this happening correctly are a bit low (I figure 30%) so I’m going to do few things.
- I’m going buy a put or call for each short for protection. If UAUA goes to $0 (zero) or goes to $100 I’m protected.
- If I get some movement, but not a lot, I’m going to close the costly side and reposition. This will help increase my probabilities.
- I’m going to severely limit the amount of capital I have risked on this trade.
Max Profit (if held to expiration and price stays right at $14) would be $1,700 on $200 risked. Likely profit (two weeks in, price stays within breakevens or at least I’m able to adjust) would be $200 on $200 risked.
If I’m wrong I only lose the $200, if I’m right I could double my money. If I’m really right I could make 500%.
Hmm… I just saw something that would keep me from doing this trade. Can you guess?
Mojo
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Posted on January 13th, 2010 by
Mojo
In tonight’s team meeting we are going to be test driving a new modified 60/40 iron condor. The idea here is that we will be selling lots of implied volatility (premium) and (unlike regular iron condors) we will be expecting to adjust. By selling lots of premium we should have plenty of cash to pay for those adjustments.
As part of this, I will show you how to create and test a new strategy and use some of the new backtesting features (OnDemand) of TOS. I will be using this strategy through 2010.
See you tonight at 730 ET.
Mojo
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Posted on January 3rd, 2010 by
Mojo
I accepted an invitation to go see Avatar with a friend of mine. My expectations were fairly low since I wasn’t really excited from the previews. We went this morning. I was blown way and can’t say enough good things about it!
Great mixture of logic, spiritualism, philosophy and military arts combined with differing technologies and a compelling storyline beautifully executed. (I love the animals, hardware, and homage to the better parts of our oceans.)
This movie is a game changer and will create a series of sequels that will set new records for revenue and profits. I haven’t been this excited about a movie since the original Star Wars. Awesome!
I will be taking my kids to see it soon (11 and 12).
Mojo
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Posted on December 7th, 2009 by
Mojo
I heard a lot of conversation and read a lot of articles this weekend talking about the end of the bullish run. (One good day for gold bears and everyone’s an expert again!)
I’m probably more bearish than most so I spent a couple of hours going over the charts. Bottom line – Yes, we are beginning to see the early signs of the market turning but we are a long way from being bearish. The Dow, SPX, and NDX are still looking strong on the daily and weekly charts. Heck, even the RUT is strengthening. 
My point is… Don’t jump the gun. Wait for the setup and look for some confirmation.
Mojo
PS – We are down -58 in the futures. I would look to fade this move early in the morning unless it exceed -80 pts.
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Posted on November 23rd, 2009 by
Mojo
Futures are up +89 as of 6:40am ET. Its the Monday after expiry so be cautious about a gap fill. Housing announcement at 10 (which I think will be pretty good but who knows how the market will react).
I’m looking for some cheap fills on calendars and maybe some long options to sell time against. If we get a gap-n-go (to the upside) then we should see vols come down pretty quick.
Mojo
PS – I’m thinking about moving our classes to Saturday at 11am ET. Send me your thoughts?
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Posted on November 5th, 2009 by
Mojo
There’s a sucker move building in the market this morning. Overnight futures (YM) went down to -60 and are now sitting at +4. Frankly, I’m not buying it.
The market action after the FOMC announcement would have normally shot to the downside (classic N pattern), instead all of that move jumped on into the close (bearish sign). During our team meeting last night I saw several charts showing little conviction to the upside and many more charts breaking down at 5 min, 15 min, and 60 min bars.
Once we get some confirming closes on the 60 min bars we will see a good bit of draft to the downside. Take a look at this chart on the Diamonds (DIA):
We got a gap up yesterday that didn’t quite get closed. If we get a gap up today then that will only add fuel to the fire for a quicker downside move. As such I would expect to see us hit our first target early. I’m going to use this as an opportunity to BTC (buy to close) some short Nov puts. If we hit the second target I would expect to see a little bounce.
All in all I’m not expecting a huge range today but I would watch out for some burst of violence.
Mojo
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Posted on November 4th, 2009 by
Mojo
I ran across this article today and thought you might enjoy it:
Trade Like a Fund Manager
Its written by a guy who tracks the performance of investment advisor newsletters and he does a good job of explaining the potential mindset of fund managers going into the end of 2009.
Anyway, take a few minutes and take a look….
Mojo
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