Jeff Kohler's Trading Blog

A New Blog Awaits...

2007-10-29T13:56:00.000-06:00

I have finally launched the new site... take a look

www.optionaddict.net

However, due to some outrageous traffic, things are moving a bit slow today, and some pages are timing out before they completely load. I am working on the solutions so please be patient. Do try to move your comments and feedback onto the new site.

Thank you!

An Interesting Comment...

2007-10-26T09:54:00.000-06:00

I pulled this comment off of last nights post. Please take a look....

OBSERVATION FROM A PASSIVE OBSERVER: I wanted to make a neutral comment to what was once a great blog site. Yes that is correct, once was a great site. The few that make the majority will start to scream now about the Blog Awards but you all know that it is a false standing because of your "pumping" of the votes with fake email addresses and multiple votes by the vocal minority.

This site has become a "Peyton Place" full of desperate housewives and husbands" - if you are in doubt then step back and read with an open mind the garbage that spews from your keyboards daily - again from the noisy few. Again you will rise up and contest this statement but the facts are the facts.

How could you begin to think that this is a trading blog? It is a fishing hole whereby Jeff in his charitable fashion hands out his watchlists week after week. Reality check? How many of you can operate without outside influences or inputs to scan for, analyze, execute and monitor your own trades? My guess would be not many!

Here is a challenge to the noisy majority: try keeping ALL comments and thoughts focused on trading for a week on this site and see how productive it becomes to not only you but the quiet minority.

I know that your screaming and threats will soon fly back and fill the comments section with rhetoric and garbage directed towards my comments. How about not reacting in a predictable manner and focus on trading. If you want or need a social outreach forum then start a group chat that will allow you to interact - my guess is that it would not succeed and there would only be the dominant few - still in disbelief? Scan the comments for who is actually posting and see a short list of names that control the blog.

To all the silent minority that visit here to try and actually learn about trading, hang in there. Hopefully Jeff will once again return to the methods he used to employ when the site was trading focused.

Have a great day TRADING!!!

Silent Bystander Speaking Out

Silent Bystander, thank you for making your comment. In fact, I would love it if you would try to get in contact with me at some point today.

As a community we have encountered this topic before, but I want to bring it back into the spotlight for a public opinion, and to hear some of YOUR feedback about it.

To be honest, I don't read the comments anymore. In fact, the last time I felt I was able to engage with the community was over the weekend when myself and a few others chatted about option greeks. I have said it before and I will say it again, I don't have problem with a little banter that is off topic. I encourage it. In fact, each day after I write "the meat" of my daily post, I try to throw in some off topic material such as music videos, talking about sports, reality t.v. or something else to shake things up a bit. As you've noticed, it is a very small portion of my content.

It is troublesome to see a good post get immediately inundated with comments that do not relate to the topic whatsoever. However, when it is trading ideas, or questions relating to trading, most readers are willing and able to engage immediately, including myself. I agree with the comment that the blog has definitely changed over the last few weeks/months and I am not quite sure it is for the best.

I have mentioned that I have been involved in some changes recently. I have developed and am currently beta-testing a new site, and I have a lot of tricks, ideas, and valuable content up my sleeve. This is part of the reason why I find it impossible to keep up the the comments.

I really want to do what is best for the community, and bring the cream back up to the top. As it stands, it drives valuable readers/contributors away. I would like to know what everyone's thoughts are on the topic.

Please, leave me a comment about this topic. Just this topic.

Even if you lurk on this site, please come out of the dark. Even if you don't agree, tell me your opinion. Let's use this as an opportunity to rally around building an efficient trading community, which is what the blog was intended for.

The Greater Good

2007-10-26T08:09:00.000-06:00

Inquiring minds want to know, what I was watching this week and last week to determine my stance on the market. If you remember a couple weeks back, I called the end of a nice rally in the SPX. I typically watch the averages on an intra-day basis as I am normally day trade in index futures or swing trade index/etf options. Let's take a look at that same 20 day chart as of today... On the 15th, you see the big break of support that I had written about. On the 17th, a successful re-test, and from then on a nice downtrend. On the 24th, we failed to make a lower low, which hinted to me that we had established a bottom. We confirmed it by creating a higher high on the 25th. Now you can see that higher highs and lows are developing.

This doesn't mean I am overall bullish on the market. Well, I am but recently that feeling has been diluted by a few things. Primarily some weak earnings, $90 oil, and the market breadth. The NASDAQ's stellar performance has been fueled by three stocks...RIMM, AAPL, and GOOG. In my mind that tells me it is not as strong as everyone thinks. In fact, Semiconductors are typically a leading indicator, and take a look at the SOX... That to me is a major reversal that I have been waiting for for quite some time. I want to see how the market reacts outside of earnings. Good ol' MSFT pumped the market full of optimism, but that doesn't mean it can't be taken away.

I want to take a moment to review a few things. In fact, I was debating a follow up video to review my watchlist. Let's see what time permits for me today.

Take a look at MCRS. I mentioned several days back that I liked the set-up...I hope you enjoyed the reward... How could I not bring up ISRG!? I know a few people took this idea on my last watchlist, nice work!
Also, those that read my rants about what I am trading in know that I have held GLDN forever. This has been one of my longest running trades of all time, next to VIP. Look at it go!
Make sure you haven't forgotten about GLD. It's a great hedge as your dollars are becoming worthless.
Anyhow, make sure you are still watching the stocks in my watchlist, and the shopping list I gave out yesterday. There are still some good trading ideas built into those. Stay tuned as I might run another video later today...

Recommendation: If you read this blog daily, the market will reward you with profits and plenty of trades.

Long: Fridays

Short: the Marketcast

Disclaimer: Tom Petty is definitely an Option Addict

Thanks!

2007-10-25T16:15:00.001-06:00

I want to send out a big thank you to all of my readers who so loyally stepped in and offered up a vote for "best business blog" and "best video blog" at the bloggers choice award site. It looks like I am a finalist in those two catagories, and will not know if I have won or not until November 10th in Las Vegas.

Even though it was not a big deal to me if I won or not, I do want to let everyone know that I appreciate the support that you all offer, regardless of taking home the crown.

Thanks everyone!

Short & Sweet

2007-10-25T10:25:00.000-06:00

Boston pulls off a huge win in Game 1 last night by a margin of 13-1. That was the game they needed to win in order to take this series. Rockies fans, I am so sorry...but at least you got good seats to the big dance.

If you are not long some CME, or any exchanges at this point, look a little closer at them. With record transaction volume and commissions, it's hard not to be loving these to the upside.

At the same time ISRG, FLIR, ESRX, LFQX, NUVA, MON, LFG, CNX, SOHU, ALXN, TSCO, GLYT and EMC have elevated my mood today.

If you want a similar feeling, you need to be watching the following today...

CNH, SYNA, OSTK, PX, TRMB, GME, ERTS, RCI, and IIG.

But if you are bearish...

LFG, CYH, SVU, COLM, RAIL, THQI, OMX, SII and AVTR...

...If you are in the market for good looking set-ups that is. Or if you just want to make some money with me today.

I am going to keep it short and sweet today, and go out with some 311...

Recommendation: Stop whatever it is you are doing today and make money.

Long: Colorado Readers

Short: Colorado Rockies

Disclaimer: 311 has offered to play at our Option Addict awards ceremony in Vegas.

Watch Your Step

2007-10-24T14:58:00.000-06:00

Trading Style

2007-10-24T10:35:00.000-06:00

My life is starting to return to normalcy... but don't get your hopes up. For those of you that registered for my advanced options open house, you have probably received an e-mail apologizing for the technical difficulties. I have received more e-mails, business/personal/marketcast than I think I have ever received in my entire life. If you haven't gotten a response, don't take it personal. Normally I delete all my e-mails, but lately I am trying my best to reply. If you get a rather short quick response from me, and you think "what a jerk" remember that it was one of hundreds I had received on the day.

As I have warned, earnings season has taken us all over the map. Technical Analysis takes a back seat during times like this. However, it impacts you and I when you see the VIX in the mid 20's. Make sure you put that on your radar, I will be talking about it a lot more at these levels.

Today I felt like I should talk about trading style. The other day I talked about creating an investing style and creating a foundation that consists of at least 7 basic principles. But once you've done this, you need to focus on what vehicles you are going to use to take you to where you want to go.

I have often mentioned that I think every individual looking to get started in the market should take an online exam. Similar to what you would go through over at eHarmony.com. If you not familiar with eHarmony, they have constructing a very intense, intrusive, complicated but yet effective personality profile to offer help to those getting into the relationship market. They help you to find someone just as crazy, emotionally inept, and unreliable as you are. In my opinion, it was a great way to corner the market. I tip my hat to them.

I know none of this from experience, but have concluded my results from 3 minutes of research. Anyway, my point was... wouldn't it be just as effective to have a questionnaire ready when you send in your check to fund your new account with an online broker dealer? This would make sure that you have access to the only tools that are compatible with your goals, level of risk tolerance and emotional instability? Over the years, broker dealers have become very laid back in the options approval process. When you notice that the nice older lady that has been retired for 30+ years has the ability to trade naked options with no former trading experience, you know the registered options principles at these firms are going to wind up in hell.

Consider what strategies are suitable for you. I normally ask someone who is in the process of deciding on their trading style these few questions...

Are you generally a risk taker, or are you conservative in your decision making processes?

Are you comfortable being wrong? If so, how often?

Are you patient?

What is your time frame with trading/investing?

What are your financial goals?

How emotional are you when it comes to money? Are you trading with money you can lose?

There are plenty more, but you get the point. I think most traders have to take one of two roads in trading options. High probability or high performance. I chose high performance. This style of trading seemed to fit well since I am a risk taker, I am comfortable being wrong a lot, I am very impatient, my time frame is forever, my financial goals are to be able to print my own money and make the Forbes 400, I am naturally emotional, but can afford to lose everything.

Many of you have already determined your trading style, but many others have looked at the fact that there are so many strategies and don't know where to begin. If you are going to be a high probability trader (non-directional), consider covered calls, spreads, naked puts and owning stock. This method is more conservative, fairly consistent, and offers lower returns. If you are the high performance trader (directional), consider buying calls and puts, stock, and maybe occasionally legging onto spreads. This method is more aggressive, less consistent, but offers much better returns when you are right.

Sometimes we get too carried away with so many details, we forget the answers to the easy questions

Recommendation: Get started on this process immediately, if you haven't already

Long: Defined trading styles

Short: Jacks of all "trades"

Disclaimer: I don't really delete e-mails, but don't test me.

PS- On a serious note, for those of you in the So Cal area, you are in my thoughts. I hope everyone is safe and doing well. Take care.

Weekly Watchlist

2007-10-23T11:12:00.000-06:00

UPDATE: The orignal video this morning was damaged, cut short and without sound. The link below is a whole new video. Enjoy.

Click To Play
Recommendation: Yes, I know. It is a work of art.

Long: Creativity

Short: Hurdles

Disclaimer: I have none today. I am an open book as it is.

Note: Hurdles have been cleared, what a pain in the ass.

Technical Difficulties

2007-10-23T07:41:00.000-06:00

My recording software is getting a soft re-boot. Yep, somebody tampered with my recording studio. Don't worry, I have asked my secret agents to check the surveillance tapes last night to see who did it. There will be hell to pay.

Until I find a solution, it is with deepest regret that I put today's video on back order. I can't imagine that it will take too long, but I wanted to give everyone a heads up.

In the meantime, AAPL has lifted the market just as I suspected. There is a monster bid for technology stocks, and we are getting some great moves from the supporting casts such as small cap, financials, etc. You have to buy into this dip. If you are nervous, nibble into it.

Lastly, if you tried to participate in last nights event, I apologize for the lack of technical support, audio stream, and everything else that went wrong. The event was way overbooked (2,700 people) and Webex apparently can't handle that type of volume. The fact that the technology around here makes me look bad is really starting to get under my skin. Anyway, the presentation was recorded, and will be posted on the Investools site later today. Again, my apologies.

Watchlist developing...

Blogasm

2007-10-22T10:55:00.000-06:00

I had a request to speak about diversification. Normally, on a Monday special requests are denied. However, it is not like this is a complicated topic...or at least this is not a topic that should be complicated.

How you approach diversity in your portfolio is your own business. But if you are building a portfolio of owning different investments such as ETF's, Equities, Gold, Bonds, etc...try to assign a delta to your portfolio. Confused? If you own 1 share of stock, you have a delta of 1. If you own one share of ten stocks, you have a delta of 10. If you own one share of ten stocks, and one call option on another stock...you get the point. If you are confused as to why many of you lost your ass-ets on Friday, plain and simple- you owned too much.

Diversify.

The last big drop in the market I went out and gave specifics as to how I survive in the market. I opened your eyes to my portfolio specifics. And while I am not about to do it again, I want you to understand the idea behind it. Last week (Monday) I mentioned how I was bearish for the upcoming week, and traded accordingly. I took bearish positions (negative delta) on trades that were highly correlated to the market, and other bearish positions that were going down regardless of the market. At the same time, I still took bullish positions (positive delta) on stocks that were moving higher. I try and stay neutral (offset delta) to the market. This is the only way you will survive as a directional trader. If you own too much, and by design your trades are intended to be profitable moving in only one direction, a day like Friday will eat you and all of your money.

Many of you spend too much time worrying about things like other peoples trading signals, what price pattern it is you are looking at, which strike price to select, how to read implied volatility, etc when you haven't constructed the basic tenets of portfolio management or asset allocation.

Shame on you.

To your defense, I can't make any assumptions when I have no idea what your time frame is, what your financial standing is, your risk tolerance, your investing objectives, or anything else looks like about you. What I do know is this... I don't care who you are or what you are trying to accomplish, you will not last long in the pursuit of becoming a decent trader without creating a firm foundation of these basic principles, which are...

Risk management- Plan your loss before planning your profit.

Diversification- Be bullish, be bearish, be involved in various groups/markets.

Proper Position Sizing- Trade small, trade safe.

