Sunday, December 20, 2009

Market Overview - Pre-Christmas Week

The market is still technically on the uptrend. However, the major indices are currently in consolidation since early November.
The volume on 18 Dec 2009 - a quadruple witching day (expiration of options and futures of both the index and stocks), for Dow Jones 30 Index was more than twice the average. Despite the high volume, the major market did not really budge from the previous day price. Based on such volume, one could expect a major move soon.

It is important to note that there are reports about major fund managers locking-in their profits as they are also protecting their potential bonus - after the market had rally since March this year. Should we then expect the market to correct soon. We shall see.

The major indices needs to break the following levels to convince us that the uptrend for the equities market is broken:
  • Dow Jones 30 index needs to close below 9679 level
  • S&P500 index needs to close below 1029 level
  • Nasdaq Composite index needs to close below 2024 level
Cheers !

PersianCat (Millionaire-in-progress)

Jewish Holidays in 2010

Just a reminder. During the "no work permitted" Jewish holidays, the market for equities, forex and others will significantly drop in volume. Significant drop in volume could dramatically skewed price movement.The Jewish holidays for 2010 could be found in:

http://www.chabad.org/calendar/holidays_cdo/aid/672022/jewish/2010-Holidays.htm

Cheers !

PersianCat (Millionaire-in-progress)

2010 U.S. Market Holidays

January 1 - New Year's Day
January 18 - Martin Luther King, Jr. Day
February 15 - Washington's Birthday/Presidents' Day (3rd Mon. of Feb)
April 2 - Good Friday
May 31 - Memorial Day
July 5 - Independence Day (observed)
September 6 - Labor Day
November 25 - Thanksgiving Day
November 26 - Half-day due to Thanksgiving Day
December 24 - Christmas (observed)

- extracted from http://www.nyse.com/

Cheers !
PersianCat (Millionaire-in-progress)

Monday, November 02, 2009

The Wait Worth Waiting For

The Market moved as expected starting a retracement from the last two weeks of October. Based on the price movement of the equities market and the US$, it seemed that the retracement is for real this time. However, the major indices needs to break the following levels to confirm that the uptrend for the equities market is broken:
  • Dow Jones 30 index needs to close below 9430 level
  • S&P500 index needs to close below 1020 level
  • Nasdaq Composite index needs to close below 2041 level




The Nasdaq Composite Index which tends to lead the market is closer to the critical levels than the other 2 major indices.
Once the critical levels are broken, the downtrend could last till Mar to Jun next year.

My position:
I have locked in my profits and open new positions with a set of Jan 2010 104 Put for SPY and a Bear Call spread 104/109 for SPY on last Friday. For SPY, the stock needs to close below 102 to confirm that the uptrend is broken.
With the downtrend in the U.S. equities market, the U.S. $ is expected to strengthen. Some would argue that the strengthening of the US$ leads the downfall in U.S. equities market. It does not matter who leads who for now as long as we know, as the US$ strengthen, the commodities (e.g. metals, oil, coal) prices could fall.
Cheers !
PersianCat (Millionaire-in-progress)










Monday, October 26, 2009

The Big One This Week?

Since my last posting, the market pushed further upwards. I have been playing intraday strategies, shorting at the intraday rally and closing my position when market shows signs of reversal - thus making small profits here and there. My mindset till the end of the month is that I am not willing to long the market when I feel that the market is overbought and can drop at anytime.

This week is critical. It's the last week of October. Normally, if any drastic things were to happen, it tends to happen in October. Currently, I think that the market is just looking for an excuse to retrace downwards.

The EUR/USD currency pair makes a new high 1-year high today. GBP/USD pair has started its divergence from the EUR/USD pair. It seems that it is starting its way down in Aug while EUR/USD is still creeping up. Normally, EUR/USD and GBP/USD pair move up and down in tandem. And as the EUR/USD and GBP/USD pair goes up, the U.S. stock market goes up, i.e. the value of US$ goes down. Is the GBP/USD then leading the pack?

So what's next? If there is any major retracement in October, it tends to happen unexpectedly. The big problem that has been happening is that "short squeeze" had occurred 3 times since August this year. "Short-squeeze" happens when those with short positions may be forced to liquidate and cover their position by purchasing the stock. If enough short sellers buy back the stock, the price is pushed even higher.

Will another short squeeze happen this week or two or will the market finally make a breakdown and move south for the next 6 months or so? We shall see.

In the meantime, I have bought 108 Puts and sold Bear Call Credit spreads (108/113) on SPY with a tight stop loss. The initial target is 104. Then the target will be moved to 102 with a timeframe of three weeks if the 104 level is breached.

