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Posted by Martin February 04, 2024
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Stock Market in Overbought Territory But More Upside Coming


stock market score A few days ago the stock market participants were again panicking over something we all know and are aware of – interest rates. We all know inflation is easing and continues, so we all know that the FED will, at some point, start cutting the rates, and it doesn’t matter whether it will begin in March or July. We all know that the US economy is booming (despite many naysayers who believe we are doomed to crash), and we all know the labor market is still strong. Yet, at any time, the media tell us that the FED may “reconsider” the market panics. But is it panicking? The news outlets needed to tell us what was going on. It is their game, but no matter what theory they are making, the truth is that this market is overbought, and everyone is in FOMO out there. Any selling is just a pause in the rally. A dip that many jump in to buy.
 
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Posted by Martin February 01, 2024
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The Resurgence of Micron Technology in the Dynamic Memory Market


Micron Technology, a key player in the semiconductor industry, primarily known for its memory and storage solutions like DRAM and NAND flash memory, is witnessing a significant phase in its business cycle as of early 2024. This post delves into the current state of the memory market, examining the trends and forecasts that are shaping Micron’s business environment.
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Posted by Martin January 29, 2024
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When and Why Rolling Options Spreads


Rolling options spreads is a challenging task. Many times, I roll due to expectations or my fear, and it ends up being a mistake, like the last trade I opened a few days ago, and it was a too-soon roll.

When trading SPX, I usually sell Iron Condors. I started trading extremely conservative strikes (1 – 6 delta). One reason for that was to avoid rolling as much as possible. So I can leave the trade on until the very last moment.

 
rolling options spreads
 

Since I trade around 2 DTE trades, rolling is rare. In this case, I let the market touch my short option strike, and then I will try to decide what to do.
Here is my exit plan:
 

  1. Let the trade expire worthless for a full profit. There is no management and no stop-loss orders.
  2.  

  3. If the market goes down and touches or even breaches my strike, I will check why it happened. What is the catalyst for it? If I can’t find any and the decline is a pure nonsensical hiccup (Wall Street is full of them), I probably do nothing (unless it is expiration day and only a few minutes to expiration (15-30 minutes). If it is close to expiration, I will roll calls down to convert the trade into an Iron Fly (a short call strike is the same as a short put strike).
  4.  

  5. If the market keeps sliding and both put strikes get in the money, I close the short call for 0.05 debit and roll the put spread into 5-10 DTE and the same strikes and the same width as long as it is a credit trade. If it is a small debit, I still may take it because I will sell a new call spread against it to offset the cost of the debit roll.
  6.  

  7. If rolling for credit doesn’t work and selling calls doesn’t offset the cost, I start widening the strikes, going from $10 wide spread to $15, $20, or similar. I may also convert the call spread into put spread and vice versa.

 

However, note that my trades are 2SD (2 standard deviations), so if the market goes down 2 SD without any catalyst, I may decide to leave it as is (unless expiring) or roll to the same strikes and same width, still attempting to make it a credit trade, because such decline is too unusual. There is a significant chance that the market will bounce the next day or the next few days. It happened to me a few times already (on put as well as on the call side), so I will not roll as much as I used to due to this fact.

As I said above, rolling trades are not an easy task, and there are no set rules that you can use every time. Sometimes, you will roll a trade, turning it into a disaster.

So the question is – roll or leave it and take a loss? My philosophy is to avoid taking a loss as much as possible. So I roll. But when rolling, you must do your math and think about the results and consequences. Are you making it worse (digging a deeper hole) or improving your trade? Sometimes, I start rolling even for debits if the trade is better off rolled than closed for a significant loss. I have a few trades from the past that cost me $400-$1000 to roll, but the risk was $5,000 or even $10,000 (the spread was 50 to 100 wide spreads. I am okay with taking a $1,000 loss rather than a $10,000 loss if the trade expires in the money for a complete loss.

What if I cannot roll because I do not have the buying power to do so or for any other reason?