Effective Trading Plan- Make sure your plan works, and/or makes money.

Cutting Losses Short- Enter a trade that offers a small loss.

Letting Winners Run- Don't kill your winners.

Curbing Your Emotion- This is a bi product of trading small.

Since I have spent the last ten years of my life developing and optimizing all of the above, I am able to do this (see below) on a day like today... or any other day for that matter.

Recommendation: Give your account the same foundation so you can participate in the activity above.

Long: My rules

Short: My emotion

Disclaimer: If you got emotional and closed good positions this morning, or shorted "mother market"... again, shame on you.

Update: If you took any part of this post personal, don't. You know I am not in the business of attacking, just trying to get a message across. If I were mad, I wouldn't have addressed it at all.. When all else fails, "Fresh Tactics."

Crash? What Crash?

2007-10-19T13:49:00.001-06:00

PLEASE!!! My inbox just went nuts with e-mails comparing today's 2.5% drop in the Dow, to 1987's 22% drop in the Dow. Are you kidding me?!

Gang, the Dow would need to drop 2,600 points to be in the same ball park.

Comparison Denied.

Recommendation: If you want to see what it was like to trade through a "Crash" I can start to liquidate my account on Monday.

Long: My account. I want to keep it.

Short: Weak Comparisons

Disclaimer: Thank you to diversification, I left my trading station for the majority of the day.

Broken Fear Gauge?

2007-10-19T11:14:00.000-06:00

The VIX looks rather flaccid for a 22 point drop in the SPX. Look at the reaction, or lack thereof...

You can't tell me that the market isn't more fearful of higher energy prices. Toss in a few earnings disappointments and we should be well off into the 20's on the VIX.

Or perhaps we shouldn't...

The market as a whole is too overly optimistic anyway.

I am surprised that I didn't see more implosions in my long positions today. The only ones I have been surprised about were SII, SLB (small position over earnings) and FLR.

How can I forget the nice surprise in HANS? I cancelled the "HANS Across America" tour and now millions are pissed at me that they are not getting a refund.

I liked CF today...a good ol' blog favorite.

How about the upset I called on the Marketcast last night? Rutgers beat South Florida, and I have footage of the victory...

Thanks to Agent Scully in the Rutgers Nation for sharing these pics.

I am about ready to call it a day. The wife has left me all alone for the weekend, and I am in a bad mood anyway. Sorry for the under-delivering of useful and witty content today, I'll be back with a vengeance next week.

Recommendation: Shake off the bad day today, and get back anything that was lost next week.

Long: Community Support

Short: Ungratefulness

Disclaimer: Thanks again for everyone's support with this competition. Hopefully we pull together a victory.

HANS Across America

2007-10-18T13:27:00.000-06:00

You must admit, the HANS trade was so money. If you didn't heed my pounding of the table on owning Hansen, you missed out on a free 54.5% increase in the stock since the official reco in August.

So the question now becomes, "what do I want to talk about today?" Other than being donkey punched by China, nothing. Today was the reason I wanted to scale back my position sizes in China last week. I guess I can redact yesterday's statement and today state that I am glad I did.
In the effort of keeping my emotions sidelined, I am trying to focus on happy thoughts, such as TBSI, OYOG, ISRG, RIMM, JEC, ALXN, PCLN, CNQ, BEAV, CTRP, TIF, HANS (of course) and finally, good ol' MON.

BTW- ANDE finally broke out for anyone that gives a $hit.

I won't forget to highlight a few shorts I am proud of...mainly JCP, GLYT, GCI, JCG, MTG, ZION and NCS.

Aside from that, I got nothing. I am scouting out a few more trading ideas for tomorrow, so keep your eyes peeled. Many of the watchlist ideas are panning out pretty well, so hope you were paying close attention.

In closing, I want to reference the "competition" one last time. Although I am flattered, please don't go overboard. Thanks to everyone who has voted, I appreciate all of your support.

Recommendation: Get yourself some HANS!

Long: HANS

Short: Effort & Homemade Images

Disclaimer: I paid a freelance artist for the HANS Across America painting. I got robbed.

On the Matter of Hopes and Slopes...

2007-10-17T16:39:00.000-06:00

Recommendation: Rumor has it that I have been mocked in pursuit of the best blogger crown. We all know the fate of those that mock my presence.

Long: Reputations

Short: Choosing words wisely

Disclaimer: The competition will eventually submit to the power and will of the Option Addict.

Excuses...

2007-10-17T11:01:00.000-06:00

Sorry I am late, blogger has been giving me hell today.

That was a mean U-turn that the market made today. Remember that 20 day SPX chart I shared on Monday? It marked a weekly top, no doubt.
Despite the exfoliation of profits in my calls today, China has kept me in the black. I have to give a nod to PTR, SNP, FXI, LFC, YZC, FSLR, BCSI, CHU, CMG, CNQR, CTRP, MTW, NVDA and CNQ. I also have to give a shout out to all my shorts for today's turn around, especially AOS, ZION, NCS, CPA, AVTR, GLYT, JCP and a few others.

By the way, I like how MCRS is setting up. I might add instead of subtract in front of earnings.

As I pondered today's topic, I looked no further than the topic of patterns. One of the most predominant patterns I am seeing across the market is the cup and handle. If you have read this blog for a decent period of time you will know that I am not a big fan of this pattern. However, rather than speak in biases, I will teach facts and you can decide on your own.

The pattern falls into the trend continuation category, which means upon breakout, prices will advance in the direction of the prior uptrend. The time frame is ideally for the pattern to form and complete within 6 months on a daily chart. The cup will be a "U" shape (not a "V") that occurs near or at the top of an uptrend. The handle should occur just off the second top of the "U" shape, and normally completes within a month. As with any breakout, volume is expected on the breakout.

Target price is measure by the depth of the cup, from top to bottom. Expected time frame is measured by how long the pattern has taken to form.

Here are a couple examples to watch...

BEAV

AXE

REMINDER- FREE ADVANCED OPTIONS OPEN HOUSE!!!

Want to learn more about the world of advanced options? The Option Addict will be hosting a free open house to all that want to learn more about advanced options. The presentation will be two weeks from today (October 22nd), and I would love to see everyone that is interested in attendance. Click Here to enroll for this presentation. Once you are there, click on "Enroll" to register. You do not have to be an Investools student to attend. Once you have enrolled, you will receive confirmation and instruction of how to join the event. Make sure you sign up now, before it fills up!

SECOND REMINDER- PLEASE, CAST YOUR VOTE!!!

I am still in the running for top business blog, top video blog, education blog, and podcast blog. I sure could use a vote since the voting ends this Friday.

All you need to do is click here, to sign up.

Once you do, Click here to cast your vote.

Recommendation: A win for me, will mean a win for all of you. Trust me.

Long: Today, it's fajitas.

Short: Operating machinery, such as a trading blog.

Disclaimer: If you don't vote, I will track you down with a dose of the following...

Watchlist Follow Up

2007-10-16T10:07:00.000-06:00

As mentioned, I wasn't able to fit all my ideas into a 10 minute video. I like to have a list of stocks that are trading at support or resistance levels. I watch these stocks for breakouts, which will normally occur within 1 or 2 weeks (some are already underway). A few of these I have been in for a while, or have recently moved into. Here are the tickers...

Support (Bearish)
HUBG, ROH, JCOM, FAF, LFG, MTG, AVY, VFC, AVTR, BWS, JCG, ATI

Resistance (Bullish)
HRS, ATU, CNX, BUCY, AXE, COL, COP, HES, ANW, AXS, TIF, FMCN, JRJC

Recommendation: This was easier than producing a video.

Long: Celebrity appearances in my comments.

Short: Celebrity appearances on my doorstep.

Disclaimer: This might be all for me today... Forecast is partly over-booked due to celebrity status.

2007-10-16T08:51:00.000-06:00

Click To Play

Grin and Bear it

2007-10-15T17:08:00.000-06:00

Unfortunately, employment kept me from being more proactive about blogging today. Missing 100 Dow points is like forgetting a friends birthday. It's not something you want to make a habit of.

This will be a pretty shaky week. Not for technical reasons, but for fundamental reasons. Most major companies report earnings this week. Make sure you know when and where your companies report, unless you are into that whole "Oh $#!+, surprise thing."

Speaking of fundamental reasons, I don't like the price action here in the market. Here is an intra-day chart. Fundamentals are the only thing that can keep our heads above water (below: SPX 20Day).

If you are not long GLD, or OIH, don't bother talking to me. I don't like being ignored, and if you are not reaping profits on the most bullish commodities on the planet, then yes, you have been ignoring me.

Speaking of profits, how could I not like the moves in TBSI, DRYS, SNP, VDSI, SII, DVA, SNDA, SLB and CNX?

My shorts performed wonderfully, most notably ZION, ATI, THQI, NCS, CPA, CAH, AVTR, GLYT, JCP and a few others.

I took down XOM. I felt pretty good about that. I won't discuss any more entries until tomorrows video though, so don't ask.

Next topic... BIIB. I can't imagine this being the case, but if you didn't sell yet, take a look my last takeover offerings I gave out early...UIC and BOBJ. As you can see, there is no upside left. Even when the price falls short of the takeover price, don't ever hold. Sell. I have tried this on a few occasions, most recently AH. If you can remember this takeover candidate I gave you earlier this summer, it was priced $4 short of the offering price, and I held for a few days only to realize what an idiot I was.

Don't get greedy.

Since China has been breaking my balls, I softened the blow by reducing my exposure. I see some softening in the "buy it all now before it bursts" department... therefore I am adapting to the potential risk. This wasn't a major sell off by myself obviously, the Chineese market would have crashed.

In closing, my bets tonight are on the New York Giants and the Boston Red Sox. I better hurry home before dinner gets cold.

Recommendation: Nil

Long: October Sports

Short: Cold Dinners

Disclaimer: The Giants and BoSox read my blog before tonight's sporting events.

New Thread

2007-10-15T09:59:00.000-06:00

Recommendation: A fine fitting tune for a day like today.

Long: Big Ass Winners

Short: Posts with too many comments

Disclaimer: Metallica owned 10,000 shares of BIIB, thanks to the Option Addict

Show Me Some Love

2007-10-12T16:26:00.000-06:00

I effectively caused another buy-out. Check out BIIB, or at least the after-hours quote.

You are welcome.

I just got off the phone with the CEO of Biogen and we both agreed that putting the company up for sale was a better alternative than a hostile take-over from the Option Addict. I am so proud of myself I am tempted to swear. How is that for a pre-cursor to a phenomenal weekend?

Speaking of a phenomenal weekend, I need your help. Apparently the competition is heating up around this "Best Blogger Award." I am not about to go down, and I am hoping you have my back on this.

All you need to do is click here, to sign up.

Once you do, Click here to cast your vote.

That's it!!!! Please!!! I am not going to get beaten in this competition. There is a lot more riding on this than I thought.

Recommendation: If you don't cast a vote, the market will take your money next week. I promise.

Long: Option Addict

Short: Competition

Disclaimer: I vote for myself regularly.

Yesterday...Seems So Far Away

2007-10-12T10:22:00.000-06:00

Rather than rant about what is working well and what is not today, I'd rather talk about yesterday. I am seeing a lot of questions coming through about "how I reacted" and asking "what I did" in response to yesterdays change in momentum.

I didn't panic.

In fact, if it weren't for a phone call yesterday, I might not have noticed.

The first thing I did was start selling off some of my positions. Primarily BIDU due to the downgrade. Once I noticed it was moving against me (thanks random caller) I reduced the position by about 60% to lock in some profits. That is what really pissed me off about yesterday, but keep in mind, my cost basis was $130 (Check my archives if you doubt me).

I added to MON. Did you expect anything else? I plan to make a market in the Nov's.

All of them.

I dollar cost averaged in only the best deals available, such as HANS, AMZN, ISRG, DRYS, FWLT, VDSI, PCLN and a few others. Being the great companies that they are, they decided to pay me back today.

I dismissed a few losers, and entered a few new positions...

However, I think many of you sometimes forget that I like to play things somewhat safe with my accounts. I stay diversified at all times, and always have a hedge against the market and or my account positions. Here are some examples...

Despite losing some big UNREALIZED gains, I made for a lot of them with nice blow-ups in ATI, LDK, SPN, ZION, RAIL, MAS, THQI, NCS, PAYX, CPA, WNR, CAH and PNR.

I also own Gold (GLD), which is intended to be a hedge.

And I always hedge with other instruments, specifically S&P Futures (Short), Crude Futures (long), and added to some Index puts on the Nasdaq (small position).

Yesterday was fine. Like I have always said, I try to put myself in a position where I don't care about the market. When I start my day every morning, I don't run to see what the market is doing, I run to see what my account is doing. I try to put the market in position where it is irrelevant to my account.

When I received this phone call that alerted me as to the change in the market, and asked how I was doing...I glanced at my bottom line and said, "Fine." Upon further inspection, I was able to make some necessary adjustments to moderate unrealized gains and turn them into realized gains, cut some losers and buy everything that was appropriate. Eventually it gets to the point where you become a well oiled machine.

Another day, another dollar.

The market was due for a little exhale, and I bought bullishly with confidence. If it were going to be a big deal, you would have seen a much bigger drop than we saw. Yesterday was an obstacle, and the Option Addict played though.

Recommendation: Cannonball often.

Long: Diversification

Short: Panic

Disclaimer: I cannonballed myself yesterday to relieve panic because I wasn't diversified.

New Blog Anthem

2007-10-11T19:46:00.000-06:00

Recommendation: Listen to the words... They go down smooth.

Long: The Good Times

Short: The Bad Times

Disclaimer: James Ingram loves the Option Addict

Better Late Than Never

2007-10-11T12:12:00.000-06:00

Looks like my MON Nov Call buyback plan was executed to perfection. This has become a MON-ster position, one of my largest single holdings with the exception of a few such as HANS, DRYS, BIDU, POT, PCU, FCX, GLDN, VIP, GLD a few casinos and a couple others that are not too far behind.