Cheers !

PersianCat (Millionaire-in-progress)

Monday, October 12, 2009

Double Top Forming?

The Week In Review

The major indexes (DOW, S&P500 and Nasdaq Composite) are now attempting to test the September High. If it breaks the High, it will test the resolves of those who shorted the market. I would love to see a double top formation, where the September High is one of the double top.

My own view is that the market might see a correction towards the end of October. Someone asked me, what if I am wrong. I said to him, so be it. At the current stock price, I am not willing to long the market anyway. Let the bubble grow bigger and explode. If I am right, I would want to be ready to short the market. Depending on how the market moves, I might short the market by end this week or early next week.

My Trading Position:
Last Tuesday, I updated my handholdees that I have closed all my Put positions on last Monday (lock-in my profits). I am back to playing ES futures and intraday SPY options (and Forex in the day).

Cheers !

PersianCat (Millionaire-in-progress)

Monday, September 28, 2009

Jewish Holidays over the next few weeks

Take note of the "No work permitted" during some of the Jewish holidays over the next few weeks. Market volume can be expected to drop significantly on that day.

Yom Kippur
No work is permitted.
Sunset of September 27 through nightfall of September 28
Sukkot
No work permitted on Oct. 3-4. Work is permitted on Oct. 5-9 with certain restrictions.
Sunset of October 2 through sunset of October 9
Hoshanah Rabbah
Work permitted with certain restrictions.
October 9
Shemini Atzeret
No work is permitted.
Sunset of October 9 through nightfall of October 10
Simchat Torah
No work is permitted.
Nightfall of October 10 through nightfall of October 11

Cheers !
PersianCat (Millionaire-in-progress)

September Peak?

Last Wednesday, I shared in my handholding class that I have placed (on Tues, 22 Sep) a Mar 2010 107 Put on SPY when SPY was around 107.30. At that point of time, the highest point since March low was 17 Sep 2009 (at around 107.55). My hypothesis is that the market is likely to have reached its Top in Sep. Then a retracement will follow. The market will then try to test its September High and fail. An October big drop might then follow.

At the point of entry, the risk is minimal while the reward is huge. Whether I am right or wrong, it does not matter. What matters most is whether the decision was correct at that point of time. Refer to my presentation slides to the Options Traders Club Meeting at http://persiancat04.blogspot.com/2009/09/v-shaped-or-w-shaped-recovery.html for some of the reasons.

My decision was reinforced by the price actions that took place after the FOMC meeting on 23 Sep.


The price tested and break the 17 September high but the price could not hold. It then broke the session low and went much lower. It represented the beginning of the recent slide. My intraday trades for both the SPY options and Forex were great on that day. My swing trade for the SPY Mar 2010 107 Put was of course doing well. My losing credit spread on SPY is also now back in the black.

The question is now, would SPY repeat the pattern of having a short retracement as in circle A, B and C in the chart below.


Or would it break the Low in Circle C and B to mark the break of the recent uptrend. We shall see. While some others would ride on the bigger trend until proven otherwise (it is the right strategy most of the time), for now, I am testing my hypothesis and it is raking $$$ for now. I might lock-in my profits if proven wrong.

Cheers !

PersianCat (Millionaire-in-progress)

Wednesday, September 23, 2009

OptionQuestSM Online Game

I was alerted to this game by a friend. Thought it might interest some readers of my blog.

OptionQuestSM Online Game
http://www.cboe.com/LearnCenter/OptionQuest/Default.aspx

It states "The options strategy game that will challenge your knowledge and help sharpen your trading skills. Whether you have just set sail to explore the world of options or conquered the “Greeks” in the jungles of option pricing, OptionQuest will be a daring adventure for you.".

Have fun!

Cheers!

PersianCat (Millionaire-in-progress)

Tuesday, September 22, 2009

V-shaped or W-shaped recovery

The slides presented at the OTCS Club Meeting on 19 Sep 2009 could be downloaded at:
http://www.mediafire.com/?tzomdzjzmhj

Cheers!

PersianCat (Millionaire-in-progress)

Thursday, September 17, 2009

80-year cycle or 60-year Cycle ?

As traders, we always like to look for patterns in the charts - as patterns do repeat itself sometimes. When it do, we want to be ready to capture the moment and ride on the trend/wave.

At this juncture, we are now almost at the crossroads. The U.S. market is now going through either a 80-year cycle or a 60-year cycle.

