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Posted by Martin November 17, 2011
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PG trade adjustment, SPY & POT puts new trade

PG trade adjustment, SPY & POT puts new trade

I am trying to trade longer term options trades. One of the trade I opened recently was long (April 2012) puts on Procter & Gamble (PG). Now I want to be opening short term trades against this trade to produce income. Same thing I am doing with my SLV long term holding and the same thing I will be doing with my Potash (POT) holding which has opened this morning.

Therefore I am opening the following new trade on PG: for each 1 long put contract I sold this morning the following:
STO 1 PG Dec17 2011 60 put @ 0.38

This trade executed this morning.

Based on the market move today I also decided to get back into shorting the market. Recently the market was forming a triangle and the question was which side the market breaks out. Most of the time, the market should break in the direction of the preceding trend, so in this case it should break upwards. However, the market is breaking down. If it closes below the lower support line of the triangle, we may expect further drop, which equals the height of the triangle. That means we should go all the way down to $115-ish level. However, we have two major supports on the way: 50 day SMA (brown line on the chart) and long term major support at 118 level. So this trade may be short lived.

SPY trend

However, I decided to open a new trade on SPY:
BTO 1 SPY Dec17 2011 124 put @ market

The trade opened this morning at 5.71 per contract.

I also opened my POT trade this morning.

Happy Trading!




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Posted by Martin November 11, 2011
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Consolidating market in Rally atempt


Today the market jumped up forming a triangle consolidation pattern after nice rally. We bounced off of the lows in October and had very wild and extended rally. Although I didn’t believe in this rally due to fundamental underlying data, this consolidation may change everything and we are truly forming a new bull trend. Every time news from Europe hit the market, buyers step in and hold the key levels at 1,220-1,230 zone buying back in.

So what can we expect now? After an extended rally like in October this consolidation pattern is a good sign that this rally is healthy. Most likely we will break up. For me that would be changing my strategy from bearish into bullish, looking for trades moving up. I will also be adding SPY calls to my portfolio.

I must admit, that this last quarter wasn’t much successful to me. I missed the rally and my bearish trades hurt my account. I hope the next quarter will be much better.

For this new development in the market, I am changing the market status to Rally Attempt. However, in the market everything is possible and we still may see drop if Europe fails to handle their debt crisis.

Happy Trading!




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Posted by Martin November 09, 2011
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DIS trade adjusted


I adjusted my entry limit on Disney (DIS) trade due to gap down this morning.

The trade executed short after.

Happy Trading!




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Posted by Martin November 09, 2011
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Stocks plunge on Italian worries – it’s happening


Here we go. What economists were saying all the time and the markets were successfully ignoring has happened this morning. As I wrote in my previous posts, the Italian bonds raised at 7.4% rate which is not sustainable for Italian economy to pay (Italy’s budget can afford paying a rate around 4.6% only). Italy at this point is a hot candidate for a bailout from EU. That will sink stocks even deeper.




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Posted by Martin November 08, 2011
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DIS Put Butterfly


Here is another trade I am going to take tomorrow. It is a butterfly on Disney (DIS) and the ideal landing spot to profit will be at or around $32 per share, so expecting Disney to drop in price.

I entered the trade today night and it should open (if it meets my entry price) tomorrow morning.

Happy Trading!




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Posted by Martin November 07, 2011
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Stocks ended higher today


Late rally today pushed DOW index back above 12,000 points on Euro optimism. In my opinion this optimism doesn’t take into account Italy’s problems with ECB and bonds rate rocketing up. As per the news, the rally started at 2 pm EST on news that Greece will receive the latest installment of emergency aid.

However, it would receive it as long as the country’s two main parties commit to implementing economic reforms agreed to by the country’s previous government. And that still may be an issue. Will the provisional government be strong enough to push those reforms thru? All those reforms will be very painful and people already suffered wage reduction, unemployment benefits reduction and more should be coming.

How will the market react on this issue and how will it react when Italian issues surface more into investors’ attention? Or is market accounted for those problems?

[poll id=”9″]




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Posted by Martin November 07, 2011
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European Central Bank (ECB) warns Italy to stop buying its bonds


ECB warned Italy last weekend that it would stop buying its bonds if it won’t pass required reforms of Italian budget to get Italian debt under control, said Yves Mersch a member of a bank governors board. Currently ECB is buying Italian bonds to slow down rates and prevent them from skyrocketing. Although ECB’s interventions the Italian bond rates reached almost 7% today.

ECB ended buyouts of bad bonds of the countries suffering with debt crisis some time ago, however due to worsened debt situation it was forced to start buying bonds back. In last few months ECB has bought bonds for 100 billions Euro. Main portion of bought bonds were Italian. “When we see our interventions sabotaged by the lack of effort of the national governments, then we ask ourselves if those interventions can provide the required improvement” as cited by Italian newspaper La Stampa.

[poll id=”8″]




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Posted by Martin November 07, 2011
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Italian 10-year bonds reached all year record highs today


The Italian bond rates reached all year new highs since Italy joined Eurozone. Today, it raised to 6.67% and that creates a tremendous pressure to Italian budget to pay their loans. ECB intervention couldn’t help this skyrocketing move.

Due to investors’ worries about Italian debt the new rate reached almost 7% and as Reuters says it is unsustainable level for Italian budget. Investors are worried that Italy can become a second victim of the debt crisis in Eurozone.

[poll id=”7″]

Will this new turmoil push the world markets down? We will have to wait for it. A few more days would reveal the next move. If more downside pressure occurs on SPY, that will be a great opportunity to short the market. In that case I will buy some puts on SPY.

Happy Trading!




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Posted by Martin November 07, 2011
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Stocks Will Be Cheap When the S&P 500 Tumbles 25% Says Portfolio Manager


There’s an old saying about lousy stocks on Wall Street: “If you liked XYZ at $50, you must love it at $25.” Along those same lines, it could be argued that if you think stocks are cheap now, just wait until you see how cheap they are when earnings estimates come down.

According to Mike Mullaney, portfolio manager at Fiduciary Trust, earnings estimates for next year have to come down another 15% before stocks should be considered cheap.

“It’s not pretty, 925 (on the S&P 500) is kind of the going rate on a worse case scenario among strategists if we do go into a recession period,” Mullaney says in the attached clip. “Most likely there will be blood in the water at that point in time, and most likely that would be a good entry point.”

Mullaney won’t consider the market cheap until he sees 25-30% drop in the S&P pushing it to levels not seen since mid-2009. But he’s not suggesting that stocks are expensive on a historical basis because 12-times estimated earnings is far cheaper than the long term averages.

Read the whole article here…

So are we here yet? It goes in hand with my expectation that the market recovered too fast and too quickly in 2009 – 2010 compared to economy, so now we are in correction of such run. We may go that far down or even lower and it is not a recession as many are trying to say, it is just a correction of too wild recovery not supported by economy, which is still a bit lousy.

Happy Trading




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Posted by Martin November 03, 2011
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WYNN weekly puts for income


Another trade I would like to take is some income producing trade. I will sell weekly options against my long puts. Currently I hold
1 WYNN Dec 17 2011 130 Puts

and I will sell

1 WYNN Nov 11 2011 (weekly)125 Put @ limit credit 1.35 per contract.

Basically this trade will be adjusted into a diagonal spread. The new trade (if it opens) will reduce the original cost of the long puts by $135, lowering it from $9.25 to $7.9 per original contract. If this new trade expires worthless next week, I will be able to repeat this trade.




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