Speaking of MON-ster position, I have to give a shout out to Toni, for the best part of my HANS position as you can see below...

I also have to give a shout to Tonya, who also was so kind to help increase my position in Java Monster. However, the position has already been consumed. But a special "Thanks" to both of you for your generous contributions. I owe you one.

Today was the day I have been waiting for out of China. My positions in FXI, SNP, YZC, BIDU, LVS, WYNN, and a few others are responding nicely. This is where that whole patience thingy I teach really starts to pay off.

Other satisfying gains today include VIP, LDSH, CNX (last nights Mastertalk officially caused today's breakout), SII, EMC, CRK, COLM, TEF, JASO, FTI, GSF, MT, BEN, WNR, CPA, and NM.

If you haven't yet, join forces with me and take down ATW, KSS, PCZ, CAH and CNX today.

You can thank me later.

Speaking of thanks, for those of you who offered your nominations for the bloggers choice awards, thank you. If you would like to cast a vote, I have been nominated for 4 different catagories.

Best Business Blog, Best Video Blog, Best Education Blog, and Best Podcast Blog. If you would like to cast a vote, look for the icon below on my right hand column on of my site...

Or you can click here to access my page directly. Vote as often as you'd like, and in any or all catagories if you would like. Thanks in advance for your support.

Newsflash...

The Fed gets Hawkish! Did you notice a massive spill off just now? From what I am hearing, this is the cause...

"Looking at the economy, Federal Reserve Governor Randall Kroszner said in prepared remarks for a speech Thursday that the central bank's decision to cut short-term interest rates last month by a larger-than-expected half percentage point was expected to be "appropriate to offset the effects of tighter financial conditions on the economic outlook."

Along with a BIDU downgrade a few minutes ago, I just got in a real bad mood.

Recommendation: Don't blink!

Long: Realized gains.

Short: People that dick with my unrealized gains.

Disclaimer: You see what happens when it takes me three hours to compile a blog post?

Amateur Hour

2007-10-10T09:54:00.000-06:00

Well, now that "amateur hour" has come and gone, and I have gotten my early morning trades taken care of, I guess I ought to talk about what is getting me riled up this morning.

By the way, ever wonder why they call the first hour of trading "amateur hour?" Yet, 99% of amateurs I have interviewed claim that the reason they don't trade in the morning is because of this nickname, and they don't want to be labeled as such. Disclaimer: The Option Addict takes more trades in the first half hour of a trading day than small Mutual Funds take in a Quarter.

Opportunity is opportunity.

Anyway, I still don't know what to do with MON. If you have any ideas, throw them at me. They posted a $210 million dollar loss this last quarter, and the stock still doesn't want to go down. Unbelievable. I started a MON Nov Call buyback plan. It has taken me most of the morning, and is going to totally ____ my cost basis. Oh well, better to gamble with winners than losers.

The biggest rush I have going today, aside from some assbag e-mailing me and telling me if he were my boss that he would fire me, is the price action that continues in my big gainers today. PCU, LVS, WYNN, GNK, FCX, ISRG, DRYS, BCSI, SOHU, ESRX, FWLT, JEC, PCLN, DVA, CNX and HANS.

Fire me?!

In the meantime, someone tell me not to keep sitting here and rooting for China stocks. This has been the single biggest source of free money I have found in the market over the last several months, and I would hate to see it start to slow down.

I've got another Mastertalk presentation tonight. A great suggestion from the blog about potential topics last week turned into a pretty good presentation. If you have any other ideas, lets hear them.

Recommendation: I might get motivated to vlog later today, but don't encourage me.

Long: Vlogging

Short: Blogging

Disclaimer: I don't need free money from China.

This Weeks "Hit List"

2007-10-09T09:55:00.000-06:00

Click To Play

Recommendation: Watch with caution.

Long: Three fingers of Monster Java this morning.

Short: Plenty this week, believe it or not.

Disclaimer: My videos have been watched by Mafia personnel, hence the new nickname.

I Need Your Help!!!

2007-10-09T08:21:00.000-06:00

Before I release today's video, I need to ask a favor from all of you. I need to get some good feedback on the following topic....

Would you see value in the ability to get access to your favorite instructor for one-on-one coaching, mentor ship or personal instruction? The all-stars like me, Josh Black, Mike Turvey, Dave Johnson, Sven Guru and Bootch Utley. The service would be served a la carte, meaning you could sign up for one meeting or several meetings until your goals or objectives were reached. This could include the developing of trading rules, building a specific system, mastering a particular strategy, etc. Do you see value in this service?

Could you please send me an e-mail with your thoughts? If your thoughts are good, bad or neutral, could you send me something? The e-mail doesn't need to be extremely long or detailed, I would just like to hear your thoughts.

Please send your responses to : marketcast@investools.com

Thanks!

FREE Advanced Options Open House

2007-10-08T17:03:00.001-06:00

Want to learn more about the world of advanced options? The Option Addict will be hosting a free open house to all that want to learn more about advanced options.

The presentation will be two weeks from today (October 22nd), and I would love to see everyone that is interested in attedance.

Click Here to enroll for this presentation.

Once you are there, click on "Enroll" to register. You do not have to be an Investools student to attend. Once you have enrolled, you will receive confirmation and instruction of how to join the event. Make sure you sign up now, before it fills up!

Recommendation: C'mon, even I registered.

Long: Free stuff

Short: Not free stuff.

Disclaimer: Professional Option Traders Have Already Enrolled For This Event.

Dear Jeff

2007-10-08T11:42:00.000-06:00

Occasionally I will dip into the ol' reader mailbag and share some fan mail, success stories, or insights that the community has to offer. I came across an interesting e-mail today that I wanted to share. Honestly, I didn't know how else to kick off the week...

Jeff,

My name is _____ and I am new to your blog. I have only been reading for a couple months and while I don't really enjoy your off topic rants, inappropriate videos, or taste in music, I am impressed by your skill and abilities to make money in the market. Your videos and watchlists have been incredible learning tools. I think this could be one of the best trading websites out there if you acted more appropriate and stuck to the things you are god at. If I wanted to read about anything other than trading, I would venture elsewhere. Thanks for taking the time to teach new traders about the market and about options.

To pay you back for your efforts, take a look at KUN.

Respectfully,

_________

Thanks for nothing.

I mean, stock pick.

I am taking a breather from my watchlist construction this morning. My equity research department, which is operating at half capacity ever since unexpected lay-offs last week, has come up with some amazing ideas. In fact, my watchlists were actually reorganized last week. Being the superstitious person that I am, I am very cautious to fix things that are not broken. If I lose any money this week, guess who is losing their job?

The biggest surprise today (not really a surprise, actually a reward from hard work and research) was the $6.8 billion dollar buyout offer that SAP put on the table for BOBJ. Not only that, but also TXT agrees to buy UIC for $1.1 billion. I hope you all were a part of these moves I put you in front of. Thanks to Alpha, my kids won't be eating left overs tonight.

If you missed out on BOBJ (and/or UIC), keep an eye on his brother, BOBE. BOBE is younger and less attractive, but he'll be getting cheaper sooner than later if you know what I mean.

I am really excited to outperform myself this week. The new re-organizations of my watchlists will allow for me to quickly find the best of the best in the market, ignore the trash and make money. Stay tuned.

Recommendation: 2 Acquisitions in 1 week. Unreal.

Long: Money

Short: Margin interest

Disclaimer: Hank Williams Jr has admitted to reading my blog.

Smile

2007-10-05T10:32:00.000-06:00

I wish to quote a good friend that goes by the name of An Artist Formerly Known As Arty, "You Can't Keep a Good HANS Down." You are right my friend...grab your potato gun, it's time to go to war against the shorts in HANS.

It is shaping up to be a great close to a great week. I love the move in RIMM today. I have already responded to 2 dozen e-mails explaining why the calls people were buying yesterday on RIMM lost money in the face of a double digit gain. Despite my pleading of people not to buy options the day before earnings, it still happens. Occasionally it will produce gains, but over several trades it tends to underperform.

The reason this hasn't worked out is you have probably traded through a 15-20% decrease in volatility. This is what I am seeing on average across several strikes/months of expiration.

To make matters worse, most have purchased short dated OTM options, which sticks a fork in that whole probability thing. However, if you think RIMM will likely continue higher (it's up 150% YTD with no reason to go down) you might hold these for a while and wait for some gains.

Aside from RIMM, I can't complain about the dip in China stocks. If you have been pouting over missed opportunity and didn't buy the dip, shame on you. Me, being the great person that I am, I bought most of them for you. FXI, ZNH, SNP, LFC, BIDU to name a few.

I also have to tip my hat to the hardworking people at CME, ISRG, FWLT, DRYS, FSLR, BOBJ, MON, PCLN, ROP and a few others for helping me create profits from their great companies.

On the flip side, I took profits in ICLR, CHNR, and JRJC today. I have a few others on deck heading into the close. I have to keep it real, even when I cut loose some winners.

A couple Friday treats you are likely already aware of...

NVDA

BIIB

I have set myself into cruise control for the remainder of the day. As always, a big shout out to all my readers across the globe. Thanks to each of you for your support, whether you contribute or not. And whether you like me or not, you can't resist my ability to make you money, and my ability to occasionally make you smile while doing it.

Have a great weekend.

Recommendation: Seriously, have a great weekend. Consider it therapy for what will come next week.

Long: Making money

Short: Smiles

Disclaimer: Professional Money Managers have admitted to reading my blog.

2007-10-05T10:01:00.001-06:00

Recommendation: Looks like the "Buy Everything" strategy paid off.

Long: Everything

Short: Hardly anything

Disclaimer: I love trading

30 Stocks to Avoid Buying Options On

2007-10-04T11:21:00.000-06:00

AA
ALCOA INC
AIG
AMER INTL GROUP INC
AXP
AMER EXPRESS INC
BA
BOEING CO
C
CITIGROUP INC
CAT
CATERPILLAR INC
DD
DU PONT E I DE NEM
DIS
WALT DISNEY-DISNEY
GE
GEN ELECTRIC CO
GM
GEN MOTORS
HD
HOME DEPOT INC
HON
HONEYWELL INTL INC
HPQ
HEWLETT PACKARD CO
IBM
INTL BUSINESS MACH
INTC
INTEL CP
JNJ
JOHNSON AND JOHNS DC
JPM
JP MORGAN CHASE CO
KO
COCA COLA CO THE
MCD
MCDONALDS CP
MMM
3M COMPANY
MO
ALTRIA GROUP INC
MRK
MERCK CO INC
MSFT
MICROSOFT CP
PFE
PFIZER INC
PG
PROCTER GAMBLE CO
T
AT&T
UTX
UNITED TECH
VZ
VERIZON COMMUNICATIONS
WMT
WAL MART STORES
XOM
EXXON MOBIL CP

Recommendation: Buy options on stocks that are going to move.

Long: Stocks that move

Short: "The Living Dead"

Disclaimer: This is only a personal preference. Always choose your poison wisely.

Harumph

2007-10-03T17:30:00.000-06:00

First off, I stumbled across a bunch of great triangle breakouts that hadn't been brought to my attention. Mainly RBA and KHD. As a result I have fired my equity research department. Beware of the unemployment report due out Friday as I have delivered a big surprise to the labor market.

Today was very interesting. I whole heartedly enjoyed moves in CME, TIN, CHNR, ISRG, AVTR, GRMN, DAKT, CBE, WFMI, and HANS. But at the same time I was crippled by my exposure to China and lost unrealized gains in LVS, WYNN, BIDU, FSLR, EXM, DRYS, FLIR, MCRS, APD, NVDA, IBM and POT.

"Harumph..."

Here is my final thought to bring a close to the day...

"It's very difficult to be different from the rest of the crowd the majority of the time, which by definition is what you're doing if you're a successful trader. "

That is one of my favorite trading quotes that was given by Bill Lipschultz. This quote reminds me how important it is to stand out, or be the "odd ball" when it comes to trading style. When I second guess my approach or my abilities to make money in the market, or I receive comments about why I shouldn't teach the way I do, I have got to thank the pioneers like Bill, who have given me direction and inspiration to be what I have become.

PS- I will be teaching Mastertalk tonight, Session 1.

Recommendation: Never Give Up.

Long: B.L.

Short: B.S.

Disclaimer: I've Never Given Up.

The End of a Long Day

2007-10-03T14:31:00.001-06:00

Recommendation: Don't go anywhere just yet, I plan on writing later today. After all, I am a long ways out from my presentation tonight.

Long: GNR

Short: China

Disclaimer: It has been a long day

China

2007-10-03T09:34:00.000-06:00

In case you missed it, China recalled a $hitload of profits today. However, I have already decapitated many of their warriors. FXI, ZNH, BIDU, LVS, WYNN, JRJC, LFC, YZC and a couple other plays like SNDA, LASO, CTRP, SOHU, SINA, and EDU to name a few. As you can see, a trader always keeps score.

I might have lost the fight today, but I have dominated the battle thus far.

BTW- HANS is about to print $60 today.

Recommendation: Let things cool down before proceeding.

Long: China, doubling down and Java Monster.

Short: Over reacting

Disclaimer: I hope China hasn't decapitated any of your profits yet.

Oooh La La

2007-10-02T09:38:00.001-06:00

Click To Play

Recommendation: I made a few minor adjustments. For entertainment value, of course.

Long: New and improved watchlistst

Short: Old and abused videos

Disclaimer: Watchlists are for watching purposes only, and if misused, you will probably lose money.

2007-10-02T08:29:00.000-06:00

Back To All Time Highs

2007-10-01T14:12:00.000-06:00

Recommendation: Get a piece of the pie.

Long: Tomorrow's Watchlist

Short: Anticipation

Disclaimer: None

Mid-Day Update

2007-10-01T10:48:00.000-06:00

DOW ABOVE 14,000...AZO- Holding Resistance!