The pattern for the 80-year cycle is similar to the 1929 October crash with its peak in 3rd September 1929. The market then went into depression for almost 3 years. It bottomed in mid 1932. If we are drawing a parallel, it would then be year 2012.


On the other hand, the market could enter a 60 year cycle. In 1949, the world economy comes out of the ashes after World War 2. The market actually bottomed in 1942. After the war, most if not all countries, flooded the market with liquidity even though they cannot afford to do it. In 1949, the market bottomed in Jun and thereafter the market is very bullish.


So which pattern would it be? Either one of the two or none at all. I will elaborate more in my presentation at the Online Traders Club (Singapore) meeting on Sat, 19 September 2009. Among the stuff I will touch would be the relationship between US$, U.S. equities market and commodities. Registration to the talk can be done at www.eoptionsclub.com.

PersianCat (Millionaire-in-progress)

Thursday, August 06, 2009

Major Levels Broken - What Now?

The major indexes already broken the major levels.
  • DOW broke 9000
  • S&P500 broke 1000
  • Nasdaq Composite Index broke 2000
The various indicators are showing that the market is tired and needed a rest. However, the market seems to be very resilient.

I practiced Scenario Planning in my previous profession. Therefore, I could not help but develop the possible scenarios for trading.

Scenario 1:
From here, the market could retrace a little, may be just at 23.8% Fibonacci level (measured from its recent high to the March Low) and then continue its climb. It may even break recent high. If this happens, the market might get a bigger fall in October. The fall could then be near the March Low or break below March Low. We could possibly see a last bottom before the market creep up from that bottom. For investors, it could be the best time to pick up stocks (Singapore, U.S. or elsewhere) - maybe in November.

Scenario 2:
A healthy retracement from the current position would be at the 50% or even 61.8% Fibonacci level. The market will then continue its climb. However, I still expect another retracement in October. The retracement would not be as great then. It would not break below March Low. The market will then tends creep upwards.

Scenario 3:
The market retraced all the way near March Low from its current position. The market then climb upwards before breaking down below March Low in October. From there, it starts to creep upwards.

In all scenarios, it would not be a V-shape recovery.

Cheers !

PersianCat (Millionaire-in-progress)

Friday, July 31, 2009

A Shooting Star was formed

The market defied the odds yesterday. It gapped up and reached a new high since Mar 09. However, it closed about the same price as the opening price - forming a shooting star. I would have preferred a longer shadow, but it is still a shooting star.

At 8:30 EST, the Advanced AGP results would be out. AGP is the broadest measure of economic activity and the primary gauge of the economy's health. It could move the market. For the market to reverse, it would be good if the today's market open much lower (gapped down) and closed below yesterday's close. It should then be followed by a series of lower lows.

If for whatever reason, the market continues its climb upwards, then we have to be prepared for a drastic reversal one day (perhaps in Oct 09) - another black October?

We shall see.

Cheers !

PersianCat (Millionaire-in-progress)

Tuesday, July 28, 2009

Shorting the SPY

[Click on the image to zoom it. ]
At the live trading session yesterday, we potentially have a winning explosive trade.
Prior to the market open, we discussed the market trend. I mentioned that my view of the market is that the market is at the tail end of the recent rally. It have to retrace soon. How soon we are not sure.
As the SPY gapped down on the intraday chart (5 mins candle) at the open, I mentioned during the session that the perfect set-up would be: the SPY fill the gap, hit Monday's high (which is the high of the recent rally since March), fill the buy stop orders of the other traders then retrace downwards. We would then want to short the SPY.
We watched. SPY did fill the day's gap but did not manage to break Monday's high. It then started to retrace. The participants shorted when the SPY was around 98.07. They bought the Sep 98 Put. The stop loss is 10cts above Monday's high. The SPY went down further. It happened that the SPY closed near our entry.
Theoretically, it was a good trade as the risk is extremely small but the SPY has the potential to drop by more than $10 in one month.
If the participants stick to the plan, they should not be stopped out yet. What they have lost so far is the time-value which is minimal for September options. However, what they have got if it goes according to plan, is a good entry point especially when the market gapped down and closed lower today, forming a potential confirmation candle (for a retracement - downtrend in this case).
My advice to the participants, once they have a good entry and they are correct about the trend, just ride the trend. When to exit? There are many ways depending on the situation, risk tolerance and trading objectives.
In the meantime, enjoy the ride when it comes to you..... Weeeeeee...........
Cheers !
PersianCat (Millionaire-in-progress)

Monday, July 27, 2009

The Major Indexes broke resistance but it is tired

The DOW30, S&P500 and Nasdaq Composite indexes all broke the resistance level. DOW30 also broke the 9000 level. Now, analysts are saying that S&P500 could target for 1,000 level (Current level is 979.26). The volume for indexes are not significantly high or even lower than average volume. Somehow, the US dollar did not follow the stock market pattern last week.

