Archive for June, 2009

 

The Covered Short Strangle is the ‘Kissin Cousin’ to last week’s strategy, the Covered Short Straddle.The Covered Short Strangle is also a high risk limited reward strategy.  However it is somewhat less risky than its counterpart.  The difference between the two is that the Covered Short Strangle’s long options are placed OTM at different strikes.  In a bullish move, the position will allow for more stock appreciation than the Covered Short Straddle and the short put is further away from price so it is more likely to expire worthless.  The risk graph is almost identical to the Covered Short Straddle.  One could think of the position as an OTM Covered Call with an added OTM naked short put.

Review the risk graph and you should gain understanding of the risk and reward of the position.  Best, Robin

ECONOMIC REPORTS

MONDAY 6/15

NY Empire Manufacturing Index, Net Long Term TIC Flows

TUESDAY 6/16

Building Permits, Core PPI, Housing Starts, PPI, Capacity Utilization, Industrial Production

WEDNESDAY 6/17

Current Account Balance, Crude Inventories

THURSDAY 6/18

Initial Claims, Leading Indicators, Philadelphia Fed

FRIDAY 6/19

None

 

 

EARNINGS OF NOTE

MONDAY 6/15

CPST, CASY

TUESDAY 6/16

ADBE, BBY

WEDNESDAY 6/17

FDX

THURSDAY 6/18

SJM, PIR, RIMM, WGO

FRIDAY 6/19

KMX

 

It is critical to do your Due Diligence.  There is no question about it!  You need to know the fundamentals of a stock prior to trading.  You also need to know that the technical’s are favorable for entry.  However, after your homework is completed, do you still have difficulty ‘pulling the trigger’?  You may be suffering from ‘Paralysis of Analysis’.  At some point, you will need to put money at risk if you want to make money in the market. 

Your reluctance is due to fear that can actually be exacerbated by an avalanche of data.  Much of that aforementioned data can be conflicting and confusing.  The preponderance of due diligence should lead you to make a trading decision, but sometimes that decision may prove to be a bad decision.  That is what creates ‘Paralysis of Analysis’; which is really just a synonym for fear.  Fear is only half of the dastardly duo known as ‘Fear and Greed’.  Fear comes into play due to uncertainty.  There is only one metric that is for certain in the stock market and that is, time will pass.  As a stock and options trader, I can leverage that by selling premium.  But even as a premium seller, there can be uncertainty which can deter the timid trader from entering the market. 

Knowing how to adjust trades is the anecdote for ‘Paralysis of Analysis’. That knowledge removes uncertainty which allows the trader to enter a position without the crippling effects of the emotion of fear.  Fear is the byproduct of uncertainty and because you know how to change the trade to optimize a change in trend, you have nothing to fear.

Click here to learn how to remove fear from your trading.   Best, Robin

Robin is Back!!! I have recently taken some time off to recharge my batteries and my trading partners have filled in with some outstanding content. You can continue to view these informative videos at our new site www.markettamer.com. I will be transitioning to more video content on my blog in the upcoming months.

The market continues its’ journey higher, although we have recently been bouncing off of the 994 swing high on the SPX from 1/6/2009. In order to continue the run, we need greater market participation as evidence by increasing volume.

It’s good to be back. Take a look at the charts and my comments as well as my commentary on ‘Trend Following’. By the way, stop by www.markettamer.com. We really have it going on over there. We are helping a lot of people become better traders.

Click here to learn how to trade like the pros!!

All the Best, Robin

We came out of the gate quickly in June posting a 221 point gain in the DOW. Personal Income numbers contributed to the bullish sentiment along with positive ISM figures.

Tuesday saw the NAR report the third consecutive month of increased existing home sales. Ford’s drop in car sales was not as severe in May as predicted which was a surprise. The DOW notched a nominal 19 point gain.

Wednesday, ADP numbers disappointed with more than 500,000 lost jobs. Although improving month over month, the number was larger than expected. The DOW retraced 66 points.

Thursday, unemployment claims improved, retailers posted spotty ‘Same Store Sales’ and bank stocks pushed higher. The DOW finished 75 points higher.

Friday, the DOW eked out a small 13 point gain. Non-Farm payrolls posted better than expected numbers but was offset by a 9.4% unemployment rate. The dollar rose amidst concerns of inflation. Speculation surfaced that the Fed might consider raising interest rates in order to stem the tide of future inflation.

Week over week the DOW was up 263, the SPX better by 21 and the COMPQ increased by 75.

This is a high risk, limited reward strategy. The position incorporates three trading instruments 1) a short call 2) a short put and 3) long stock. The short call and short put are sold to open at the same strike and expiration month, usually with 30 days or less to expiration. The long stock covers the short call obligation but the short put is naked. The position is less risky than the short straddle (see April 11th article) because of the addition of long stock.
The expectation is for the stock to remain stagnant or move bullish. Another way to think of the position is an ATM covered call with a naked short put in order to enhance the short option premium. The naked short put is the synthetic equivalent of a covered call, so the risk graph is identical to the covered call. Study the risk graph and you should gain understanding of the risk and reward associated with the position. Best, Robin

ECONOMIC REPORTS

MONDAY 6/8

None

TUESDAY 6/9

Wholesale Inventories

WEDNESDAY 6/10

Crude Inventories, Treasury Budget, Fed Beige Book

THURSDAY 6/11

Retail Sales, Retail Sales Ex-auto, Initial Claims, Business Inventories

FRIDAY 6/12

Export Prices Ex-ag, Import Prices Ex-oil, Michigan Sentiment

 

 

EARNINGS OF NOTE

MONDAY 6/8

FCEL

 

TUESDAY 6/9

PBY, PNY, SINA, TLB

WEDNESDAY 6/10

MW

THURSDAY 6/11

NSM

FRIDAY 6/12

None