Yes, I am still bearish on AZO. Until it proves me wrong, I have no reason to be anything else. The market has been cruising higher, and AZO is flat. That accounts for something, right?

I've highlighted it's recent trading range to illustrate it's reluctance to move higher. If the market catches some profit taking, AZO will respond. If not, I'll cut it loose.

Stay tuned.

Recommendation: It's just that simple.

Long: K.I.S.S.

Short: AZO, of course

Disclaimer: I write this in response to some of the comments about this trade.

All Work and No Play...

2007-10-01T09:46:00.000-06:00

The biggest news this morning is Merger & Acquisition activity. I know! I couldn't believe it either!

The problem is that it impacts an Addict Favorite, Garmin.

Nokia announced that the plan to purchase Navteq, NVT for over $8 Billion. What you might not realize is that Garmin is Navteq's biggest customer, and with the Nokia buyout, Garmin will now need to negotiate pricing on it's map subscription. Had they just spent the money and acquired Navteq themselves, this would have made it possible to collect the revenues from cell phone and other handheld device makers that offer maps and navigation systems.

My feeling is that they deserve it. For those looking to "get a good deal" you are going to be dealing with downgrades galore, and a few have already come out and downgraded to "neutral" or "sector perform." Buyers beware.

Addict Rating: Under perform. Sell.

That is right, I ditched it at the open. I am not expecting to see the performance that I anticipated when I got into this trade, so I washed my hands with it this morning. Good riddance.

NOK looks better now anyway. I am moving the proceeds into a hearty position.

With the leftovers, I am taking down the following...

MCK- I've been bearish on this P.O.S. forever. Eventually, the shorts will "Halve" this.

LIFC- Added to my calls FSLR- A clean cut entry point

As you 've seen demonstrated over the last few weeks, I am buying everything hand over fist. After all, we are at new highs today!

"To the Moon, Alice!"

Recommendation: These are just appetizers until I get to the entrees (watchlist) later today/tomorrow.

Long: Play

Short: Work

Disclaimer: "Do as I say, not as I do."

Drawing a Blank

2007-09-28T09:42:00.000-06:00

From the surface, the market looks like it is still closed.

I am moderately amused by some gains in SLB, VMI, DE, SCHN, MON, CLB, POT, WHQ and WFMI. I am annoyed with a couple positions such as ZNH, SYNA and the lost gains in WYNN from yesterday.

And that's all she wrote.

Honestly, aside from that.... I am drawing a blank today.

I'm going out to get some lunch.

Recommendation: This video details what will happen to the market next week.

Watch it again.

Long: The Dude

Short: The Market

Disclaimer: I'll be back if you can think of something for me to talk about.

Closing Bell

2007-09-27T14:38:00.000-06:00

Recommendation: I hope you swing for the fences on the next trade as well.

Long: The firm minimum.

Short: The loving memory of being a broker. I mean, salesman.

Disclaimer: I've been tagged as a Salesman for my "Fever" in HANS. Hence the video.

Just Another "Day in the Life"

2007-09-27T10:03:00.000-06:00

I am dealing with a lot of insignificant movement in my trades today. Plenty of positions are trying to appease by throwing amateur gains at me. Please find out why RIMM, DW, ROP, APD, FLIR, UIC, CELG, FCX, SLB and a few others, don't want to move anymore.

It could be worse. I could be seeing a lot more pullbacks, such as ADSK, CNQR, WFMI, and DVA are slapping me with today. Good thing I am only losing profits here.

I hate days like this. When I lose the equivalent of "Belle Isle" in time value. Nothing I can do but take it like a man, and sit here and watch my trades melt.

By the way, I am not fighting the trend in LVS or WYNN either. Just in case you were wondering.

What has me really happy though, was that someone noticed some big news about one of our benefactors of free online advertising. In all seriousness, click here to check out the recent news about my long term investment idea in Hansens (HANS). Nothing like an analyst who wants a little boost in his stake to come out and throw down an upgrade. I wasn't kidding when I told you this new drink would be the Game Changer. For newer readers, click here to go back in time and look into my crystal ball.

Since earnings season is upon us, the straddle/strangle idea surfaced... and I decided to look at the chart of my bread & butter strangle play... MSTR. This strategy has worked 8 of the last 8 times I have traded it. The strategy is 3 weeks early, 1 strike out. I hesitated though when I saw the chart...

The stock obviously was crushed after the last earnings announcement, and looks to be confirming a bottom here. Volatility is quite a bit higher this time.

Before I forget, I still love China.

Here are a few other thoughts I have taken out of this mornings session thus far...

STRA- Watching for a re-testDWSN- Glad I bought the dip yesterday
DE- Ditto.
CMI- Yes Please!
ARW- Wants to break out sooooo bad!

As you can see, just another "day in the life." Nothing sexy, just operating a well oiled machine.

Finally, I read this quote yesterday and would like to share it with you...

"Investing is not for everyone. Sometimes the best investment a person can make is acknowledging his/her limitations. Buy a mutual fund."

I think this is a powerful quote in so many ways. I'd love to hear any thoughts about it. Does it motivate, or discourage? Does it offer any perspective? This opened up a great dialogue yesterday on strategies, suitability, perspectives and think it could be an interesting topic today.

Feel free to chime in, or just go about your typical day.

Recommendation: What are "limitations?"

Long: Capabilities

Short: Limitations

Disclaimer: Trading involves risk, but only the risk you create.

2007-09-26T10:12:00.000-06:00

This video speaks to me in so many ways today.

Primarily it reflects what is happening to profits this morning in stocks like BIDU, EXM, GRMN, UIC, and a few others. These positions were so full of profits, they needed to let loose some juice.

Not to worry though. If you caught yesterdays watchlist, you are so thankful for APD, WFMI, DW, ROP, and DVA that I provided yesterday as breakouts, and for their continued movements today. I love how a couple good winners pay for a lot of little losses or lost profits, I should say.

I am watching my position in RIMM, and loving how the stock price just happens to go up $2 a day for the last few weeks. Should I hold it over earnings?

Yesterday's re-tests in FLIR/ADSK have worked fairly well this morning. I am adding a few contracts here on FLIR and using roughly $55 as my new line in the sand.

Don't fight the dips on DWSN, ZNH, and DE, either. I have been forced to add to these as well.

Finally, here are my favorite entries of the day.

SLB- Lovely Dip

VMI- Ditto.

CNH- Boom!

Thought of the day: "I wonder what I should do with MON. It won't stop going up."

Recommendation: Find Alpha

Long: The obvious

Short: The oblivious

Disclaimer: If you trade any of these stocks, you might lose money.

Fantasy Trading

2007-09-25T10:41:00.000-06:00

The market isn't doing much. My watchlist is published, and fund managers around the world are leaving messages, sending e-mails and re-balancing their funds accordingly. I'm not really hungry, I have no exits to take, or positions to enter...so I guess I will blog.

About what, you ask?

Halo 3 comes out today. Have you ever played Halo? I played the first one, once. I dominated my opponent to the point that I was never invited over again, or talked to for that matter.

From the beat on the street, and the price point, it looks as if this game will single handedly push the "Softie" up to it's prior highs. You know I am struggling when I start blogging about stocks like Microsoft.

I could talk about the season premier of the Bachelor last night?

My old lady tells me that the claim about this guy being "the hottest bachelor yet" is true. After making her sleep outside, I figured I should have an underlying interest in this show so I can monitor her intake. Since I am emotionally involved, I have confided in DeAnna, Mallory, Jenni and Solisa as my Final Four.

Since I am bored, I am also toying with the idea of setting up Option Addict "Fantasy Trading." We could do this one of two ways...

One: We all compete against each other, and I dominate.

Two: Just like fantasy football, you select your teams based on trader stats, and create your own "trader franchise."

If we decide to go this route, you will want to select the bigger stronger players for your team.

Leave players like Winston, for me. They are easier to teach.

Recommendation: We'll need statements & confirms to determine stats :)

Long: Patches O'Houlihan

Short: Winston

Disclaimer: C'mon, I wouldn't dominate.... I wouldn't play.
(Just Having fun, have a good one!)

New Watchlist

2007-09-25T08:52:00.000-06:00

Click To Play

Start Me Up!

2007-09-24T10:36:00.000-06:00

First off, to the BAMM user group...my hat's off to you. You sure know how to make a guy feel welcome. I hope the presentation was up to par with your expectations. Thanks again for the opportunity.

The trip was awesome. I miss everything from the weather to the traffic. Plus, my presence helped to create a Raider victory. I couldn't be happier.

As I have returned to greatness in the market, I am enjoying the correlation between the NASDAQ & NYSE dollar gainers, and the positions I am holding. SCHN, DRYS, BCSI, GRMN, WYNN, BIDU, LVS, FXI, etc. You have to be able to pick winners in order to let them run.

I'm spending the rest of the day deleting e-mails and picking future winners.

Recommendation: I suggest that you pick some winners too.

Long: Winners

Short: E-mails

Disclaimer: I am a Raiders fan, in case you already didn't know.

I need the Stones to get things Rolling today. No pun intended.

Expiration Day

2007-09-21T09:41:00.000-06:00

September paper expires today. Sell it like it's hot.

Aside from breakfast, the only constructive thing I have been able to do is tighten up risk in my positions and add a few contracts here or there. My high flyer's have become hard to add to add to (entry & pricing), unless we are talking stock positions like ZNH, AMZN, SCHN or HANS, which I effectively added to today. I am scaling out of GMCR to buy more HANS. Coffee served cold is the next biggest trend, and I'm way ahead of the moves to come.

I love DRYS, CNQ, POT, BIDU and BIIB. I'm addicted to the early profits I am seeing in my October paper.

I wish the option market was more like a swap meet, where I could trade up old hand me downs like GRMN, ONXX, ISRG and VDSI to the old lady that ran a shop out of the back of her van. If you knew her well, she always had something special for you.

I took profits in SYNA, LIFC, and MON today. Once management found out about this they almost elected to go private, since they lost one of their biggest shareholders.

All in all, I have been automatically enrolled in the "Jelly of the Month Club" for all the commissions I have contributed to my online brokers bottom line.

For my index traders out there, I will disclose my long position in the Russell this morning.

Addicted to $RUT (20 Day Chart)

I couldn't leave without a couple good set-ups to share...

Long: SNDA
Short: AZO...again.

The remainder of my day will be used to monitor positions, delete e-mails and prepare to catch a flight to Oakland. Since I elected to go with a Johnny Cash cover of a NIN song a few days back, I will ask for redemption with the attached offering...

Recommendation: Have a great weekend

Long: NIN

Short: Churning

Disclaimer: I probably missed a few things...I had 20 minutes to write this. I was Free-stylin'

Become an Official Option Addict Today!

2007-09-20T14:04:00.001-06:00

I advertise this every so often, but if you want to show some support please click here to create a profile.

Once you have created a screen name and an account, please join the addict community. Click here to get to my page.

This goes for existing members also...please add a photo! If you don't want to put a pic of yourself, post something creative, funny or random in it's place. If you need help doing this you can e-mail me and I will give you some personal help.

Whether or not you decide to contribute is up to you, I would just like to get more readers registered. Consider it a personal favor.

Recommendation: Take the plunge.

Long: Official members

Short: Official offers

Disclaimer: This is your big opportunity! Don't delay!

Option Pricing

2007-09-20T10:47:00.000-06:00

Carrying the nickname of the Option Addict means that by law I am required to talk about options at least once in a while. You’ll see my archives are full of good stuff like this, but today I am going to go back and talk about some key points to consider when evaluating option prices.

Always remember that shopping for options is like shopping for anything else; you get what you pay for. Cheaper options are of lesser quality and expensive options are of better quality. I will define quality as…

Increased sensitivity to price movements

Decreased sensitivity to time decay

Decreased sensitivity to implied volatility

As a buyer of an option, this is what you are looking for. Since time decay and volatility are typically more of an enemy than a friend, you want to defeat their ill intent. This is why in the money options are so valuable. You get to leverage the stock at a fraction of the cost, while not having to put up with the problems that time decay and implied volatility present.

The downside?

They are so damn expensive! And if the stock moves against you, delta isn’t all that appealing on the flipside.

“So Jeff, if what you are saying is truth, which we know you speak, why do you always trade out-the-money options?”

Let me give you the considerations of selecting an option first.

#1- Expected price movement.

#2- Expected time frame

#3- Expected change in volatility

#4- Expected probability of success

#5- Expected risk

#6- Source of trade recommendation

Expected Price Movement

The first and most important consideration is what you are expecting the stock price to do. If you are staring down the barrel of a breakout, big shift in momentum or just a big price swing in general, you can afford to take on more risk. The reason I trade a lot of out-the-money options is because I try to put myself in front of big price moves. Despite the out-the-money option being of lesser quality and lower probability, I see tremendous returns in exchange for an insignificant cost. Even though these trades start off with an insignificant sensitivity to price movement, a heavier gamma gives me comfort in the fact that if I am right in my price prediction, my sensitivity will increase dramatically.

Expected Time Frame

The quicker my stock moves, the lesser time decay becomes a factor. I always encourage traders to buy adequate time, and even when in doubt, to go further out! For those that buy short dated options, you are in a race against time. This means you stock needs to move in larger amounts to offset this loss in time value. To enhance this part of your selection process, only buy short dated options on stocks that make quick moves. And always default to buying more time than you need. However, don’t buy TOO MUCH TIME! I loathe long dated options.

Expected Change in Volatility

I hammer on this in most of my option courses and classes since volatility is a major player in the selection process. I have several posts that expand on this in greater detail. Click here to get started.

Expected Probability of Success

Look at delta as a measurement of probability. This means that an out-the-money option will have the smallest chance of success, while an in-the-money option carries the greatest chance of success. As always, a higher probability comes with a lower reward while a lower probability of success comes with a higher reward.

Expected Risk

Always pay close attention to what is really at stake in the trade. This can be determined in several ways. I like to consider the drop I am willing to take in the stock price, and translate that into the general impact in the option premium. If you use stops, consider the difference between the purchase price of the contract and where your stop is set. Or if you are a gunslinger, consider the full option premium.