In this case, I let the old trade expire as is but opened a new “box” trade to kick the can down the road to get time to deal with the trade later when I have enough money.
What is a “box” trade? The box trade is when your short call strike is at the same strike as your long put, and your long call is at the same strike as your short put:
 

Example:
 

4760 short call – 4760 long put
4770 long call – 4770 short put
 

What does this do to you? Well, you keep the trade alive, and you collect the entire width premium minus fees. In the example above, you will collect a $1000 premium, and your BP requirement will only be between $50 and $100. I usually open this with 45 DTE; if I am stressed, I may choose more DTE – 150 or 200 DTE. Why? The most important thing is time. I gain time without hitting my portfolio and can think about what to do next. Also, based on the market conditions, I started rolling calls higher to widen the box into an Iron Fly or even Iron Condor. I roll the entire structure (which will not impact the collected premium as it will be either a small credit or debit) and then start widening the spreads. If I was unsuccessful (the market was moving too fast, for example), I stopped adjusting and let it go while opening a new box.

So, these are my strategies for rolling the trades. Deciding which one to use depends on the market. If there is a legitimate panic (bear market, crisis, etc.), I might convert puts to calls or roll to lower strikes, etc.; if there is no catalyst, I may do what is described above.

Here is my latest trade with the rolls and my journal of why and what I did. Maybe it will help you better understand my process (read the section below in the spreadsheet under the “Notes” section.).

 




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Posted by Martin January 28, 2024
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Navigating the Market Currents: A Week Ahead Analysis


As we gear up for another trading week, it’s crucial for investors and market enthusiasts to understand the complex interplay of factors shaping market sentiment. This week’s outlook presents a cautiously optimistic scenario, tempered by geopolitical uncertainties and macroeconomic dynamics.
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Posted by Martin January 28, 2024
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Contest #9: Guess the S&P 500 Friday Close And Win Cash!


Last week, we didn’t get the minimum voters to have a valid contest. We need minimum of 5 people to validate the contest and have a true competition with one winner of cash. I hope, next week, we will have enough people to participate, have fun, and one of them win the cash prize! So far, it looks like, visitors are not interested in free cash gift. All you need to do is predict the next Friday’s market closing price and if you get close enough you win $100 cash gift card. Contest #7 was viewed by 215 visitors… contest #8 was viewed by 49 people. No one voted. Well, I will spend this week’s prize with my family. But don’t worry, next week will be another chance to win. And if no one votes, I will cancel this contest…

 

Contest voting is from Sunday January 28th – Wednesday January 31st and it is now CLOSED

 
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Posted by Martin January 22, 2024
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The SPX Crumbs Strategy Is Working!


I started trading an SPX Crumbs Strategy and developing it into other instruments such as individual stocks and futures. And it is working. I still deal with the old SPX trades that got me into trouble, but I am slowly eliminating them. It will take time, but I am confident. In the meantime, I trade the SPX crumbs and generate the desired income.
 

What exactly is the SPX crumbs Strategy?

 
The SPX Crumbs refers to a trade collecting a tiny premium (hence crumbs) but significantly increasing the probability of profit. A few days ago I watched a Tasty Trade video about this and they were not in favor of this strategy. Honestly, I do not remember why anymore because I disagreed with them. The strategy works for me, so what is the problem?

But what exactly is SPX Crumbs? First of all, I sell options. I do not buy them. I only buy them as protection, which is a part of a trade, like an Iron Condor or a single vertical spread. Buyers are suckers, and eventually, they will lose money. There may be a few traders that make money. I am not one of them, so I need a trade that works most of the time.

Selling options can be tricky and also riskier than buying them. That’s why many people do not sell options. When you buy an option, you pay a premium. The premium can be small, but you can make a lot of money if the stock moves in your favor. All you risk is the premium you paid. In general terms, you risk 1 to make 9. But your probability of profit (of it happening) is extremely small, and you must be right on three determining aspects – time, magnitude, and direction. If you are wrong on any of those, you will lose money.

You can be wrong on all three aspects as a seller and still make money. The probability of profit is high (in my “crumbs” case, over 95% of it happens), but the income is tiny. You literally risk 9 to make 1. Discouraging?

But win 95 times of 100, and you will make money!

