Friday, June 29, 2007

PWE is one of my favorite dividend plays, but the way they game this thing can make a strong man cry. PWE behaves like a high school drama queen, with major fluctuations either direction as the stops get wiped and the shorts get hammered. With the renewed vigor in XLE PWE has taken off again after an ex-div implosion on the 27th. That was a buy. Catch it next round on July 26-27th.

And the high yesterday was...47.85!!!!!! No, I'm not a mathematical genius. I just used the statistical probability that with solid TICK momemtum behind them and the FOMC dynamics on hand the Qs would hit R2...and they did. Exit on close with the shorts is the way to play those vignettes. Happens all the time, which is why I use the pivots as intraday targets. I think Q trading is going to get a little dicey for the next few days as the 4th approaches. We are at the cusp of the month, so I'm leanng towards a low volume move up followed by another leg down after the 4th. R2 target for the Qs today is 48.00...which seems like a long way except the Qs opened at R1 47.79, and the TICK is upslope as I write this.

Thursday, June 28, 2007

Got the Bollinger Band reversal we were expecting. Next stop, 10 day SMA , then 20. End of month and July 4th historical up bias hint that VIX may fall to the 50 day SMA.
Histogram still looks solidly OB.

As with XLE, the Qs went right to support and then reversed. In yesterday's case precisely to R2. The Qs have actually been fairly resilient relative to the rest of the market and probably have a little more juice left in them. Cheap short at 47.85.

And then there's gold, which has really taken a hit lately. NEM and XLE use to track farily close on daily bars, but a significant diverence has developed recently. The logical pairs trade is to short XLE and long NEM until the two get in sync again. Both NEM and ABX showing some strength this am. I like to watch both for alignment. No interest in options.

Wednesday, June 27, 2007

Show time for XLE. Can oil really break support? The near 68s are paying $ 1.55 and the ITM 67s are paying $2.15 or +2%. Risk ratio looks attractive to me and I am stepping on a few with 24 days to expiration.
TICK action has not favored the bulls recently. Chart suggests we still have room to the down slide until we get the capitulation low. Semis are actually positive this am, led by the twins, MSFT and INTC and the Qs are following. Gold (broken through support) and oil (at support)have suffered major pullbacks the past 5 days and a relief rally seems highly probable, though it may be short term.

Tuesday, June 26, 2007

Huge volume on XLF last 3 days. Not quite sure this is the intermediate bottom but picked some near the pm lows and sold the 36s for 2.5%. TLT had a good day. Remains to be seen if today's pop on the NYAD to 4+ and R2 can hold though 2 articles in the new issue of TASC suggest it won't.

Monday, June 25, 2007

I should have seen this earlier. VIX on a double short term top. The VIX is one place I like the daily bollinger band (14,2). The turns are generally well predicted by the bands, although the action can stay firmly in the middle for extended periods of time. I usually put on at least a small position when the bands are touched, with better odds if the bars close through the band.
Could be a double bottom in TLT. Little pop and drop at the open but still holding well above Friday's close. Next near term support looks like 88 area so some room to go here. With 26 days to expiration, protection is a bit thin. The ATMs are yielding 1%, the close OTMs at .5%.
Keeping an eye on this one to see if it holds. Would really like it at 82.50. Volume surge not following buying.

Friday, June 22, 2007

For those who missed this quarterly session of the Traders Expo, my opinion is that you didn't miss much. I typically go to the Las Vegas meeting each year and each year attendance is less and less. The number of exhibitors keeps declining and the crowds that were there a few years ago are gone. I walked through the entire show in 15 minutes. Big presence by Schwab, Fidelity and TradeStation. More display monitors than a NASA launch. Most of the marketing emphasis has switched to the option and futures side with a few FX offerings. Autotrade and mechanical systems are the current hot buttons. The usual suspects touting their 500%+ ROI systems that a child can master. You can view most of the presentations on line through the Expo site and with the horrific parking situation and the mind-numbing I-5 traffic from SD to Oceanside this is the no-brainer strategy I will use for future Expos.
EBAY on a tear this am with China news and an upgrade. I've ridden this one up since a nice hairy bottom back in August and although the current chart may be a double bottom or a trap door, I'm playing the near 32.50 calls,which at 1.10 yield a potential nice 4% for 29 days.