Source of the Recommendation

It is easy to select an option when it comes from a credible source.

This will probably open up a a big can of worms, so I will try to be as responsive as possible to incoming questions. For those that struggle with selecting options, hopefully this can act as a checklist when making your choice.

Recommendation: If you are like me, you hate reading long posts.

Long: Short posts

Short: Long posts

Disclaimer: I love options

I Know I Got Skillz

2007-09-20T10:16:00.000-06:00

Recommendation: I needed some "Mood Music" before I release today's thoughts.

Long: Shaquille O'Neal...the basketball player or deputy sheriff.

Short: Shaquille O'Neal...the rapper.

Disclaimer: I get kickbacks for posting this video. BOOM-SHAQ-A-LAQ-A-LAQA!!!

Hello! My Name Is: Angry Trader

2007-09-19T13:22:00.000-06:00

You've all had days like this, so I won't bother apologizing up front.

Question: Jeff, why are you angry?

Where to begin?

The market rallies, as it was foretold, and I am "half mast" in most of my unbelievable positions. Out of everything wrong with the world today, this has me pissed off the most.

I ate Oatmeal for breakfast.

I have been slapped in the mouth with truckloads of e-mails asking about where the market is going.. What my thoughts are about a recession? Am I bullish or bearish? Do I trade stock splits? What significance is 50 basis points compared to 25? Is that a triangle? Do you like the MACD? Or is it a head & shoulders? Do you use the Sto? Are you worried about inflation? What is your favorite song? Ok, is it a channel? What is a lake play?

Get the point? Or shall I continue?

"I know what you are thinking...and yes, you are right. "

(I would quote Brian Fantana from Anchorman, but it is inappropriate)

I am just venting from a rough day, my bad.

However, here is my thought for the day... Does it matter?

If you knew the fate of the market or economy for that matter, what would you do differently today? What if the economy heads towards a recession next year...does it matter? What if the market finishes the year higher...does it matter? Even if you know the specific closing price of the S&P 500 on Dec 31st, 2007...does it matter?

Bear with me, I am thinking out loud... but honestly I don't think I would do anything different. I still trade in a market of stocks, not a stock market. I pick winners and cut losers. That will never change.

I hope to get everyone to the point in their career where the "market" becomes less of a factor in their overall account.

By the way, lots of stocks that broke out yesterday offer great entries today. So, bon appétit!

Recommendation: You can't hold this post against me since I used my alter ego to write it.

Long: Jeff

Short: Angry Trader

Disclaimer: If you didn't notice, my mood is at a 2 on a scale of 1 - 1,000,000. Mostly because "I hurt myself today."

2007-09-19T10:20:00.000-06:00

Click To Play

Recommendation: You thought I was joking about HANS, huh?

Long: HANS

Short: Where was the plug for JAVA?

Disclaimer: I am considering taking my HANS profits and rolling them into a new vending machine for my garage and/or basement.

Check This Out!!!

2007-09-18T13:28:00.000-06:00

I just found footage of what I did to the market today!

Recommendation: I hope you did the same thing to the parties on the other side of your trades.

Long: Profits

Short: Losses

Disclaimer: I am the dude in the Orange Afro (I had to protect my identity).

The Fed Bails "Them" Out...

2007-09-18T12:17:00.000-06:00

Unbelieveable.

Getting prepared to sell this rally (mentally...down the road). Below is the text of the statement. Enjoy.

WASHINGTON (MarketWatch) - Here is the text of the statement released by the Federal Open Market Committee Tuesday.

The Federal Open Market Committee decided today to lower its target for the federal funds rate 50 basis points to 4-3/4 percent.

Economic growth was moderate during the first half of the year, but the tightening of credit conditions has the potential to intensify the housing correction and to restrain economic growth more generally. Today's action is intended to help forestall some of the adverse effects on the broader economy that might otherwise arise from the disruptions in financial markets and to promote moderate growth over time.

Readings on core inflation have improved modestly this year. However, the Committee judges that some inflation risks remain, and it will continue to monitor inflation developments carefully.

Developments in financial markets since the Committee's last regular meeting have increased the uncertainty surrounding the economic outlook. The Committee will continue to assess the effects of these and other developments on economic prospects and will act as needed to foster price stability and sustainable economic growth.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Timothy F. Geithner, Vice Chairman; Charles L. Evans; Thomas M. Hoenig; Donald L. Kohn; Randall S. Kroszner; Frederic S. Mishkin; William Poole; Eric Rosengren; and Kevin M. Warsh.

In a related action, the Board of Governors unanimously approved a 50-basis-point decrease in the discount rate to 5-1/4 percent. In taking this action, the Board approved the requests submitted by the Boards of Directors of the Federal Reserve Banks of Boston, New York, Cleveland, St. Louis, Minneapolis, Kansas City, and San Francisco.

Marks, Get- Set, GO!!!

2007-09-18T11:59:00.000-06:00

$RUT

$OEX NQ
Pick your poision. We are moments from "the action!"

Recommendation: Lots of action heading your way, right?

Long: The market

Short: The market

Disclaimer: Let's get ready to roll!!!

Making Magic... One Video at a Time

2007-09-18T08:17:00.000-06:00

Click To Play

Recommendation: Videos make my oatmeal taste better.

Long: The Watchlist

Short: The "Event"

Disclaimer: "Plan the trade, trade the plan."

Feeling a Little "Punchy"

2007-09-17T12:48:00.000-06:00

I have been preoccupied punching bids all day long on amazingly great trades. Although I am a little pissed that I am bowing down to "Headline Risk".... I must admit, risk is risk. In efforts of controlling lost profits in tomorrows event, or lack thereof... I have decided that I am scaling out of a lot of positions today & tomorrow. That's the extent of how much I want to talk about it.

See what I mean? Look at BIDU! I hate taking profits!

Or the casinos... how about LVS?
MON is right there with them...

So is SYNA...

But GLDN isn't... this will wind up on tomorrows watchlist.

So what is my take on tomorrows action? I haven't decided yet, and partially don't care. Tomorrow will be a good day regardless, so let's make sure we have our bets ready to place.

On a side note: I will be making my way back to the Bay Area this weekend courtesy of the BAMM user group. They have invited me to come give a presentation on options trading. Thanks guys, can't wait.

PS- I also do birthdays, weddings, bachelorette parties, and bar mitzvahs.

Recommendation: Consider your position size going into tomorrow.

Long: Trade confirms

Short: Commissions

Disclaimer: Just because I mention that I am low on e-mails doesn't obligate you to fill the inbox! Just kidding, but if you have not got a response that is because I got blasted this weekend. Replies are coming shortly.

Monday

2007-09-17T10:13:00.000-06:00

Recommendation: I needed a new thread, and AC/DC is the only way to start off a day... Yeah, I know...Off topic! Trading related detail is coming shortly.

Long: AC/DC, in size.

Short: Anticipating tomorrow

Disclaimer: I think the lead singer is a CEO look alike.

Friday Trivia

2007-09-14T16:56:00.001-06:00

Congrats to Loretta who won the first ever "Friday Trivia" competition here on Option Addict. The question was to name the controversial trade idea I presented in my first ever Mastertalk presentation back in the spring of 2006. The answer was Boeing (BA).

The trade was controversial since aggressive option trading/momentum trading was unheard of in these spotlight presentations. I chose a one month out, out-the-money put on a conservative stock like BA trading at it's highs. It yielded over a 250% return in a week. This was one of the "big trades" that put my name on the map.

It was also a controversial trade since at the time a well known figure was adamant on buying Leaps on this stock. Literally at the same time. Names withheld to salvage the pride of others.

Loretta, you are the lucky winner of a new DVD set. This set was offered to me as an extra to hand out to a deserving individual. Send me your mailing address and they are on their way. I can't reference the name/title/type of DVD's for fear that some assbag will jump my case about it.

Thanks for the fun and games, and for the close of a great week. Have a great weekend everyone.

Recommendation: I need some photos. I missed the opportunity to thank the individual that offered to "be my billboard" and sport my gear. I say we start another competition "Show Me Your Stuff" competition. Gimme a photo of you in your gear. Best photo wins another top notch prize.

Long: Photos, competitions and prizes

Short: E-mails.

Disclaimer: I have plenty of top notch prizes.

How about a little Nugent to send us into a weekend?

I Love You

2007-09-14T11:49:00.000-06:00

Prepare yourself, I am going to chime in about all the recent comments.

First I want to start with the role I play in distribution of off topic content. I must admit, I get depressed at the response I get from my daily production here. I have put the masses in front of tons of profitable and wildly profitable trades. I record videos, I share opinions, I take a lot of time out of my day to add this value to the world in their pursuit of achieving greatness...

And often it seems over looked.

I appreciate the recent recognition by a few to say "thanks" for my efforts. I am in a zone right now with all the trades I have presented, and of all the tickers I see in the comments, none are consistent with what I put out there. Uhhh....Ok.

I'll quote Joseph Marshall Wade...

"If I wanted to become a tramp, I would seek information and advice from the most successful tramp I could find. If I wanted to become a failure, I would seek advice from men who had never succeeded. If I wanted to succeed in all things, I would look around me for those who are succeeding and do as they have done. "

After a great post I get excited to check the comments to see what people think, only to find that my efforts acted as a service to move conversation & banter to another location. I am not complaining, but I agree that this site has become somewhat of a chat room. Don't get me wrong, I love the idea of community. Duh! That is why I created this mess and encouraged comments!

But let's not lose sight of the task at hand.

I like the idea of trying to stay a little more trader focused. But only if that means we all elevate our game to this level. I'm guilty of talking about reality tv, sports, music, energy drinks, my sex life, etc. I only do this a small amount of the time in relation to what I offer related to trading. Let's all try to shoot for that same goal.

In closing, if we are going to get back on track, let's try to elevate our standards as traders. If you are going to contribute, make sure that you are profitable and experienced in your ideas and methods. The person on the other side of your comments appreciates it.

Also, as always, please do not attack the ideas of others or ever make things personal here. Respect opinions, and if people are behind the curve, recommend where to go (ARCHIVES) to play catch up. Consider this a club, and we are all for one, one for all. One Nation, under Jeff. :)

And Remember..."I love you....You love me..."

Recommendation: Can't we all just get along?

Long: Happiness

Short: Weakness

Disclaimer: I will up my standards, so up yours!

The GRMN Video

2007-09-14T10:23:00.000-06:00

Click To Play

Recommendation: Make sure you are watching this while under the influence of Monster JAVA. Preferrably Mean Bean.

Long: GRMN

Short: GRMN

Disclaimer: Long/Short only because this ticker is a tired subject. Too bad we didn't have more controversy when I gave the initial reco at $64. Nobody would care what it is doing today. By the way, you'll notice that the CEO couldn't make it. However, he sends his regards and recommends you double down on your position.

Houston, We Have Lift Off!!!

2007-09-13T10:36:00.000-06:00

Big move in the Dow today, however a weak response out of Tech, Small Cap, Mid Cap and broader market stocks. Looks like Mc D's is lifting the market. I'm Lovin' it.

Take a look... underneath it all, it isn't that great of a day.

I am going to release a video a little bit later in relation to entry and exits, and we will review none other than Garmin. I am hoping to get the CEO to show up and make a few comments about recent price action. Looking at the insider trading, he has some explaining to do.

In unrelated news I am mentally gearing up for two upcoming events.

#1- Tonight is Eviction Night on Big Brother 8. With Jameka getting the boot earlier this week, it is finally down to 3. Daniele, Evel Dick and Zach. I am pulling for E.D.

#2- The upcoming battle of the beaten. Michigan vs. Notre Dame. The line is 7.5, who are you taking?

Recommendation: Who has the big upset prediction for this weekend?

Long: GRMN. Dow up 150, GRMN up a ____ nickel. Apparently it is waiting for the unworthy to exit their trades before going higher.

Short: LFG. Did anyone take this one from last week?

Disclaimer: Of course not, it wasn't a reco, right?

Counter Blog Post Reversal

2007-09-12T13:15:00.000-06:00

With yesterday being a "multi-post" day for the Option Addict, he follows up with a reversal today. Meaning that he mysteriously disappears all day to offer up a late, meaningless and irrelevant post to his following. What an ass.

Truth is, I just woke up.

In all honesty the only thing I can really preach today is more alpha, and follow up on how well all the positions are doing that I have been preaching over the last month. Especially the more recent ones (if you look at the top 10 dollar gainers, dollar losers, New 52 week highs & lows for the NYSE and NASDAQ you will see about 15 familiar tickers).

But I refuse.

Being on the reading end, I would hate to read the same old "I told you so's" and "Look Mom! I'm Actually Making Money!" claims that so many financial bloggers illustrate in their writings.

Instead I will act like I have been there before. If you've been reading for a while, we are familiar with "alpha" and it is part of what we do here.

So instead, here are a few things that have been running through my mind today...

With the dollar fading fast I am loving the FXE breakout more and more.

I am glad I am a long term provider for AMZN...

And a short term provider for Casinos. Both of them.

I love China. All of it.

So I think I am done talking about the market.

A side note: For those of you that watched the Bills vs. Broncos last weekend, you saw the severe spinal injury that Kevin Everett had after an attempted tackle. I heard last night that it is likely that he will walk again. Stuff like that puts me in a great mood.

In closing to my random thoughts today, I wanted to say thanks for all the e-mails and comments left recently. Not just the anniversary, but the congrats on my recent performance, and responses to the feedback I asked for last week. I am amazed at what I have been able to create here with this group and the caliber of participants that we have. Again, my sincere thanks to all of my readers and the support and contributions you all offer. I think I am going to use the video below as a potential theme song for our community.

Recommendation: Pat yourself on the back

Long: Option Addict

Short: Hyperlinks

Disclaimer: Past performance does not indicate future results.