What about the 5 times losers? If not managed, these can wipe out your gains and more.
 

Example of the SPX crumbs trade

 
Yes, you can make a tiny profit 95 times and lose money five times. With the crumbs, you can make $30 every 95 times, but you can lose $970 every remaining five times of the time. That doesn’t look good.

That is what happened to me when I traded a regular strategy with 30 – 10 deltas. I was looking for a trade that would improve my chances of making a profit, sleeping well, and not worrying about every open trade.

The crumbs strategy is a trade in which you place your short strikes far away from the current market. With SPX, I trade Iron Condors (short and long calls and short and long puts). The reason is buying power. I need to limit the BP to a minimum to be able to trade. I prefer trading strangles (short call and short put only), but the buying power requirements are enormous! I would need over $90,000 in buying power to trade one 2-DTE trade. Not doable.

I can do this with futures (E-minis) as one strangle would require around $6,000 in buying power, but not with SPX. So, I must trade an Iron Condor and buy protective puts and calls to limit my exposure. I usually go with $ 10 wide spreads.

Then, you place your short strikes as far away from the market. I go way beyond 2-SD (2 standard deviations). The delta of the trade is 1 and up to 4, sometimes 5, but not higher. And the premium is about $15 to $30 before fees (I hear many saying phew, not worth it! I don’t want to risk over $900 and make $15!). But it works. Do this 100 times, and you will make a lot of money.

 
SPX crumbs strategy
 

The charts above indicate how my accounts improved since September 2023, when I started trading this strategy. I hope the trend will continue. You can also follow me on Kinfo, a third-party website that verifies my trading. So, all trades are now third-party verified.

Here is an example of constructing a trade. I start with puts and calls at 2 SD and then check the premium. In the example below, the premium was 0.60, allowing me to lower the put strikes. When I did, the premium dropped to 0.35. I changed it to 0.25 for it to fill.

 
SPX crumbs strategy puts
 

Here is the call side example:

 
SPX crumbs strategy calls
 

As you can see, the entire trade has a 97% probability of profit. The markets would have to rally or crash more than 1.5 – 2% in two days for this trade to go bust. How often can this happen?

I analyzed all SPX trades since 2007. I checked how often the market dropped by over 2% in two consecutive days. And the market dropped more than 2% in a single day in 205 occurrences out of 4,278 trading days since 2007. That represents 4.79% of occurrences when this can happen. Your chances of winning are high.
 

What about those 4.79% of losses?

 
The losses can happen, and they will be happening. Although we have over 95% chance of constantly winning, the losses can still wipe out all winning trades, plus more! The math is simple. Out of 100 trades, we will make $30 premium 95 times, which is $2,850, but we can lose $970 5 times, which is -$4,850. So we still can lose more than what we make!

That’s why the losers still have to be managed – either closed before the loss gets larger, roll it, or any other type of management. I usually roll the trades, keep them alive, and manage them to minimize a loss or even turn the trade into a winner.

Of course, the losing trades may occur fewer times than indicated above because I only trade 2 DTE trades. When the market starts crashing, I can react to it by stopping trading puts (until the bear market ends) or opening new trades with lower strikes every time I open a new trade. But that is a future to be seen.
 

Conclusion

 
I am happy with this trading so far. It delivers the results I wanted and always dreamed of and provides enough safety that I do not have to worry about the trade once I put it on. I collect small premiums every time I place a trade, which will add up. It is just a matter of time.
 




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Posted by Martin January 21, 2024
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Contest #8: Guess the S&P 500 Friday Close And Win Cash!


Last week, we didn’t get the minimum voters again to have the contest valid. We only need 5 people to validate this contest and have a true competition with one winner of cash. I hope, next week, we will have enough people to participate, have fun, and one of them win the cash prize!

 

Contest voting is from Sunday January 21th – Wednesday January 24th and it is now CLOSED

 
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Posted by Martin January 15, 2024
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Market Sentiment for the Upcoming Week


As we stand at the cusp of a new trading week, understanding the market sentiment becomes crucial for investors and traders alike. Market sentiment, the overall attitude of investors towards a particular market or asset, can significantly influence market movements. This week, various factors, including economic indicators, global events, and sector-specific news, will shape the market’s direction. Let’s delve into these aspects to gauge whether the sentiment leans bullish, bearish, or neutral.
 