The current rally started 12 market days ago. It has gone up too fast too furious. In such market environment, I am looking for signs of retracement. The candlesticks are not showing much. The oscillators are showing signs of losing momentum - the market is now tired.

Basically, the technicals are showing that the market is losing its "steam". It is tired. If there is any buying left at this juncture, it could basically comes from retail traders and unenlightened institutional traders.

The negative effects from the total solar eclipse did not seem to materialise. However, proponents of such views said that the effects may not be immediate.

Bottomline, it is too late to enter the market now. I shall wait for the market to retrace and "short" as the market retrace downwards. It could happen very soon.

Cheers !

Rafee

Tuesday, July 21, 2009

Total Solar Eclipse

The market failed to continue with its Head and Shoulders pattern. The Dow Jones 30 and S&P500 index are now testing the June high level. Nasdaq Composite Index has already broke the June high. The June high for Dow Jones 30 and S&P500 index are now the natural resistance. I would love to see the market drops from this level. The Stochastics and RSI are at a level showing an overbought position. The market euphoria is still high and retail traders (not necessarily the big players) expect to push the market further.

Interestingly, the chart pattern for GBP/USD and EUR/USD are somewhat similar to the major equity index.

While the market wants to test the June high and perhaps for Dow to test the 9000 level, I am not sure if the currrent rally can sustain, at least for now. I expect the market to pause and drop perhaps from this week onwards.

On the natural phenomena front, the total solar eclipse is due to happen tommorrow morning. At six minutes 39 seconds, it is the longest solar eclispse in this century. Some scientists expect more natural calamities to happen due to greater movements of the earth tectonic plates. Already, a few earthquakes had happened around the world over the last few weeks. Soothsayers and astrologers are shouting more dangers and calamities during the total solar eclipse. Whether they are to be believed is another story. My concern is whether there is a big swing in the market pyschology (the market is made up of humans) should any of the calamities happens. If it is, the market would then react accordingly and drop without any warning. How convenient can it be - dropping from the resistance level !

Cheers !

PersianCat (Millionaire-in-progress)

Tuesday, July 07, 2009

Head and Shoulder pattern forming?

On the personal health front, I have not been tip-top condition being affected by the flu bug - not the H1N1 type ! I have been feeling lethargic lately too. I supposed it could be due to an inconsistent sleeping pattern. I have been busy though. I shall take positive steps to boost my physical, mental and spiritual well-being.

On the trading front, the market will start to release the last quarter's earnings results with Alcoa (AA) on Wed (ET). I expect the market to be volatile.

I have not been taking any swing position for the past few weeks. I have been playing intraday, playing the ES (S&P500 Index futures) and SPY options (On last Tuesday's handholding class, I played the SPY "live". I profited about US$215 on five contracts in 30mins - that is a return of more than 50% - my capital exposed was US$400).

The major indices are now looking to form a Head and Shoulder pattern. The Right Shoulder is now being formed. Whether the S&P500 hit 9,000 is not important for now. I am looking for a confirmation that the market will drop by the end of July. I am looking forward to play the Bear Call spread and/or long Sep Put on SPY. We shall see......

In the Singapore market, I have still 2 lots of SPC - waiting for PetroChina to buy over my shares at S$6.25. I bought 5 lots at S$2.40 (average price) sometime in Feb 2009 using my CPF funds. Sold 3 lots at S$6.07 (a profit of more than 150% over less than 3 months). The remaining 2 lots are now free money as I already got back my capital.

Cheers !

PersianCat (Millionaire-in-progress)

Wednesday, June 03, 2009

DOW To Touch 9,000 and Reverse?

The DOW, S&P500 and the Nasdaq Composite Indices were all overbought. The Nasdaq Composite Index had been leading the other 2 indices in the recent rally since March 9.

I stand by my previous posting that there is a high probability that the DOW will attempt to touch 9,000. Whether the DOW will retrace or continue with the rally is another matter.

What I am looking for is a nice setup:
  • Long shadow on a daily candle for DOW. The shadow would have then have crossed 9,000 level.
  • Volume spike

I would then short the market.

Cheers !