Ending on a Positive Note

2007-09-11T10:31:00.000-06:00

I went on a blogging rampage today didn't I? What can I say, something came over me. I am in a zone and each day gets better and better. Plus, there is so much out there to write about it seems. I wish it was always this easy.

Heading into the close everything looks to be in order. For those that took the GLD trade, congrats. You were a part of the biggest move in the metal this year.
If you are looking for another way to profit on a weak dollar, consider the breakout on FXE.

How could I forget LVS?

I like the pullback on SYNA, but I will check it again tomorrow before buying this dip.

BIDU (China in general) is throwing more money at me today, guess I will take it.
On a personal note, despite today being a day that is remembered for tragic events, I can say that I remember this day as the best day of my life. Happy Anniversary, Amber. 9 years strong and I love you more each day. Thanks for all your love and support. It would mean nothing without you.

Intra Day Index Trade

2007-09-11T10:25:00.001-06:00

10 day/10 minute chart of the Russell. I mentioned in my first video being long with a stop at $77 on IWM or $774 on the $RUT. On a 10 day chart this might signal a beefy move.

A gambler gets long here, a person awaiting confirmation waits for a break of the neckline.

Stay tuned.

Recommendation: I am trying to implement new ideas. Bear with me.

Long: The Russell

Short: Energy Drinks ( The Machine is still sold out)

Disclaimer: Just because I am long the Russell, doesn't mean it is the right thing to do.

In Loving Memory

2007-09-11T10:06:00.000-06:00

Even though my opinion is not always widely accepted, I do want to pay tribute to this day in remembrance of the innocent victims that lost their lives in such a terrible tragedy.

I was working at Morgan Stanley at the time, and our main offices were located in the World Trade Center. The company lost only 6 employees, but of course, it was six too many. To those out there that lost a family member, relatives, friends, etc. my heart goes out to you.

As always, for those who protect our Country and dedicate their lives to preventing these situations before they happen, thank you. In behalf of my family, your efforts are appreciated.

More Watchlist

2007-09-11T08:36:00.000-06:00

Click To Play

Recommendation: Didn't think I would double up today with 2 new releases, did you?

Long: The first video

Short: The second video

Disclaimer: Don't trade anything detailed in this video either.

PS- It is actually a second video, despite earlier confusion.

Watchlist

2007-09-11T08:07:00.000-06:00

Click To Play

Recommendation: Want to see a real traders watchlist? Drink it in, goes down smooth.

Long: Watchlists

Short: Checklists

Disclaimer: Don't trade anything detailed in my videos.

Enlightened By Randomness

2007-09-10T11:22:00.000-06:00

I love the price action in China this morning. But then again, I talked about that last week. This week I am shopping for long positions in Health Care, Biotech, Retail and various Technology stocks. I am shopping for new shorts in Pharmaceutical, Airline, Broker/Finance and a few high end Retails.

On an intra-day basis, I have been long, short, and long again in the Russell.

I have also attached the Economic Calendar for this week. Most of the meat will be served later in the week.

I take Monday's to piece together and formalize my weekly watchlist, so if you came here for fish, you'll have to check back with me tomorrow. However, I will give you a glimpse into some of my trading activity today. I became a share holder of Rick's (RICK).

Little slice of heaven, right? Well, actually I was referring to the entry point.

In the meantime, more content is developing. Until then, there was some decent football being played this weekend. The two longest winning streaks in college football ended (Boise St 14 / BYU 11). I have personal interest in both being relatively local. Plus I happen to own a Boise St DVD, courtesy of Arty, and a BYU t-shirt courtesy of bad decision making processes.

For the NFL how can you go wrong with a straddle on the Patriots and the Colts?

Recommendation: Look up the spread on that trade.

Long: Football

Short: Gambling

Disclaimer: This post should not be taken as a recommendation to gamble. As a trader, I can attest that gambling references should be interpreted as entertainment value only.

Speaking of gambling, click here.

Closing Thoughts

2007-09-07T12:07:00.000-06:00

Today I find myself busier than a one legged man trying to play some DDR (Dance Dance Revolution). With my partner out of the office, I have had to catch up on over one hundred e-mails, then deal with the counter questions that have kept rolling in (All of which is Marketcast traffic.) My personal e-mail is at a 52 week low and I am anxious to keep it that way.

I am going to try and play a little catch up. I have a lot of ideas running around inside my head that need to be blogged, so bear with me.

First off, how about that prediction in GLD? Here is a snapshot of the 5yr...this is kind of a big deal. Watch for it to stall around $730 per ounce, but when it breaks higher, you gotta buy with both hands.

I am also a big fan of buying this dip in China. Rather than list the same ol' FXI chart, here is ZNH, China Southern Airlines...in which I am a proud owner.
KLAC finally broke out. I lathered my accounts with Oct paper.

What about the FXY? Run baby, run!

I am also eyeballing the FXE. It's been awhile since I last talked about this, but as you can see it is near another action point.

I love to prove Guru's wrong. I finally own puts on COST.

BCSI...dare me to buy the dip on a 200 point drop today?
Done.
AMZN. Take a profit. Unless you are longer term, like myself.

I also happened to notice that Oil has quietly crept back up to $77 per barrel today. Keep an eye on refiners going into next week. (VLO, HES, HOC, WNR, ETC...) I love the fact that I am still paying only $2.50 per gallon.

Well, it has been a great week, and as always thanks to all my readers for their support and participation. In fact, since I am at a 52 week low on e-mail traffic, why don't you send me your feedback or suggestions for the blog. If you have an opinion of sorts that you think would be a good addition here, click here and send me your feedback.

Thanks in advance.

Now if you'll excuse me, I am off to grab some Afternoon Delight.

Recommendation: Hit that suggestion box this weekend!

Long: Fridays, Legs, DDR and Afternoon delight

Short: Plenty of stocks, the market, and vending machines that are out of Monster Java.

Disclaimer: Mastertalk is in the process of being loaded...for those that were interested.

iRock

2007-09-06T10:31:00.000-06:00

As I pondered this morning what I should blog about today a couple different thoughts had entered my mind as usual. I could regurgitate meaningless financial news, follow up on trades, present a few new ideas I took this morning or I could discuss how much I rule.

I choose the latter.

The reason I want to talk candidly about myself is that I have just realized I am in an incredible winning streak. Given the market climate here, it showcases a knack for picking winners. Going back over the last month (post Chicago) I tallied up all the wins/losses.

Allow me to share the percentage movements in the underlying since I have spoken about them here on the blog...

WYNN: +3.29%
PAYX: +3.93%
OII: +16.53
MA: +5.25%
GMCR: the initial stock trade: +59.32% since recently mentioned -.86%
AZO: +5.73%
ONXX: +20.36%
KLAC: still waiting for a signal
FXI: +.65%
BIIB: +8.29%
GLDN: initial trade from last year +115%, Since recently mentioned+8.25%
GRMN: initial trade from June +68.44%, Since recently mentioned +9.18%
MTG: +11.13%
OMG: +13.3%
RIMM: +4.37%
VMI: +4.70%
CNH: -3.45%
ICE: +2.14% (but I took a loss)
SGR: -6.12% (I took a smaller loss)
ATI: -.51% (I took a slightly bigger loss)

I was too lazy to incorporate all the ideas from the videos, but those who were following noticed some pretty strong movers in there, only a few losses, and several still waiting for trading signals. You know, the usual.

In case you missed Mastertalk last night, here were the ideas I presented...

SHLD (Vertical Spread Sept 145/150)

LFG (Long Puts)
GNK (Long Stock)

FSTR (Long Stock)

GLYT (Long Puts/Vertical Spread Sept 70/75)

I also ran across a job opening I am going to apply for at the end of the month. It won't effect my status here on the blog, but it might conflict with my teaching schedule.

Stay tuned...

Recommendation: "Pride is a great banana peel, as are hope, fear, and greed."- Ed Seykota

Long: Myself

Short: Ed Seykota

Disclaimer: You know the drill, once you get complacent about the market...this is what happens.

Wednesday

2007-09-05T08:50:00.000-06:00

I established a position of index puts at the open and so far that has treated me pretty well. If you missed some of the monster breakouts yesterday, you are being offered a second chance today. The market gods have allowed these stocks to pull back to reasonable prices and points on the chart that make risk management that much easier to perform.

Pending home sales dropped 12% in July! Of course, that means it's probably time to take XHB out for another spin...

Keep an eye on FXY. $86 has held strong and we are seeing a nice rally from these lows. This of course is bad for the market.

Later today AAPL should make the decision on whether or not it wants to start working towards $200. A new iPod is scheduled to be released.

Interesting side note: I read that iPhones are now being sold in China. Good news? Customers are paying as much as $8800 Yuan ($1170 USD) and the phone doesn't work. It can make outbound calls and send text messages, but will not receive calls and voicemail doesn't work on them either. What a deal!

I missed a couple trades today. Sometimes my trading rules really piss me off. OSIS down 10% and I knew it was coming. Oh well, I'll make that money back on the upcoming COST trade, when it closes below $58.

I also like the SHLD trade someone mentioned yesterday. What a beautiful move it has made today. Kind of similar to monster move found in GES (-8%). GES what? I talked about this on the marketcast last night as a great opportunity to pick up some calls when it breaks out. What this really means is that hundreds of people already own them and are going to come to my office with torches, pitchforks, and rocks to pay their respects. GES I will have to go into hiding today.

Recommendation: Speaking of hiding, where in the hell is the records room?

Long: Strong Stocks

Short: Weak Stocks

Disclaimer: GES what? I don't own any GES.

Closing Time

2007-09-04T13:00:00.000-06:00

As I mentioned in my video earlier today, I am very bewildered about the recent performance of the overall market. I realize that the market is pricing in a rate cut here, but the way things are setting up... could we possibly fathom stocks getting back to their highs?

This is why I try not to let my opinions of fundamentals impact what I see going on in the prices of stocks. The two don't normally correlate, and my opinions are full of $hit.

I will be adding some more charts to my watchlist for tomorrow. I had a long list today of breakouts & trend bounces but couldn't spare the time for a second video. Too many trades to be placed today.

Last item of business: attached are a few photos of a recent visit that Arty and Sue paid to the Marketcast.

Arty and the Marketcast

An Option Addict Logo and a Monster Java. My Hero.

Sue, Arty, the Marketcast and Hot Wings

Recommendation: I haven't gotten many photos of Addicts in their new threads. If you want a slot on the blog, you have priority, you know.

Long: Closing Time

Short: Stack of photos

ONE TIME ONLY

2007-09-04T09:26:00.000-06:00

I need to re-record a trading room that had issues this morning.

The topic: Price Patterns

If you'd like to join, follow the instructions below.

*REMEMBER*

This is a one-time only freebie. I need some participants for the session.

Meeting Number: 921 782 573
Meeting Password: (This meeting does not require a password.)

To join the online meeting
1. Go to https://toolbox.webex.com/toolbox/e.php?AT=WMI&MK=921782573
2. Enter your name and email address.
3. Enter the meeting password: (This meeting does not require a password.)
4. Click "Join".
5. Follow the instructions that appear on your screen.

To join the teleconference only
Call-in toll-free number (US/Canada): 866-469-3239
Call-in toll number (US/Canada): 650-429-3300
Toll-free dialing restrictions: http://www.webex.com/pdf/tollfree_restrictions.pdf

Recommendation: FOLLOW THE INSTRUCTIONS

Long: Freebies :)

Short: Late Notices (for all the e-mails I will be getting later today)

Welcome Back

2007-09-04T08:18:00.000-06:00

Click To Play

Bear Repellent

2007-08-31T09:14:00.000-06:00

Uncle Ben steps in and let's the market know he's going to do whatever it takes to keep the credit crisis in check. It also appears that Wall Street is pricing in a decent probability that the Fed cuts before the September meeting. At the moment, I still don't think it will happen, but that viewpoint is likely to change as the time draws near.

Bush is on deck to make a speech here about his plan to save his voters, but I wouldn't even make my Tivo watch it. You'll have to tell me what happens, if anything.

So outside influences are trying to tamper with my bearish stance on the market...

Fools.

In fact, I have footage of Bernanke and Bush...take a look...

Recommendation: I think the Fed is going to need a bigger gun.

Long: Japan, most definitely

Short: "Bull"nanke

The Day Before Friday

2007-08-30T12:05:00.000-06:00

Running late today, but for plenty of good reasons.

Take a look at a few intra-day charts I have going here. We are at some interesting points as I write this....

SPX 5 day, waiting for a breakout.

FXY setting up a nice descending triangle
$RUT has stalled.

VMI is running. Good thing I only had two portions.

Honorable mentions from yesterdays post include MTG, GRMN, OMG, RIMM, BIIB. Those trades are keeping me from going postal about my losses in CNH and GLDN.

Looks like the market is finally cracking down. Let's root for some losses by the close. If not, I will find the money responsible and give them a dose of the following...

Recommendation: Take profits quickly, and don't take any losses.

Long: The Closing Bell

Short: The Market

2007-08-29T10:31:00.000-06:00

That video pretty well sums up how I reacted to the market open.

Then I realized we still have plenty of time left before the bell.

I have been able to get my feet modestly wet over the last week, but still not fully operational like I was pre-Chicago. I haven't seen the types of gains I had wanted to see yet, but I haven't lost anything, which is not surprising.

I will say that I have never seen volatility like this in my career. It is unreal. Regardless, I still won't trade VIX options (I have 3 unread e-mail on this topic). I haven't heard much day trade chatter, but honestly that is the only place to be right now. Place your bets at the open and cash out at the close. Anyone long the Russell right now?

Before I go forward I want to pay tribute to the Hurricane Katrina anniversary. I have talked with people that were involved in this disaster and want to take a moment to let them know that they are in my thoughts. I'm glad to know that many people made it through everything and have been able to move on.

Today will be remembered as a festival of charts here on Option Addict. I didn't have the time or motivation to be creative, otherwise I would have thrown these into a slide show while playing some good tunes in the background. Here's part 2 of my watchlist...

