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A Large Rebound Eases Tensions, Will It Last?

S&P PanicWhat I expected on Friday came on Monday. A significant bounce. But will this turn into a recovery or is it a dead cat bounce for further selloff? I do not know and cannot predict. However, given the markets erratic behavior and fast reactions this may turn into a recovery.

We did a few trades today to take advantage of a rally plus some rolling. It was successful. We received nice credit and rolled some SPX trades lower. However, I have a hunch that it would be wise to stay aside and get a clear signal from the market where are we actually going from here.
 

 
I hoped for today’s trading recovery. It would ease everyone’s tensions. The stock market, and investors accounts. Many were caught with bad positions last Thursday and Friday when markets pretty much crashed. We knew we were going to re-test the 200 DMA but still the speed and magnitude was surprising.

On the other hand, I didn’t believe that China would engage in a full scale trade war although Trump is crazy enough to start it regardless what damage it would do to the US economy. Nevertheless, reaction of Wall Street was, as usually, overboard and it was obvious that this will not last long and we will rebound.

But, now, that we had a bounce, will it turn into a recovery?

No one knows for sure. We still may go lower and go under the 200 DMA. Some technical analysts believe that the market must close below 200 DMA in order to rebound. We haven’t done that yet. In February we barely and for a few minutes touched 200 DMA and last week, we ricocheted that level by 2 points only. If we have to close below 200 DMA for completing the correction pattern then more selling is ahead of us. Time will tell.

And that is a reason for me to stay aside and wait. I may ride a few 0 DTE trades if I can clearly see the direction but no longer term commitment so I do not get stuck with more trades which need to be rolled later on for several weeks or months.

 

 · Trading activity today

 

A summary of opening and closing trades.
(premiums received / paid: + $825.00)

Note: This is a cash flow of credits, not profits!

Today, I rolled one old trade (an SPX put spread) down but kept the same expiration. I widened the spread from 30 dollars to 40 dollars to keep it a credit trade. I considered it a good way to manage this trade and get it down. Some traders would despise this strategy saying that I am increasing the risk and digging a hole underneath my a$$ deeper. But I have enough cash to do this and roll although adding more risk. I see it as opening a new trade which helps me to roll the old one. Keeping the same expiration and lowering the strike gets me closer to possible expiration of the trade or closure for a profit. If not, i still will be able to roll it as is but this time farther away in time. Or converting it into calls.

I learned that converting into calls is a good strategy short term. Long term, in a bullish market (and we are still in a bull market) you can get wiped out. So I am keeping it as a put spread and I will roll it accordingly once I get closer to the expiration or to the money. There is still tons of time to decide which strategy to take.

I also opened a few new trades this morning which later on I started regretting big as the rally faded in the morning. I placed those trades when S&P500 was up by 45 points. It went up to 50 points and than faded down to only 14 points up. My 2 SD trades were suddenly at the money. Quite sickening. As soon as I started thinking about what rolling trade adjustments I would take to avoid these trades getting in the money, the market reversed and marched higher again.

We finished up 70 points.

This shows clearly how crazy this volatile market is.
 

Here are the today’s trades:

 
0323trading
 

All trades, I opened this morning, expired worthless.

 

 · Dividend stocks to buy

 

Out of our watch list of 37 dividend stocks the following ones are a good buy at today’s prices (03/26/2018):
 

ABBV
AGNC
AWK
BA
CVX
HD
KMB
MCD
OXY
PG
PPL
XOM
 


Disclaimer: The list above is based on calculated fair value and 52wk high offset valuation. The values are subjective to our calculations and opinion and may differ from your own. If you decide to trade or buy these stocks, do so on your own risk and do your own homework. The list is not our recommendation to you.

 





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