PersianCat (Millionaire-in-progress)

Monday, May 11, 2009

Market Outlook




The market has been creeping upwards since Mar 9, 2009 and it seems unstoppable as fresh traders are trying to enter the market afraid of missing the rally. More and more analysts are now looking for a correction. My sentiments happen to be likewise. I am looking for a correction but it is elusive for now. As mentioned in the last posting, the market are just over-optimistic. As such, even if there is a dip in the market, it is deemed to be temporary.

For now, I am just playing intraday until the market showed me something to play on the downside for a swing trade.

The Dow Jones 30 Index is now close to the Jan 09 high of 9088. Likewise, the S&P500 index is also close to its Jan 09 high of 944. There is a good probability that the market will attempt to touch or break the Jan high before any retracement downwards.

Cheers !
PersianCat (Millionaire-in-progress)

Monday, April 27, 2009

Swine Flu vs Over-optimistic market

The market had been generally positive for the past 7th weeks. Though it may seemed that the market is overbought, the RSI and the Stochastics are showing that the market managed to let off the "steam". It seem that the general public are afraid of losing out in the market, entering at the time when the market is supposed to correct itself. Each time the market dropped, it only ended negative for one or two days before closing higher the following days.

Last night (SG time), news of swine flu pandemic in Mexico gave me the gitters as it reminded me of the SARS crisis in Asia a few years back. Today, we have confirmation that the swine flu had reached U.S., Europe and other countries. The Asian markets generally closed lower today. One can expect the European markets to also end lower today. The U.S. market is already showing negative during the pre-market session.

The big question is, will the U.S. market just drop for one or two days, or will it represent the continuation of the bigger downtrend. More bad news needed to be released over the next few days before the market is convinced that they need to continue with the major downtrend.

When Asia had its SARS crisis, the Asian economies were in tatters. The swine flu could be worse than SARS and it now occured when the world economies are slowing down / already in recession, etc. If things are really bad, we can expect the U.S. market to break the March lows. The great losers could be the airlines as travelling would be greatly affected. Viral vaccines manufacturers such as Roche would be one of the greatest winners. When Singapore was hit with SARS, the sales transactions in NTUC Fairprice increased significantly as many families bought more groceries to eat at home instead of eating out. The same consumer behaviour pattern could repeat itself in U.S. and elsewhere.

Cheers !

PersianCat (Millionaire-in-progress)

Thursday, April 16, 2009

Jon Stewart Bashes CNBC and Rick Santelli

I always thought that most of CNBC newscasters/hosts are a bunch of *$@^*~ (I am advised not to call people names. Good advice though). This video I supposed sum it all:

http://www.dailymotion.com/video/x8lou7_jon-stewart-bashes-cnbc-and-rick-sa_news

Cheers !

PersianCat (Millionaire-in-progress)

Thursday, April 09, 2009

Reminder - Jewish Passover & Good Friday

The Jewish Passover falls on April 9-11 and April 15-16. During these few days, no work is permitted. Expect the volume of all trading instruments to be low. More info on the Jewish holidays could be found thro the link:
http://persiancat04.blogspot.com/2009/02/jewish-holidays-in-2009.html

Tommorow is Good Friday holiday. U.S. stock market is closed.

Cheers !

PersianCat (Millionaire-in-progress)

Tuesday, March 31, 2009

Yesterday's Market Round-up

As expected (though for some it is "as feared"), the market dropped significantly yesterday.
  • Dow Jones Index - drop 3.27%
  • S&P500 Index - drop 3.48%
  • Nasdaq Composite Index - 2.81%

Will the drop continues? Technically, it should be likely. For now, I am riding on the wave downwards. Wheeeeeeeeeee !!!!!!

Cheers !

PersianCat (Millionaire-in-progress)

Monday, March 30, 2009

Asian Markets is down - So Will The U.S. ?

The U.S. markets (so are the world markets) had been having a very good run since 6 March 2009. The expected continuation of downtrend failed to materialise after 20 Mar when the Obama Administration announced its plans to buy over toxic assets. Since then, the market is looking for an excuse to continue its downtrend.

Technically, the 3 major indices showed signs of overbought positions. Divergence can also be seen in the RSI and Stochastics.

Today, the Asian markets closed significantly lower on reports that "the Obama administration has forced the departure of General Motors Corp.'s chief executive and suggested a "quick and surgical" bankruptcy for struggling U.S. car makers".

This could be the excuse the market is looking for to continue with its downtrend. As to whether the market will test its March Lows is yet to be seen. At the moment, the immediate target is the March Lows.

At some point today, the DOW futures was negative 200 points. I still have my SPY credit spread which expires tommorrow. I would just need the SPY to drop below $78 upon expiry to fully keep the premium.