$SPX

I talked about this earlier, but keep an eye out for the inverse head & shoulders. If you are bearish, of course.VMI SGR
RIMM
OMG! It's OMG!
MTG
GRMN
GLDN, one of few long term positions I am still sitting on. Looking to add on the upcoming breakout.
CMI
CNH
BIIB

Well, that will conclude the festivities. Thanks to those that showed up this morning.

Recommendation: Have a good one!

Long: Lunch

Short: Work

Deep Thoughts After The Bell

2007-08-28T14:00:00.000-06:00

New Release!

2007-08-28T09:18:00.000-06:00

Click To Play

Recommendation: Right click and select "open in new window" for best viewing results.

Long: Watchlists

Short: Playlists

Terror in the SPX Pit

2007-08-27T12:15:00.000-06:00

I am going to follow the trend of bloggers commenting on the "911 trade."

This was in regards to the open interest on the Sept 700 SPX calls. A lot of traders are looking at this as a large bet on a predicted directional movement in the market. "A prediction of a terrorist attack." Niner.

The headlines won't tell you this, but notice how the Sept 1700's have the same open interest. It's a box spread (I checked). It's commonly used for short term financing. The trader picks strikes that are unlikely to get hit and at expiration it will unwind, hence trading the "tips" of the option chain.

Don't bet on another 911, unless you see huge lots firing off in stocks like RICK, SWHC, HAL and PYX.

It brings up a good question though... How should I protect myself from this event?

You can't. Don't let it hinder what you have going. Continue to position size, diversify, and manage your portfolio by risk first, and you'll do fine.

My scrapbook is running behind... here are a few more contributions.

Here is a pic of Jamie on a kayak trip in Jersey. This was taken at an event he helps organize and manage to raise money for the Special Olympics. Jamie, I told you before, but you are a hero in my book.

Here is a pic of Kim and Dan (aka "VA beach girl") at the 3 day live class last week. We got to visit for a few of the days that they were here... thanks for keeping me company!

Next you'll see Tim on his Option Addict water sled. He bought the one and only limited OA edition. Nice call.

Finally the Marketcast posed for a few shots with Danny and his mom at Investools headquarters.

Well, I think I will crawl back into my hole. I might post a watchlist this evening, if the mood catches me right.

Recommendation: If you happened to be on any side of the box trade, exercise your option just to piss off some hedge fund/corporation.

Long: 911 (the Porsche kind)

Short: 911 (the terrorist kind)

Dow 14,000 or 12,000?

2007-08-27T08:08:00.000-06:00

Who gives a $hit at this point. I think the market is infested with morons. Mostly because they don't know which way the market is going either.

I'm reading a few headlines regarding M& A activity. Wow. I must have taken the last years worth of M&A fueled rallies for granted being that I was so caught off guard. US Steel, Gateway, Chicago Bridge & Iron all inking deals this morning. Despite all the supply getting taken out of the market, we're still heading lower.

While all this madness has been going on around me, I am just now noticing China stocks hitting new highs. Unreal. That was pretty quick, don't you think? I'm okay with shorting the US and going long China at the moment, but let's see how I feel after lunch. Take a look at the FXI today.I also like the triangle setting up in KLAC. I can't imagine this one taking much longer to break out.

ONXX breaking out of a lovely cup and handle this morning. I'm going to re-evaluate towards the close.

It looks like my game plan will stay the same this week. I am keeping an eye on materials, water transports, China, Bob Pasani, high volume breakouts and Monster Java. For those that haven't tried this drink yet, I can't explain how amazing it is. Experience it for yourself.

It's been fun, but it's time for me to go back to my equity research department and make some noise. We'll get a watchlist out there soon enough.

Recommendation: It's going to be a great week, I can tell.

Long: Profits

Short: Losses

Keeping It Real

2007-08-24T10:38:00.000-06:00

Imagine trading in the market from a pure technical perspective. You never pick up a newspaper, turn on the evening news, watch CNBC, or even worse, read my blog (insert scream). You'll never hear reporters acknowledge or deny any storms brewing in the financial markets. You'll never be influenced by guru's, or financial media celebrities that throw daily opinions in your face, but struggle to outperform the market themselves. You'd be left to form your own opinions, come to your own conclusions, and solicit your own ideas from none other than yourself.

Is this bad?

Technical Analysis is of course the study of price action, and price action represents how market participants feel about the market. What better opinions to gather than that of the actual participants as a consensus. You've heard all the hype about how bad the market is underneath the wad of debt being injected into our system, but how are traders reacting to this? Check this out...

SPY

VIX (5 YR)

If you have read about my approach to trading, you'll know I don't get too caught up with technical indicators. I am an easy goer when it comes to my technical analysis. However, you'll see as clear as day the bullish divergence going on between any oscillator and any major index. Compare this to the bullish divergence that occurred May/June of 06, and the end result.

The VIX has gone flaccid from the black swan run it has taken over the last several weeks. It's reverting back to a historical mean that falls right around the $20 level. I expect it to consolidate here for a little while until the market sorts out some of the lingering credit and housing issues. Who knows... perhaps piling on the debt in a debt fueled crisis is the answer?

Next week I am going to keep a close eye on materials stocks. It seems that they have ceased to move lower, and many you'll find at long term trend lines on long term charts. I don't think that these are bad buys at these levels as long as you are taking care of risk first.

Here are a few interesting set-ups I am throwing money at this afternoon...

ATI
AZO

GMCR

ICE

MA

OII

PAYX
WYNN

I try not to let my opinions get in the way of making money. Neither should anyone looking to become a more efficient trader. I have been open about my feelings on some of the market fundamentals, and yes, these feelings are bearish. But make no mistake, time frames are the only variable. Your time frame is different than that of the next person, and that time frame is what should drive your actions.

Well, I still have a long road to walk today to try and get caught up from my recent absence. I am going to need to a little "Encore" to take us out today...

Recommendation: Drink it in... Goes down smooth.

Long: Fridays, Money, Jay-Z, Linkin Park, and Volume

Short: Time

Welcome Back

2007-08-22T23:34:00.000-06:00

Chicago Midway Airport, Gate A13, Wednesday, August 22, 2007 5:43 p.m. Central

Here I sit in the stench of a crowded airport, hungry and tired, awaiting a 3 hour flight back to the good life.

Sweet.

Chicago has come and gone and I must admit, I had a great time. For all those who took the time to come up and introduce themselves, for those who took the time to meet with myself and the group (both on campus and off), for those who reluctantly decided to attend my presentations, I want to say… "thanks." There was quite a group of addicts that showed up to meet with the group after the opening reception on Sunday night, but only a few addicts showed up at the piano bar on Monday night (what’s up with that?).

Regardless of attendance we had a great time. Here are a few photos…

The Addict Family

Angela, Tonya, and Papa Addict

In Action...

The Marketcast Live!

Howling at the Moon

Having a blast

First, a few items of business…

I finally got to try the Chipotle Mexican Grill (CMG). The illustrious "burrito" that had always been talked about in the comments is going to receive a new nickname. "The bullet." Don’t ask me to elaborate any further. Although the market did finish up well over a hundred points upon consumption, I couldn’t imagine adding that do my daily repertoire. Giordano’s however, was a different story. Whoever offered the reco, I owe you one.

Returning back to the market after a vacation is always a complicated task (read: pain in the ass). It’s nice when you have multiple trades already in play to help absorb new trades you are looking to get into. But establishing a new inventory is going to cause some serious sensitivity between my account and the market movement.

For the last several days the only contact I have had with the market is through word of mouth, a couple glances from CNBC, and Fidelity’s ticker tape across from my hotel. I haven’t bothered opening my accounts to check positions or tally up my triggered stops, because I am not in the mood. In fact, it’s likely when I check things out in the morning; I might be totally in cash. Wouldn’t that be fun?

I plan to spend the rest of the week establishing a decent watchlist and surfing the comments for reco’s. Speaking of comments, I haven’t had the time to read them all, but upon browsing through them quickly I see a few things going on that I plan on addressing soon. I know it’s been tough to trade in this market, but keep your heads up.

In the process of meeting all of you, I appreciate the nice words and encouragement that you all had to offer. The insight has helped me to realize how important this community really is. Thank you for the perspective.

Well, I am officially back to business. I’m going to sleep. See you all in the morning.

Option Addict Gathering Goes Mainstream

2007-08-20T13:01:00.000-06:00

Check out this link. The rumors of an Option Addict party have hit the financial media.

Stay tuned...

Recommendation: It's not too late to catch a plane, train, or automobile ride to Chicago.

Long: Champagne rooms

Short: Class rooms

See you at 9.

Wishing You Were Here

2007-08-19T22:35:00.000-06:00

For those that are not in attendance here in Chicago, you are missed. We had a casual meet and greet after the opening reception on Sunday night and took a large group photo. I'll upload it as soon as I can find a USB cable.

The live Marketcast presentation starts at 7 a.m. and after that I am scheduled for two breakout sessions. It will b a long day, so hopefully all of you out there can hold down the fort while I am passed out.

For those that are here and were looking for directions to tomorrow nights gathering, here is the address...

Howl at the moon
26 W Hubbard St Chicago, IL 60610(312) 863-7427

Click here to map it

For those not here, we are wishing you were here...

Recommendation: Listen to tomorrows Marketcast

Long: Chicago

Short: Rain and humidity

What Rally?

2007-08-17T08:57:00.000-06:00

The emergency discount rate cut has played out beautifully. As I said yesterday, the Fed's hand was forced to do this. What is hilarious is that the Dow panics higher by about 300 points, remembers that this rate cut solves nothing, and in all likelihood the market heads back lower sooner than later.

Last time the Fed stepped in to service the market with an emergency rate cut, the Dow responded a lot better (temporarily) but the end result was a continued trend lower. I can't imagine we see anything but the same scenario. Remember, downtrends will have rallies too. Sharp ones!

If you dare step into a bullish stance here, reevaluate your stance at the end of each trading day. Keep your time frames short term, be quick to take profits, and trade small. Yes, I know this is the same regurgitated BS I say every single day. Listen, because I still mean it.

CONFERENCE UPDATE: Since the recent poll reflected more individuals wanting to meet at the Conference Center instead of a Piano Bar, I am making a change. After the welcome reception, I say we meet in the "lobby." I haven't been to this establishment yet, and I imagine that the "lobby" will be a good place to meet until we get a better feel for the conference center. Once everyone has at least gotten together, they can plan future rendezvous accordingly. Afterwards, I am still going to check out the Piano Bar, and those interested are welcome to attend. For all those that won't be making the trip, I hope we will cross paths at some point.

It's been a long week, and early next week will be some light blogging. I'll do my best to get a new thread opened each day, but I won't have time to deliver much content. Wednesday I should be back on track.

I'll see you on the other side....

Recommendation: Have a great weekend.

Long: Chicago

Short: Packing

AFTERNOON UPDATE:

Karen (aka. Doji Girl) typed up this piece about trading parallels that she wanted to share with the group. Karen, thank you for your efforts, job well done.

Since becoming immersed in the world of trading I am constantly finding parallels between other aspects of my life to the trading world. I have often thought that dancing is a lot like trading. So is art. Real estate….the list goes on.

In the dojo where I learn and practice Taiko drumming, hang four framed Japanese characters with a sentence in English below each one. Although I look at these every week, I never related it to trading but for some reason last week something clicked in my mind. I realized that the way the dojo is run reminds me a lot of this wonderful blog community that many of us have come to call Home.

Here is what the four plaques say:

Manners, Harmony, Commitment,
Language and Unity of Spirit

How we conduct ourselves in the dojo and online on our blog is basically the same. We are all here for the same reason. We are all committed to becoming the best traders (drummers) we can be. Respect for the dojo (blog); respect for each other.

Discipline of Body Strength,
Power & Stamina

If we do not take care of ourselves physically we will not have the mental energy and psychological fortitude necessary to be successful. Drumming is hard work. So is trading.

Musical skills, Artistic Expression & Rhythm

You’ve heard it said many times that technical analysis is an art. Creating the perfect trade is an expression of that art. Being in tune with the rhythm of the markets will allow that art to flourish and become the masterpiece you envision.

Discipline of Mind, Self Control and Spirit

This last one is for me the most important. Without the discipline and self control to plan your trades and trade your plan, you will not be successful. The spirit of the Taiko drummer is a warrior’s spirit. The spirit of a trader is much the same. Attitude is everything.

Forcing the Hand...

2007-08-16T11:02:00.000-06:00

Treasury prices are flying, yields are falling. The market has already priced in the rate cut that the Fed failed to provide in it's last meeting. The flight to quality confirms that the market is finally starting to understand what a serious bind we are in here. I have been warning everyone about this since July 24th (according to the archives) and I hope that everyone has been able to take a defensive stance and proceed cautiously with their exposure, position size, and portfolio risk during this panic (which by the way is the worst I've seen since Sept 11th).

(This doesn't really help either)

Amidst this sell off, I can't believe how well some of the recent trades I have been talking about have worked out. Based on recent e-mail traffic, I know a lot of people are enjoying some of the following trades I have discussed...

XOM

OMX

ICE

LEN, or any others from this post

GOOG

CAT

BTU

And finally, I had to use the INDU to mark the top that the Marketcast called.

I have divided my option positions in my portfolio by about a 70-30 ratio of puts to calls. As of last week I was about 60-40, but I have been stopped out on quite a few yesterday, and a few again today. I would talk about the ass kicking I am taking in a few of my bullish positions, but I am not in the mood. I hate to see profits evaporate.

Chicago is almost upon us. I am pretty busy trying to get my act together. More details about our gathering will follow.

Recommendation: Buy puts by the truck load.

Long: Very little as of today's close.

Short: Everything I can get my hands on.

Finish Them!!!

2007-08-15T08:40:00.000-06:00

A sympathy bid is preventing me from causing bankruptcies in the home builders. I bet the Citadel is wondering where the 2.23 million shares they own is going to take them?

Right to the scene of the crash.

