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Trading Goals
John Locke published a good article on trading goals earlier today. Trader's commonly ask “what can I make each month trading?” Can I make $1000 per month? $5000 per month? What's my number?
This is really a question about what monthly yield or return want to make. How much capital you have and what your average yields are will determine what your average profits are.
We can't control the monthly returns. Those depend on what the market does and how we react to it and trade. Unfortunately, “monthly income” is only possible with a job or an annuity. Trading is neither one of these.
SPX Jul 11 Broken Wing Butterfly Trade Started
I put a new SPX Broken Wing Butterfly trade on yesterday with 29 days to expiration. It's an eight lot at 1910/1890/1830 with a put debit spread at 1910/1890 for a next credit of $926 on $31,574 of Reg T margin. That would be +2.93% in 29 days if held to expiration and SPX stays above 1910. If SPX sells off below 1910 and stays above 1867, it could have a much higher profit. Anything below 1867 at expiration would be a loss with the maximum loss of -$30,000 below 1830
The trade likely will not be held to expiration. The target for these types of trades is about 15 days into the trade, which has an excellent chance of being profitable.
Website Update: New Calendars Added
We added two calendars to help you plan your trading:
The Economic Events Calendar is for U.S. economic events only. If you trade currencies, you'll want to use an international calendar that includes events in the countries (or regions) you are trading. The calendar helps you plan by pointing out potential market moving events like the FOMC meeting announcements. It is important to check it before putting trades, especially weekly option trades that have more price risk built into them.
Sharp USDJPY Overnight Sell Off – US Equity Futures In The Red
In an article from Zero Hedge: http://www.zerohedge.com/node/489531
“… Unless, or course, central banks finally are starting to shift their policy, realizing that they may have lost controlto the upside since algos no longer care about warnings that “volatility is too low”, knowing full well the same Fed will come and bail them out on even the tiniest downtick. Which begs the question: is a big Fed-mandated shakeout coming? Could the coming FOMC announcement be just the right time and place for the Fed to surprise the market out of its “complacency” and whip out an unexpected hawk out of its sleeve?”
The S&P 500 Move Higher is Strengthening
This is an interesting post from Jim Riggio in our forums where Jim discusses his charts and why he thinks the S&P 500 up move is getting strong…
My “Momentum” charts are showing that the S&P's persistant move higher is strengthening.
As you have heard me say in the past… the Oscillators can live up here on the “ceiling” for longer then seems reasonable. This is the type of market (or stock prices) that Peter Lynch was referring to in his classic “One Up on Wall Street” when defining the most common mistakes that investors make… “The price has gone up this high. It can't go any higher.” Oh yes it can.
The Risk is Gone: VIX at a Seven Year Low
The VIX held above 11 most of the day yesterday but closed with a thud at the low for the day of 10.73!
The last time the VIX was below 11 was on Feb 23, 2007 when it closed at 10.58. On Jan 24, 2007, the VIX closed at 9.89. The lowest price I saw on a 14-year chart was Dec 22, 1993 when the VIX was at 9.31.
Jun 28 SPX Broken Wing Butterfly
I put an SPX Jun 28 Broken Wing Butterfly (BWB) on yesterday. They seem to be what many of my option trading friends are trading these days. With volatility at historic lows, trading Iron Condors, Weirdors and Jeeps is very difficult because the premium is so low. The Russell 2000 Index (RUT) has been especially challenging. SV (historical volatility) has mostly been higher than IV (Implied Volatility for nearly two months.
Which is Better: Married Puts or Long Calls?
I read an article about position sizing using married puts with long stock at radioactivetrading.com. Kurt's strategy of married puts is a good idea, but if you remember from my article on option synthetics, that:
Long Stock + Long Put = Long Call
Kurt could achieve the identical risk profile using only long calls. Asking which trade is better is a trick question. The two positions are identical!
This is what long stock versus a long call (or married put) looks like:
The Big Fish are Eating the Smaller Fish
According to Crain's Chicago Business, a New York private-equity firm is planning to take control of OptionsHouse LLC and TradeMonster Group Inc. by investing in both of them and then merging the two companies.
General Atlantic LLC is purchasing OptionsHouse from Peak6 Investments LP and acquiring a majority interest in TradeMonster.
VIX Options to Add Half-Point Strikes in Near-Term Expiration
The CBOE announced they are adding half-point strikes for the CBOE Volatility Index (VIX) options. The half-point strikes will be listed for the near-term expiration month and in the strike price range of 10 to 15 (i.e. 10.5, 11.5, 12.5, 13.5 and 14.5 strikes).
The CBOE will keep half-point strikes (between 10 and 15) on a continual basis. The CBOE said customers have been asking for the half-point strikes. VXST already has half-point strikes.