The Chinese solar companies unexpectedly jumped last Thursday when it was reported that the Chinese government would subsidise and jump start the solar industries.

I had been playing the covered call on STP (a Chinese Solar Energy play). Such strategy is good for bullish stocks (not very bullish stocks). When the market jumped on Thursday, I closed the April 7.5 Call at a loss. I sold back the April 10 Call after the stock climb much higher. Overall, I still make $$$ as the underlying stock (which I owned) makes much more $$$ than the loss through the April 7.5 Call.

I expect the Chinese Solar stocks to retrace and consolidate its next move. It is likely to move lower with the general market. I would be shorting a naked Put on STP when the time is right.

Cheers !

PersianCat (Millionaire-in-progress)

Monday, March 23, 2009

Selling Naked Put

Someone asked me, "Isn't selling naked options very risky?".

The fact is, buying options is also risky, so is buying/selling shares, playing commodities, futures and forex. The main question should be, "Is it worth the risk and how can I manage the risk?"

I do not encourage any novice traders to sell naked Calls Options. With naked Put Options, it is a different matter. Due to the recent market turmoil, fresh opportunities arise. I have subscribe to to idea of selling naked Put (even to novice traders) provided traders follow certain strict rules. Selling naked Puts is a strategy used by Warren Buffet to collect shares of the stocks that he want to accumulate. Note that he accumulates stocks (a very long term investor) rather than trade stocks.

Selling Naked Put

This is how it works. Lets assume the following:
  • Warren Buffet wants to accumulate more shares in BNI (he actually had bought BNI !).
  • The shares is currently hovering around $55.
  • He wants to buy more shares at $45 or below.
He could just place a buy stop order to buy the shares at $45. However, what he had done before was to sell the Put options, in this assumption, he would place an order to sell the $45 Put for say $6.00. If the share price drops below $45 by the time the options expired, he would have to buy the stock at $45. However, since he already sold the Put for $6, his actual cost of buying the additional shares is only $39 ($45 - $6). Whether it is wise to even buy the stock at $39 is another matter. What matters for him is that he has decided to accumulate more shares of the stock at $39.

If the above Put options expire worthless, he pocket all the $6 that he sold. Either way, he is happy with the transaction.

For novice traders, I have tweaked the above strategy further. I will be sharing the strategy to the next batch of my handholding sessions starting in May 2009. I will show them how to fish as well as giving some fish to start with. The strategy do not stop here. After collecting the shares, we must find ways to effectively maximise our returns. I would then share my trading style in playing the covered Calls. This set of strategies works best for those who want limited but decent profits with limited risk on a monthly basis. It does not require much monitoring - giving me time to invest more time on my Forex plays. When played well, each part of the strategies could generate more than 10% per month !

For March expiry options, I have played STP, selling $7.5 Put for $1.35 and selling $5 Put for $0.60 (played on different days). My $5 Put expired worthless (as such, I keep all the $0.60, a return of about 24% in less than a month, based on a margin of about $2.50).

My $7.5 Put expired in-the-money. As such, I was assigned with 100 shares for every option contract that I sold. However, my breakeven cost is $6.15 (the stock closed at $6.91 on Friday).

I would then play covered Calls on STP.

Cheers !

PersianCat (Millionaire-in-progress)


P.S.
As I write this posting, my intuition says that I should share this set of strategies in detail, separately to non-novice traders. Hmm.... We shall see .....

Friday, March 20, 2009

Triple Witching Day

Today is a Triple Witching Day - "the third Friday of the month that ends each quarter. It marks the simultaneous expiration, at the close, of stock options, index options and index futures." Typically, there is an increase in volatility of the stock market on such a day.

But what is more interesting is that the Triple Witching Day coincided with an overbought market.
  • The DOW Index is now at the 38.2% Fibonacci retracement level and hovering at the Nov 2008 Low level (now become a resistance).
  • The S&P500 Index is now at the 50% Fibonacci retracement level and hovering at the Jan 2009 Low level (now become a resistance).
  • The Nasdaq Composite Index is now at the 61.8% Fibonacci retracement level.
Unless there is good news, it is more likely that the market will close lower today as traders may not want to hold their positions over the weekend and would also like to take profits after a good run.

I have already closed my SPY Bull Put spreads. My naked sold Mar 7.5 and 5.0 Puts for STP are still in play and are performing well so far. I have added GS Puts recently.

Depending on how the market behaves tonight, I might leave a set of fresh Bear Call Spreads expiring 31 March overnight.

Cheers !