These stocks are all sitting at last weeks lows, contemplating whether or not to move lower. BZH and I have fought a long hard battle over the last several months, but the outcome is inevitable...

Since my handpicked bear basket is overflowing with good trades, I needed to tap the bulls keg and partake of a few good call option positions.

I'm taking down some JEC...

Chasing it with some AMLN...

and if OMX breaks down, I'll guess I will have to make more room.

Only a few ideas for this morning. After all, I have been trying to lighten my basket while I am in Chicago. I'd rather relax and have little to worry about while I am there. Speaking of Chicago, it looks like the majority would rather meet somewhere at the conference. That's fine with me. I plan on doing both. I'm keeping the poll open for another day, and then I will discuss the results.
Recommendation: If you have missed the double play in GMCR, I like this spot to double down.

Long: Us

Short: Them

(I am long Pink Floyd lately, In SIZE... in case you didn't notice)

Scrapbooking & Chicago

2007-08-14T13:39:00.001-06:00

Here is a picture of Raimo keeping the peace, with his piece.

A pic of Grant, Liz and myself taken at their 3 day class here in Utah. Notice the beautiful line of clothing they wore while in attendance. Priceless.

Finally, in regards to Chicago... My time will be somewhat limited, but the time to meet will be Sunday night after the Reception. I didn't get everyone's opinion on the meeting place, but here are the final two choices...

Take a minute to submit your opinion. I'm neutral, but want to make sure everyone knows the plan and that they have the opportunity to meet one another.

Recommendation: Beware of falling prices!!!

Long: Puts

Short: Everything

Weekly Watchlist

2007-08-14T08:06:00.000-06:00

Since there was a lot of drama surrounding this video, I imagine it will fail to live up to the hype. That doesn't mean I am not using these ideas to make money though. For the best results, right click on the link and "open in new window."

Click To Play

Recommendation: I might do some scrap booking later today.

Long: Something with caffeine

Short: Oatmeal

Low Risk Trades In Headline Risk Groups

2007-08-13T12:17:00.000-06:00

The big name groups i've been bearish on for the last 2-3 months are providing the usual low risk entry point that they normally do about every 2-3 weeks. Time to start swinging.

There is obviously a lot of headline risk around these groups, which ought to be taken into consideration before taking any trades, but an entry point is an entry point. I'm starting with homebuilders.

Homebuliders: I'm only interested in the stocks that haven't hit $20 or less yet. I want to hop in the next "going to $20" homebuilder stock.

RYL

CTX

KBH

Next: Realty Stocks

GGP

CPT

AVB

I am flattered by everyone's offer to substitute my weekly watchlist, but thanks anyway. I've got it covered. The real deal is coming out later this evening. Stay tuned.

Recommendation: "Choose, but choose wisely..."

Long: Puts

Short: Monday

A Day Late, A Dollar Short

2007-08-10T13:08:00.000-06:00

That's right. Invest that dollar in shorting the US markets. Like I have been saying, it is going to get worse. I know that some technicals cloud the vision that lurks in the news, but I have been privy to the rumor mill and there is a lot of things that haven't hit the news yet. Be prepared. How many times have I led you in the wrong direction?

I closed out my MSTR position today with a healthy profit, and gave back a few points on my GMCR. If you are still in this one with me, you know where that line is drawn. Respect it.

The realty stocks kept me entertained along with a few small bets in Semi's, more specifically SNDK, and waiting to take down some CY if the trend holds.

It's been a violent week and I am happy to read how the majority is surviving and making money. This is going to be my best year by far and I hope the same for each of you. For those that are not finding their way yet, remember to bet small right now and that cash is a position (unless we're talking US Dollars).

Again, I appreciate the eyes of each and every one of you out there that read this mess. I also want to give a shout out to Rich and his staff at www.currencytrading.net. He recently published the "Top 100 Trading Blogs" and gave the ol' Option Addict the #26 spot. Thanks again, Rich!

In closing I am going out with some Kid Rock and special footage from Rounders. Despite a couple expletives, this was a video well done. If you are down about some of the madness this week, or the lack of watchlists, let this soothe the soul...

Recommendation: Have a great weekend

Long: Watchlists next week

Short: Everything

Closing Comments

2007-08-09T16:50:00.000-06:00

I realize I am inappropriately late to post on a day like today. Early on I spent some time with a tailor getting fitted for the upcoming event, and from lunch towards the close, I was literally attached to the screen. Today was one of many days lthat I have foretold, and things are not looking so good. If you want to know more, listen to the Macro Minute on the Marketcast tonight. Some interesting words coming from Central Banks about our little "situation" in the US.

Obviously there were still a lot of gems out there today. Last night in Mastertalk I discussed SNDK as a good relative strength candidate going forward, and it held up nicely today. In fact, I hear Cramer pumping that baby as we speak. That means tomorrow is probably a good day to take some money off the table. Speaking of technology, Semis held up today as well. An insignificant change considering the blowup on today's tape.

For those that took profits on financials yesterday, tip your hats to the market gods for your 2-3 day window of profits. You've probably notice that a big blow was delivered to even the finest of the financial institutions.

Finally I want to say one more piece about the comments flying around about watchlists. Both good and bad. I think some have taken the impression that I am not doing them just because I got some negative feedback that has filtered in. Speaking of negative feedback, I never discussed the severity or details with anyone, so mind your own damn business. I am simply putting my efforts on hold until I can deliver them with a new method. Besides, you have no legs to stand on when you are out there bitching about free content. So for all the e-mails/posts that you people have sent that criticized me in the last 48 hours, believe me, I thrive on negative feedback. Remember, on this blog I am Michael Jackson (the 80's version, not the child molester), and you are Tito.

For all my loyal readers, thank you for your support, both in comments and with personal e-mails. I will continue to bring it. After all...

Recommendation: That's what friends are for... but..."THIS IS SPARTA!"

Long: Friday

Short: The Market

The Game Changer

2007-08-08T13:22:00.000-06:00

I used this term when I talked about Apple creating the iPhone. A product that blows the competition out of the water and changes the lives of their customers is what I consider to be a Game Changer.

Game Changers are few and far between. The key to making money off someone else's brilliant idea or creation is to know about it early. Based on 4 minutes of research, I have found the next Game Changer.

Want to know what it is? I will tell you. It is Monster Java.

The value of Energy Drinks has been severely diluted due to so many disgusting flavors, brands, and lack of real stimulation upon consumption. Note: Included in the term "Energy Drinks" are the Starbucks "Frapuccinos." They don't hold a candle to our newly found friend.

Bottom line, this new drink is standing alone in a sea of amateurs. If you look at the chart of Coffee Powerhouse SBUX, you'll notice that they (the market) have seen this drink coming. Despite raising the price for coffee, they can't do anything about it.

I am getting long some HANS. If you choose to do this, the market may choose to punish you for taking the ideas of others without your own proper analysis.

Recommendation: Remember, volume is a leading indicator to cheap smelling rallies. So are doji patterns at resistance ;)

Long: HANS

Short: SBUX

*Disclaimer (*NEW!): I am not a representative or affiliate of Hansens (HANS)

Below is an example of what happens at Option Addict Headquarters if you offer watchlists to the general public and they lose money. Bastards.

The Goldman Trade

2007-08-07T20:46:00.000-06:00

Disclaimer: Before reading this post, realize that I am not attacking anyone, discrediting opinions, or creating controversy. I am strictly providing my personal opinion based on a decade of experience. If you happen to disagree with this opinion, you are wrong.

I am intrigued by this debate. The Goldman Trade.

Let's scan a few charts. Starting long term, and zooming in.

GS 10 Year Log Scale

All price treated equal, a clear break of support. Broken in a vicious fashion compared to most retracements in this stock price. Nasty volume too.

GS 10 Year Chart Log Arithmetic Scale

Ahhh.... price has settled at support. It hasn't gone up a lot, but it has temporarily stopped going down. In a bullish environment, this is a low risk set up, meaning a break below should be treated as an exit.

GS 5 Year Chart Log Scale

Log scale shows a clear break below support, but also illustrates some clear lower highs and lower lows. That recent sell off is looking a bit worse!

GS 5 Year Chart Log Arithmetic Scale

Log Arithmetic shows another trade at a potential trendline. Which is great, but can you look past the last several months? If not, I am going to make you...

GS 1 Year Chart Log Scale

Both charts (Log & Log Arithmetic) show the same thing broken support after a vicious sell off.

BTW- on the topic of Log vs Log Arithmetic, my opinion is that all price action should be treated equal. For short term traders using a 1 year chart or less... you'll see the changes are less than insignificant. However, if you are a longer term trader or use charts beyond 1 year, this is a critical detail. Log it. Accept nothing less.

Back to the trade. Technicians always give more weight to recent price action and this sell off has me concerned for those looking to take significant positions here. I am not debating that the stock could rise or fall, but in terms of looking for the "cream of the crop" trades out there... this would be more of a gamble in my eyes. I don't discredit gambling. Plenty of trades I take are flat out gambles.

For those looking to build that consistent repeatable approach to trading, or even developing trading rules, this might appear confusing to take short term trades based on long term signals.

Bottom line, if you feel you know what you are doing, and you understand your risk and feel comfortable with the probabilities, fire away. There is a lot of bad news surrounding the group and market right now, and frankly, there are much better trades out there. Like Heelys. Down about 60% since the reco.

Recommendation: GS is trading higher this morning...better watch

Long: Log scale charts

Short: HLYS

WWYD?

2007-08-07T08:54:00.000-06:00

If you have followed my blog, or listened to various other presentations I give, you'll recall the stock MSTR. I strangle this stock over every earnings announcement. It has never failed to provide monster profits, provided you enter into the trade at least a couple weeks ahead of the volatility increase. Normally, the price doesn't move much ahead of the announcement, but on this trade it did. I went two strikes OTM on this stock on July 11th. I took down the 105 calls and the 85 puts. Here is the dilemma I ran across. The stock dropped nearly 10 points ahead of the announcement. My puts at the time were at the money, while my calls are 20 points out the money. Of course the stock dropped after the earnings call, but not knowing the outcome, would you have adjusted the trade ahead of the announcement? Had the stock decided to rise, it would have less of an effect on the calls, and killed the puts. How would you have handled this?

By the way, here are some other things I figured I would talk about today. The long term re-test on PNRA...

I had no other choice to up my ante on my shares of GMCR, which tripled after the stock split... New exit: A close below $32.

DF... Bleeding to death and loving it.

If you traded this (AHS) ahead of the earnings announcement from last months watchlist, it paid off big time....

By the way, if you haven't joined my reader community yet, ask yourself why? Why lurk in the darkness? It's creepy. You don't have to leave comments if you join, which I know scares people from signing up. Bottom line, join my reader community now, or else. Click here to do it.

Also, a quick Chicago poll...

Recommendation: Tuesdays almost gone.

Long: Pronounced Leh-Nerd Skin-Nerd (The Album)

Short: Microstrategy

Armageddon

2007-08-06T12:31:00.000-06:00

Most know that I am not much of a Cramer fan, but listen to his take on the fixed income market. While you are at it, don't let these short covering rallies influence your opinion. If you do, you'll never survive. Also, if you are not short Bear Sterns, I hope you have an excellent excuse, like you had other easy money trades that were generating too much money for you to worry about little old BSC.

I took the day off today...my first of the year. Yeah, I know... slacker.

Later today I will post a poll about Chicago. I need to get some plans in place.

Recommendation: Fade the rallies...

Long: Diet Coke and Ephedrine

Short: Bear Sterns

Pick Your Poision

2007-08-03T14:06:00.000-06:00

If you didn't heed my warnings over the last few weeks, heed them again. As traders, we need to think outside the dotted lines and understand the difference between overconfidence in our analysis and respect for the markets. Short covering rallies can be deceiving, especially when most traders are only used to this market, but now you are getting the taste for how hard it can be to trade in a bear market.

DOW

SPX

NASDAQ

Russell

VIX

Please make sure you are trying to adapt, managing your risk, diversifying and position sizing properly. If it has been a bad week, we'll regroup on Monday.

Recommendation: Shake it off

Long: Bears

Short: Bulls

Roll Me Away...

2007-08-03T08:57:00.000-06:00

I am so glad it's Friday, and that last nights event has come and gone. Now I can breathe a little easier and focus on much more important things. Like what I am going to eat for lunch, which on-the-go list I am going to play on my ipod, or whether I should go with a code red mountain dew, or a regular diet mountain dew.

I'll admit, with some changes taking place in the indices, the VIX, earnings season, and a busy schedule, I am trading at about 50% capacity that I normally do. My position size has been cut in half, and I have tried to reduce my exposure by selling a little more premium in some recent trades. Mostly legging into cal spreads/diagonal spreads on the real choppy trades I have out there, but at the same time leaving the big winners alone...GRMN, KRC, BSC, MTH, etc.

I also mentioned that this is a great time to take advantage of the intra-day ranges in the averages. E-mini's are the preferred day trading vehicle, followed by ETF's, and finally ETF options. I've mentioned my hesitance to everyone about day trading options, but if you are trading in penny wide markets that are extremely liquid, ETF options are the only way to go. Index options will kick you in the face with the wide spreads.

The reason E-mini's are the trade of choice is you get the same liquidity, great spreads, but you don't have to deal with implied volatility, theta, time value, etc. If you haven't traded them before, put on a few paper trades and give them a try. You need to be more system oriented when doing this, meaning if you are a discretionary trader, an emotional train wreck, or just thinking because you are not having success in the other markets that you want to try this one, forget about it. Finally, if you are going to day trade, have a goal of being settled in cash at the end of each trading day.

After a relaxing weekend I plan to get back into my normal swing and offer a few more videos, trade ideas, commentary, and the works. The Addict is back.

As a side note I am sporting the shirt around the office today. I wonder when I am going to get called into someones office.

PS- Chicago is almost here and I will be posting some ideas soon about a little meet and greet.

Recommendation: I couldn't find a better video that included my song of the day. My bad.

Long: Bob Seger

Short: Video footage of random car rides despite quality tunes