Factors Influencing Market Sentiment

 
Economic Indicators have always been a cornerstone in assessing market health. Recent data on GDP growth and unemployment rates provide insights into the economy’s strength. For instance, a higher GDP growth rate typically signals a robust economy, often translating into bullish market sentiment. Conversely, rising unemployment rates can indicate economic struggles, potentially leading to a bearish outlook.

Political and Global Events also play a pivotal role. For example, geopolitical tensions can create uncertainty, often resulting in a bearish sentiment. Conversely, positive developments, like trade agreements, can foster a bullish outlook.
 

market sentiment
 

Technological and Sector-Specific Trends are equally influential. Breakthroughs in technology or significant shifts in energy, healthcare, or finance sectors can drive market sentiment in either direction. For instance, a major innovation in renewable energy might spur a bullish sentiment in the energy sector.
 

Analysis of Current Market Trends

 
The Stock Market Performance last week showed a mix of highs and lows, reflecting the market’s reaction to diverse stimuli. The major indices, such as the S&P 500 and NASDAQ, have been fluctuating, indicating investor uncertainty.

Bullish vs. Bearish Perspectives are evident in the market. Some investors display optimism, driven by strong corporate earnings and technological advancements. Others lean bearish, concerned about inflation and political instability.

Investor Behavior trends, like increased buying in certain sectors or cautious trading patterns, provide a window into the current sentiment. For instance, a surge in green energy stocks might reflect a bullish sentiment in that sector.
 

Expert Opinions and Predictions

 
Financial analysts and economists offer varied opinions. Some predict a bullish week ahead, citing strong economic fundamentals. Others caution against potential bearish trends due to unresolved geopolitical issues.

Contrasting these expert views with Popular Investor Sentiment, it’s clear that while experts might lean towards a bullish outlook based on data, investors’ sentiments are mixed, swayed by both global events and domestic economic indicators.
 

Preparing for the Week Ahead

 
For casual investors and traders, it’s essential to balance optimism with caution. Diversifying your portfolio and setting stop-loss orders can mitigate risk. Staying abreast of news and economic reports is also vital for informed decision-making.
 

Conclusion

 
In conclusion, the market sentiment for the upcoming week appears to be a blend of bullish and bearish influences. While economic indicators show some strength, geopolitical tensions and sector-specific uncertainties add a layer of complexity. It’s essential for investors and traders to remain informed and agile, ready to adjust their strategies in response to the evolving market landscape.

Remember, the key to successful investing is not just about predicting the market correctly but also about managing risks and adapting to changes efficiently. Stay informed, stay diversified, and, most importantly, stay calm in the face of market volatility.

 




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Posted by Martin January 14, 2024
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Contest #7: Guess the S&P 500 Friday Close And Win Cash!


Last week, we didn’t get the minimum voters again to have the contest valid. We only need 5 people to validate this contest and have a true competition with one winner of cash. I hope, next week, we will have enough people to participate, have fun, and one of them win the cash prize!

 

Contest voting is from Sunday January 14th – Wednesday January 17th and it is now CLOSED

 

Welcome to the Guess the S&P 500 Friday Close Challenge!

 

We’re thrilled to bring you an exciting contest where your forecasting skills could win you a fantastic prize – an Amazon or Cash gift card! Get ready to flex your market intuition and join the fun.

 

Last Closing Market Price: 4,783.83
Friday, January 5th Closing Price: 4,839.81

 
Contest Gift Card

 

Contest Rules:

 

1. Eligibility:

 

  • Open to participants worldwide.
  • Participants must be 18 years or older.

 

2. How to Participate:

 

  • The contest will run every week.
  • A post will be made on our official website every Sunday, opening during regular trading hours.
  • To participate, enter your prediction of the S&P 500 closing price for that upcoming Friday in the comments section of this announcement.
  • When posting, enter a valid email address where you can be reached if you win the contest.

