Sucker Rally?

I am just getting settled in this morning and starting the journey through my watchlists to pick out a few candidates for this week. It's nice to see the market posting some moderate gains, but I have made my stance public....I'm a little more bearish to tell you the truth.

I saw a lot of comments come through about Mastertalk this week. Yes, it is true...the recording was damaged about halfway through the presentation. All that was salvageable was the Q&A. I talked about trading index options, daytrading them (since intraday trends have been amazing), and also discussed why trading spreads on the indices & a few higher priced stocks was a great strategy right now (VIX high, bearish sentiment, etc).

I'll be back this afternoon with a video. Get out there and make a few bucks!

Is anyone at INVESTools bullish? You're bearish, Alan's bearish, Tim Knight's bearish.

I'm not saying this isn't a fake rally, but there are a LOT of REAL breakouts occurring today. Given the action of the past couple of weeks, i'm seeing plenty of triangle breakouts and even a very special breakout on BWLD occurring as we speak.

I'm trading these breakouts, hanging onto my bearish positions (that are sitting right at resistance), and watching very carefully.

I am very very bullish on JKB...Though I'd like to see more volume.

I do not know what I am on the market in general, other than cautious right now.

DE breakout today as well??but could use some more volume. GRP also, though at a resistance level at $47

COP not rallying as mentioned earlier, so bearish on that.

Where is everyone today??

I don't know what's going to happen and nobody else does either but I can tell you that I am up 28% since January 1st and hardly any of that is from bullish trades. I am bearish until I start losing money. That said I entered a 180/185 bear spread on SHLD this morning and right now it is retesting the H&S neckline as resistance. I also entered 115/120 AGN and 480/490 GOOG bear spreads.

Bob, is jkb the right symbol, I can't bring that one up?

Hey Jeff:

Can you take a look at AXP it looks good for a bearish play. Double resistance at $56.40 and next support is at $54

I tried playing the SPX options but you have a lot of strenght to overcome the volatility. Options can go against you very fast.

Any ideas on how to trade these?

David S

Yes, JKB is the right symbol. IF YOU ARE NOT IN JKB, YOU NEED TO GET IN NOW!

Jeff Kohler Blog, ticker, JKB......

ok, i see, very funny!!
Debbie

Debbie,

Just tyring to bring in some humor!

Glad it put a smile on your face!!

Jeff:

Should we choose ITM, ATM or OTM options for JKB?

Maybe we should by Stock in JKB....

Rumor has it that Alan Keates is shorting JKB ..:)

Afternoon all,

Anyone who's met Jeff knows that only Shaq could short JKB.
We just got in from the murder capitol of Mexico and managed to get all 7 of us home undamaged (except for a few brain cells on the parents, and some skin on the kidlettes.) Haven't had a second yet to look in on the markets... just read up on all of last weeks blogging. Very, very interesting stuff, Jeff, as we have been reading up on the Bible of Options Trading, and Options Trading Made Easy, while we were away.
Hey Brett... I'm thinking you must be yelling "AAPL to $100!!!" Keep on believing, brother. I personally see a sideways market right now and lots of sideways moving stocks out there. I'm thinking of Allen S. and getting into some bear spreads (don't hate me Jeff. After two weeks ago, I need to find something that I'm both comfortable with and enjoy. I think we're going to experiment in some spreads as we continue our learning curve, while keeping our directional stuff going at a bit slower pace.) I agree with Allen, in that I believe GOOG is a good choice for a spread play.
Looking forward to getting back in play here.
Chris and Catherine.

SNDK looks to be heading back down.
SLM has retested it's breakout and could be a good time to jump in.

Happy Monday everyone. Glad to have you back C&C.

Amy

C&C and all,
Does anyone use Naked Puts at expiration week as a strategy? I heard it called free money so had to try it. This was our first month and as we went with positions under two levels of support we had all our sold puts expire worthless. Margin is an issue but if done right appears "safe" and very easy trade for around $1000 on Friday. WCG, RUT, SPX, NMX are some we tried. This was somewhat in line with Jeff's topic on the last Mastertalk just a one legged "spread." It was in keeping with the being a seller of options theme though.
Bob H.
CA

everbody is must be recovering from the weekend of basktetball. Low volume day! Like BWS bearish.

Go OSU!!

C&C (music factory)-

I ditched AAPL around the same time I ditched VIP. DOH!

Welcome back!

Must admit I have been sitting on the sidelines this past week. Was ready to jump in today with some bearish trades--shld, kbh, goog but am really glad I didn't. I have had good success doing credit spreads on these stocks in the past and this might be a good time to revisit them. Right now RIMM is looking pretty sideways and could be a good candidate.

There was someone who signed their name Danny from Mo-town,CA and I'm wondering if you are from Modesto?

Suzanne

can somebody tell me if there is a way to be notified when there is a new comment or post made?
I signed up for "feeds" but that doesn't tell me anything.

