Tuesday, January 28, 2014

Taking a Visit to No Man's Land

Last week we discussed the importance of waiting during uncertain times.  For those that waited, you are probably relieved to see equities down 5%.  So what now?

We are in 'no-man's-land'.  What does that mean? We stepped away from our highs and there is no telling where the next month will take us.  Why would you want to speculate the direction of the market when there is little conviction that equities will rally or sell-off?

The S&P500 is below the 20 and 50 day moving average.  With that in mind, I am preparing to sell volatility at the right time. I am also looking into the following trades.

Long YUM:

Short KEP:

Stay smart and trade safe!

Friday, January 24, 2014

Remaining Market Neutral

By Jon Haghayeghi
After a weak month (with index futures down .75% before the bell) it is particularly important to shift toward having a market neutral portfolio.  As a result, I am looking for trades that are 91 days out that are bearish to match the 'deltadollars' I have long.

I will be selling call options on a few candidates above to get my negative exposure.

Is this the start of a major correction or is this minor capitulation? I am not sure, which is why I am market neutral and looking for opportunities in the event of a volatility spike.  When volatility spikes then I can sell premium at an attractive rate and make higher probability trades.  It also opens the door for powerful VIX trades. Stay smart and trade safe.

Wednesday, January 22, 2014

Selling a vertical spread on VFC

One of the strongest signals from our database comes from VF Corporation.  The stock has rallied 13 years in a row for the quarter following mid-to-late January.  Take a look below:

If you were interested in structuring a position using options, take a look at the model below! 

The position benefits from time and is profitable as long as VFC does not depreciate over the 91 days.  You win even if the stock stays flat.  The max gain is $800 and the max loss is $1700 - the position should be closed on 4/22/13. Stay smart and trade safe.

Thursday, January 16, 2014

What is going on? Is this a market top?

To determine whether a market top has been reached, one would have to correctly aggregate the beliefs of all major players in the financial markets and process them through time - this is impossible to do. To complicate things, data points are sending mixed signals and asset prices are hovering near 5 year highs.

This morning, jobless claims decreased by 2,000 in the United States.  Yesterday, the IMF said that the global economy should strengthen in 2014, but growth is also "too low, too fragile and too uneven."

Should you sell your long positions? What about sitting back and observing? What is everyone else doing?  As time elapses, these are the questions you will never have a perfect answer to.

Whatever your investment strategy, do not be afraid to watch – sometimes sitting on the sidelines allows you to identify the most ripe opportunities. Here is a Seasonal trade for January 16th.  Stay smart and trade safe.

Tuesday, January 14, 2014

January 14th, 2014

After U.S. markets sold-off on Monday, global equities also retreated in anticipation of a widespread correction. With futures markets up in the pre-market and uncertainty around the world, it would not be surprising to see an increase in actual (and implied) volatility.

To protect your portfolio from a downside move (without bidding volatility), short positions can be opened. Here is an example of a trade being opened today, short Monster Worldwide (MWW). Because MWW has sold off 7 years in a row over the 49 days following January 14th, it is a great candidate for a short position in the event of a market-wide sell off.  Stay smart and trade safe.