 

3. Prediction Window:

 

  • The voting will be open for comments from Sunday to Wednesday. The voting will close every Wednesday at the market close (4:00 pm ET).
  • Comment your vote in the comments section below this post.
  • Only one entry per participant is allowed.
  • All votes made after Wednesday market closing hours will be disregarded.

 

4. Scoring:

 

  • The winner will be determined based on the closest prediction to the actual closing price of the S&P 500 on Friday.
  • Decimal points will be considered for precision.
  •  

    5. Tiebreakers:

     

  • In the case of a tie, the participant who submitted their prediction first will be declared the winner.

 

6. Winner Announcement:

 

  • The winner will be announced on our official website on the following Sunday.
  • The winner will be contacted privately at his/her provided email address to arrange the delivery of the prize.
  • The prize will be electronic or physical mailed to a provided postal address. For deliveries of the prize expect two to three days for electronic cards and five to ten days for physical cards.
  • The contest will be invalid and cancelled if less than 5 participants vote.

 

7. Prize:

 

  • This week, the winner will receive a $100 Amazon or Cash gift card (e.g. Visa gift card) or similar.
  • Prizes are non-transferable and cannot be exchanged for cash.

 

7. Disclaimer:

 

  • This contest is for entertainment purposes only.
  • The closing price of the S&P 500 will be based on reputable financial news sources.
  • We reserve the right to cancel the contest at any time without liability. Participants acknowledge that the cancellation of the contest does not incur any legal harm or claims against the organizers.
  • By participating, participants agree to abide by the terms and conditions of this contest.

 

8. Have Fun:

 

  • Remember, this contest is all about having fun and testing your forecasting skills. Good luck to all participants!

 

Get ready to showcase your market wisdom and take a shot at winning the Guess the S&P 500 Friday Close Challenge. May the most accurate predictor win!

 




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Posted by Martin January 11, 2024
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November – December 2023 SPX put credit spreads trading review


Our SPX Crumbs Strategy works great so far. I hope it will continue like that for years to come. September was a volatile market. After a strong rally since the end of the bear market in October 2022, the market pulled back. Our strategy sustained that pullback. We made good money even when the market was declining. During November – December, we had an opposite problem. The market rallied hard and call spreads could be a trouble trade. But the strategy held well. It was me who panicked. But at the end of December, all is good and I look into the next year with optimism.

 

Our SPX account is up +1,384.76% since the beginning of this program.

 

Initial SPX trade set ups

 

I dedicated a $3,600 initial amount that will be used to trade SPX PCS (Crumbs) strategy per week. Today, the account is up at $53,451.53.
 

Our SPX Crumbs strategy is designed as neutral options trading. We select our strikes far away from the market – more than 2 SD (standard deviation) away. The premiums are smaller, but the chance of profit is 99%. Even during last week’s rally (due to better-than-expected CPI report) when the markets rallied more than 2.4% in a single day, our trades remained safe.

 

Here you can see our 2023 Crumbs trades:

 

SPX PCS account value
Click on the picture above to see the entire list.
 

Last month trading

 

Overall, the strategy resulted in a +1,384.76% gain last month.
 

Initial account value (since inception: 12/07/2021): $3,600.00
Last month beginning value: $51,553.82
Last month ending value: $53,451.53 (+2.81%; total: +1,384.76%)
The highest capital requirements to trade this strategy: $9,038.02
Current capital at risk: $9,038.02
Realized Gain: $1,462.27
Win Ratio: 93.75%

 

SPX PCS account value
SPX PCS account value
 

SPX PCS account vs SPX net liq
SPX PCS account vs SPX index net liq
 

SPX PCS account vs SPX performance
SPX PCS account vs SPX performance
 

If you want to receive trade alerts whenever we open a new SPX put credit spread or a hedge trade, you can subscribe to our service:

 

 

Note that if you wish to subscribe to multiple levels, you can only subscribe to one level and send us an email that you want to be added to other levels.

Also, if you like this report, hit the like button so I know there is enough audience wanting to see this type of report. If you have any questions or want to see anything else about my SPX trading, do not hesitate to contact me or comment in the comments section. Thank you!

 
 




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