Thursday, June 21, 2007

STX showing good strength this am following yesterday's strong showing in the face of market collaspse. Pattern of higher highs and higher lows. Little downside protection from the calls as volatilty at the 20s is only 38. Better play at the 22.50s. Close when delta approaches high 80s.

Yesterday's action can only be characterized as a pop and really big drop day.
Here's a daily chart of the NYSE advance decline line. A diffent way to look at market volatility but the histogram and MACD signals give a close indication of the turns.
One thing I look for after a day like yesterday is what stocks held up well. NWS/A was unique in this category.

We got the bounce off the VIX zero line. A big one. This morning's early action suggests we may have more to go.

Wednesday, June 20, 2007

VIX popped down to 12.75 at the open today, bringing it to intermediate support. Action was somewhat subdued yesterday as the rollover window began to close. Premium faded throughout the day.....I missed a couple valid fills no thanks to my usually reliable broker and the folks at the ISE. Stay tuned to see if VIX will hold at the zero line. I'm playing it defensively for the next couple days as I will be gone all day Thursday and part of Friday to attend the Traders Expo here in San Diego.

Tuesday, June 19, 2007

Nice post today by Vix and More on a library of books dedicated to risk.
Here's a weekly of EK again. 32 days till expiration and a 2%+ yield on the near 27.50 Buy/write.
EK has really popped out of the box with its new digital technology, but is beginning to look a bit overextended along with the rest of the market...hence the 27.50s.

Friday, June 15, 2007

Recap for the week.....
Back on Jan 16th, Vix and More noted the following:

Options expiration week.... is the only week where the VIX has traditionally made a significant move down, probably a case of reality falling short of the expectations that some associate with -- and plan for -- on triple and quadruple witching expiration weeks. On average, options expiration week has the VIX falling 2.7%, compared with an average rise of 1.4% on non-expiration weeks. The VIX is significantly more likely to fall 15% or more on this week than on any other week. Correspondingly, this is the week in which the VIX is least likely -- at least in terms of historical data -- to spike to the upside.

The correlation has proven to be dramatically true this expiration week. For those of us who pursue a defensive hedged approach to the markets at these lofty levels a lot of potential profit is left on the table in exchange for risk mitigation. As the traditional summer doldrum months approach it remains to be seen if these record levels can be sustained, but for the near term I will continue with my hedged strategy and rely on Qs options daytrading to augment my primary premium decay revenue stream..
NEM volatility holding firm. A July 40 Buy/write will yield 3% +. Negligible dividend.
Headed for an intermediate triple bottom on next turn?

Thursday, June 14, 2007

A little earnings pop from WM this am. The July 42.50 Buy/write will yield just over 3%. July 26th is x-div for .55, so an August rollver will yield an additonal 1 %+.

Wednesday, June 13, 2007

Still like oil? Here's a Canadian oil trust with an annual dividend of $4.08 distributed monthly. Current Buy/write yield on the July 35's is over 3% for 37 days. With the dividend factored in the monthly return is over 4%. Low volume on the stock and wide spreads on the options so a Buy/write order with a debit limit is advised.
Still can't get the cobwebs off this one, but a July 25 Buy/write will yield 2% for 38 days. Set Buy for 24.42 net debit.

If you read yesterday's link to the current issue of Futures and Options Trader go back and check out a different take on call crdit spreads in the trader interview with Yehuda Belsky.

Monday, June 11, 2007

Interesting article on the Debit Spread by John Larson in this month's Futures and Options Trader.

After a Dec/Feb double top, a steep high volume plunge and a double S1 bottom yesterday TLTs may find support around 82.50 altho July ATMs are only yielding 1% on thin liquidity, so not much interest here yet. Little action in the far months. Look for the hairy bottom.

Volatility in the ATM Q puts is running 50% ahead of the calls this morning. Naked calls at risk in this scenario. Pop and drop likely if the NYAD can't make it to PP. Early rise in the TICK not supported by volume surge . Check TICK histogram for next turn. Currently flatline.

Friday, June 08, 2007

After 3 down days on accelerating volume today feels like a consolidation with a recovey break . The TICK locked between PP and R1 following the anticipated first hour morning pop. Both IWM and Qs locked at PP. Volatility on the Q calls is anemic with heavy put activity. If TICK holds look for the break at circa 11:30 PST to R1.