Brett, What's with the C&C music factory? I used to do some work for a C&C Yacht company... sure wish they were still in business, I'd love to pretend I worked for them and reek havok with their stock. We should form a club... The Don't Buy What I Buy Club. Although I seem to recall you had a pretty good run for a while, there.
Bob H.... Whenever anyone says "free money" my red flags go up, and my ears perk up (after all... I AM human) As we're just getting into the various spreads I have no idea what you're talking about but my mother says I'm a fast learner (Catherine says I'm as smart as a bag of hammers... so it just proves I is) so I'm going to take this on as a challenge. The whole concept of naked puts scares me a bit (although not as much as the term "naked" scares Catherine... when it comes to stocks, anyway)
Came up with a good list of sideways moving stocks (no... on second thought GOOG wasn't one of the better ones) including AAPL (with a doff of my cap to Brett), RIMM, and a few others, but I LOST THE DARNED LIST!!! Sheesh, a day back on the job and my mind's gone missing in action. Where's that bag of hammers?
Chris and Catherine

ICE
Gathering strength at a very solid support level around $130. If it turns up from here on decent volume, I'm mortgaging the house, selling the kids, and going hunting for Bobby Jone's Locker (to which I'd be cemented by Catherine if I actually did that.)

WCG as per the Marketcast... yikes!! Have a look what happened to it on that dasterdly day two weeks ago. Nothing!
Chris and Catherine

TAKE A LOOK AT BWLD. IT LOOKS TO HAVE BROKEN OUT OF AN REVERSE HEAD AND SHOULDERS PATTERN TODAY ON GOOD VOLUME. THE ONLY PROBLEM IS TH AT THIS PATTERN IS FORMING IN A INTERMEDIATE SIDEWAYS TREND. THE OTHER WAY TO SEE THIS IS THE BREAKOUT OF AN ASCENDING TRIANGLE

ANU

ANU,
Yes BWLD looks very good. Thanks for the tip. Looks like about 14 - 16 point move up. looks like a 4 month long pattern and since there is no July, might have to buy the Sep option.

Mahmood

Anu and Mahmood,
BWLD does look good as the volume's been increasing as the price goes up... but $60 (or close to it, has been a bit of a sticking point in the past. If it continues past $60 today, I'm thinking it looks good. And besides how can you not like a company that promotes Buffalo Wings!?!?! I could live off wings forever. Mind you it'd probably kill me. So I guess that living off them forever would be mutually exclusive.

Huh.

Never mind.
Chris and Catherine

is there any cause for concern on the low volumne on bwld. Not talking about today, it seems to have quite a range of volume.

Debbie

Brett,
I'm bullish right this minute, but like the weather here in New England, I'm ready to turn at a moment's notice!

I would like to see PCP get above this $100 a little higher. It keeps flirting to drive above and stalls.

ZMH is a bull play that keeps on chugging along. Looks to be at a 52 week high if it maintains it's course.

If anyone wants to help me better understand the risk/reward dilemma with options, I would greatly appreciate it.

I would like to know how you typically calculate the risk reward. If I buy 1 strike price in the money I've seen Delta's anywhere from .5 to .8. Obviously the return is going to vary greatly in that case. Are you taking the intrinsic value (at your targeted gain) and multiplying it by the delta to analyze if it is a 2:1 or 3:1, etc??

Gary

Gary,

In part of the email I sent to you on the topic of risk reward, the calculation I mentioned should factor all of your expected intrinsic value as a minimum, and depending on your time until expiration, you'll have to try to guestimate this in your head. The latter should be a very minor product of this calculation.

PS- R/R shouldn't be calculated to the nickel anyway.

JK

C&C
Sorry for my delay, caught a bit of a bug and now down for the count. I really should have qualified that Free Money comment huh? It came from Stacy at our Adv Options class. Just like Jeff said go for a target that it will never hit and then just let them decay to zero. On R/R I only use intrinsic and no time as that is what Investools taugh us in our class. Some high priced options (big fluff)like CME just never pencil without some time value in them at target though. I hope this is clear as my brain is in a fog.
Bob H.
CA

Bob H.
Just read up about naked puts and the one caveat that they mention is that one bad month (ie naked puts on a stock that crashes) can wipe out your profits for a year. I...am...speaking...vey...slowly ... so... you... can... understand. I can use sign language too if need be. Didn't quite understand what you were trying to say at the end of your comment. But that's OK 'cause some nights I'm from another planet.
Just playing with some Bull Put spreads tonight and my brain hurts. Built a spreadsheet to calculate all the risks and rewards... and it'll wash the cats and cook breakfast too!!

Bonus.

Chris and Catherine

Post a Comment
...I'M AN OPTION ADDICT...I'M AN OPTION ADDICT...I'M AN OPTION ADDICT... ...I'M AN OPTION ADDICT...I'M AN OPTION ADDICT...I'M AN OPTION ADDICT...

About me

  • I'm Option Addict
  • From Saratoga Springs, Utah, United States
  • I am a professional trader and an instructor for Investools. I've had relations with the markets for 9 years. Born in Concord, CA, but reside in Saratoga Springs, Utah. Father of THREE, Husband of one.
My profile

Prescriptions Here!

Other stuff

Blogarama - 
The Blog Directory
Directory of 
Finance/Business Blogs Finance 
blogs Top Blogs Finance Blogs - BlogCatalog Blog Directory