PersianCat (Millionaire-in-progress)

Monday, March 16, 2009

Are You An Academician Or Practitioner?

I was watching the re-run of the "Matrix Reloaded" last night. There was scene where the Councillor was talking with Neo about the many things he probably do not know and understand. While he know what some of the machines do (the good things) for them, he do not understand and will never comprehend how it works. Nevertheless, he did not stop the machines from doing what they are supposed to do (e.g. purifying water).

This reminded me of some of my observations in attending courses and in handholding groups of novice traders. In trading, some of the concepts and indicators can be pretty complex to understand. However, what is important is to know how to apply it. Some novice traders are too bogged down trying to understand a concept before they want to apply what they had learned. e.g. some try to understand "Black-Scholes" formula - at the expense of losing the opportunity to make money.

As a car driver, I do not know how the engine of a car really works. But all I need to know to drive a car safely is to know how to use the ABCs (Accelerator, Brake and Clutch) at the right moment. As a trading practitioner, I do not need to remember and know exactly the Black Scholes formula. What is important is to know how to make money from the application of the formula.

As a trading academician, you need to know the formula well, etc. You may even see a compelling need to develop a new indicator or a formula (after years of trading in the market).

So as a novice trader, do you want to be a Trading Practitioner or jump to be a Trading Academician?

I choose to be a Trading Practitioner first (making my money). Whether I want to be a Trading Academician later in life is yet to be seen (not likely for me though). My coaching and handholding sessions are more geared at the practical aspects rather than the academic aspects.

Cheers !

PersianCat (Millionaire-in-progress)

Will The Bear Rally Continue?

The market had a good run closing positive in four consecutive days. What is more significant is that the market closed positive (though not a big positive) last Friday. It means that the market players (not sure the bug ones though - perhaps its the small ones, who would get injured again) are positive about the general market this week, as they left their position opened over the weekend. The comments made by Citigroup's CEO about C on its good results for Jan and Feb this year provided the stimulus for the rest of the market to move foreward. It would be interesting to watch how C and other financial giants (now dwarfted - C market capitalisation is less than DBS Singapore ! ) perform over the next few weeks and months.

Would the market continue with its bear market rally? It seems so though it is likely to take a breather (a slight dip or ends sideways) on Monday and perhaps on Tuesday - unless new bad news are released again.

All my Bull Put credit spreads on my SPY are positive again. My short Puts on STP are also positive. I have added Bull Put credit spreads on SPY based on the quarterly expiry dates.

Cheers !

PersianCat (Millionaire-in-progress)

Wednesday, March 11, 2009

The Bounce Worth Waiting For !

All the three major indices did very well yesterday. It is the bounce I have waiting for. The credit spreads (Bull Put Spreads) that I have been playing on the SPY since the last few days were in the red before yesterday's move. Currently, most of them are back in the black.

Even my sold naked Puts on STP are now either in the black or pass the breakeven point.

With the current price action, I expect the market to go up today and perhaps tommorrow.

Cheers !

PersianCat (Millionaire-in-progress)

Monday, February 23, 2009

Jewish Holidays in 2009

Just a reminder. During the "no work permitted" Jewish holidays, the market for equities, forex and others will significantly drop in volume. Significant drop in volume could dramatically skewed price movement.

The Jewish holidays for 2009 could be found in:
http://www.chabad.org/calendar/holidays_cdo/aid/614415/jewish/2009-Holidays.htm

Cheers !

PersianCat (Millionaire-in-progress)

Dow Broke below Nov 08 low

The Dow had broken its Nov 08 Low and is poised to test the Oct 2002 Low at 7197. In the meantime, S&P 500 is still testing the Nov 08 Low.

At the moment, the major indices are showing signs of being grossly oversold. Based on the intraday price action, I am not comfortable in leaving any swing bearish plays. My Bear Call Spreads on SPY and QQQQ as well as my Puts on SPY had done very well. My positions are all closed for now (by Friday last week). I was locking-in my profits. I am waiting for the market to retrace some what before I short again. In the meantime, I will possibly play intraday trades if the setup is right.

Cheers !

PersianCat (Millionaire-in-progress)

Thursday, February 12, 2009

Winds of Change

Obama stimulus plan had been approved. Yet the market's response was pretty muted. I supposed the winds have changed again. It's time for shorting. Have placed some Puts and Bear Call spreads.

PersianCat (Millionaire-in-progress)

Saturday, February 07, 2009

Next Market Stimulus - Obama Stimulus Package?

The market had climb up nicely since my last posting. Notably, it climb up significantly higher yesterday despite the worst unemployment figure since the last 17 years ago. My long positions are doing well thus far. I still have Calls on SPY and QQQQ as well as Bull Put credit spreads. The targets mentioned at the last postings remains valid.

The market is actually anticipating the approval of the US$800 billion stimulus package by the U.S. senate - long overdue. How exactly the market reacts after the approval remains to be seen. At the moment, the momentum is still there and we could expect the market to continue its climb. Like I said before, I am expecting a short rally perhaps up to end next week, if not earlier.

I was always asked, what stock should I play now. Typically in a short rally like this, it should logically be stocks with good fundamentals that can withstand the current economic crisis. However, this short rally also gives the opportunity for the weak stocks to pick itself up before continuing with its downtrend. If for whatever reason we could not find a stock to play, then just focus on SPY and/or QQQQ as I do now.

Cheers !

PersianCat (Millionaire-in-progress)

Wednesday, February 04, 2009

The Mini Rally has started

It seems that the mini rally that I am expecting is starting. The market rally somewhat with better than expected pending home sales (frankly, I personally feel that the home sales figures are no big deal). The market just need an excuse to rally. Even those with worse than expected earnings rally too. The rally is expected to last a few days.

This mini rally moves in tandem with the upward movement in the Euros and the Pound (for those trading Forex).

The main target for this rally:
  • Dow = 9090
  • S$P500 = 944
  • Nasdaq Composite = 1666

Cheers !

PersianCat (Millionaire-in-progress)

Wednesday, January 21, 2009

Post-Steve Jobs

Well, I overestimated the market reaction towards Steve Jobs ill health. I expected more negative reaction but the market was more sympathetic. I also overestimated the market reaction towards Obama Inauguration. I had expected a rally towards the end of the day.

That said, I still make some money from AAPL since the stock had been going south the last few days. Furthermore, towards the expiry day last Friday, three of the four credits spreads (AAPL, SPY, RTH) that I played made money. The last one was TGT - loss some here.

Last Friday, I played two fresh trades. Bought SPY Put and played credit spreads on SPY (apart from an existing AAPL Put). The plays were made based on the off-chance that the market would not be kind to Obama. It IS NOT kind to him ending significantly negative yesterday.

The market is oversold at the moment. It might want to test the Nov 2008 low. However, it may not have enough energy to test the Low soon. I have liquidated all my short positions for now - waiting to short again at the right moment.

Cheers !

PersianCat (Millionaire-in-progress)

Wednesday, January 14, 2009

Steve Jobs and Obama Rally ?

Breaking News !!!

CNBC reported after market close that Apple CEO Steve Jobs is taking medical leave till Jun 2009. The stock is expected to take a beating tommorrow.

In my 23 Dec 2008 posting, I mentioned about Steve Jobs's health. I still have AAPL April 80 Put as well as a Bear Call Spread (Jan 90/95 Call). My April Put is slightly negative while my credit spread is doing well. By tommorrow, my April Put should be doing well while my buy limit order of $0.05 on my credit spread is likely to be filled. One analyst already mentioned that AAPL is likely to be in the $75 region tommorrow. I think it could be more than that. A knee jerk reaction could force the stock to be down by more than $20 in the pre-market before settling higher. We shall see what happens next.

Obama Inauguration Rally

Prior to the breaking news on Steve Jobs, I am expecting a Obama Inauguration rally on Thursday and Friday. It is partly due to a feel good factor prior to a great event on 20 January. However, the market might be greatly affected by AAPL performance tommorrow. A rally is less likely on Thursday.

Martin Luther King Holiday

This holiday falls on 19 January. Last year, the day after Martin Luther King holiday, the DOW drops more than 600 points in pre-market. This year, the day after the holiday happens to be the day Obama will be inaugurated. While I hope things goes well for Obama, there is a small probability that the Inauguration will be marred with nasty incidents. I am contemplating of buying Puts on SPY or playing Bear Call Spreads (Feb expiry) on SPY by the end of Friday in case the market reacted negatively on 20th January. Whatever happens, I will close these positions on Tuesday if I played them.

PersianCat (Millionaire-in-progress)

Monday, January 05, 2009

Start of the New Year

Today is the first day of the year where the majority of traders will be back from holidays. Though the market was trying to put a brave front by being bullish over the last few trading days, the trading movements were based on low volume. What matters now is whether the market ends bullish today. If it does, then it is likely that the market will continue its retracement perhaps until Obama's inauguration. If it does not, then the fight between the Bulls and the Bears continues.

Stay tune !

Cheers !

PersianCat (Millionaire-in-progress)