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Posted by Martin February 09, 2018
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Stocks plunge another 37 points, now -11.13% correction from ATH


The market opened relatively strong luring investors getting in just to toast them later afternoon. But volatility and weakness returned and the market lost another 37 points adding to yesterday’s 100 point losses.

S&P 500 is now down to 2,546 losing 37 points (-1.43%), DOW is down 23,512.49 losing another 347.97 points (-1.46%), and Nasdaq is down by 127.08(-1.88%). This is a second day of a correction deepening it to -11.13% from all time high.
 

We are now approaching 200 DMA which may work as a support:
 

S&P 500 support
 

A typical correction is 13% and it will take 4 weeks to recover from the correction (so the seasonal patterns say). Expect more pain in the next few weeks.




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Posted by Martin February 08, 2018
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Why the freakout? History shows rising rates have been good for stocks


  • Using Kensho, a hedge fund analytics tool, CNBC looked at what happens during major periods of rising interest rates.
  • The findings show the market rose big during five of six instances and only fell slightly during the one lagging period.
     

Bonds
Getty Images
 

The stock market is plunging on rising interest rates worries, but perhaps investors shouldn’t be so concerned.

A stronger-than-expected jobs report and wage number on Friday sent interest rates higher, sparking a sharp 6 percent sell-off by the S&P 500 over two trading sessions. The market is dropping again Thursday.

Traders are concerned the Federal Reserve may reduce its monetary stimulus and increase interest rates more aggressively as the economy continues to strengthen.

 
Major periods of rising interest rates
 

Bonds
Source: FactSet
 

Using Kensho, a hedge fund analytics tool, CNBC looked at what happens during periods of major increases in interest rates using the 10-year Treasury yield over the last 30 years.

 
Bonds
 

The findings show there were six periods with major rises in interest rates in the last three decades. The market rose big during five of those instances and only fell slightly during the one lagging period.

 
Bonds
 

The S&P 500 rallied 23 percent on average in the time periods.

CNBC also looked at the sectors which climbed the most during the rising interest rate time frames.

 
Bonds
 

The screen showed technology stocks did well, followed by consumer and financial stocks.

Investors are freaking out this month, but higher rates have been good for stocks in the past. Or at the very least, stocks were able to rise alongside higher rates.

Likely because accelerating economic growth was pushing earnings higher at the same time.

Past performance does not always equal future returns and of course it could be different this time.

But in the past, higher rates didn’t equal lower stock returns.
 

S&P after big single-day drops from CNBC.

 

Disclosure: NBCUniversal, parent of CNBC, is a minority investor in Kensho.
 

Source: CNBC
 




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Posted by Martin February 08, 2018
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-10.13% from ATH


The market just entered a healthy correction when it felt for second time more than 100 points in a day (-3.75%). Unless you got caught in a wrong trade this sell off is a great opportunity to buy more shares of cheap stocks.

Unfortunately, people blow up their accounts or are fully invested and they cannot take advantage of this event. To many, the correction look more like a crash (to me too in fact). And many got scared. Many now think, this is the end of the world, bear market from which we will not recover.

 
S&P500
 

But this is not an end!

I met an investor who asked me to trade his account, so I did. Everything went well until this correction hit the markets and everything went south. He said, he could no longer bear the pain and he closed all his positions. Realizing huge loss. Panicking.

But there is no need to panic. This sell off is not the end of this bull market and we will see more growth. We just went so up lately that this correction was needed.

If you are participating in the markets, you must have a plan! You must know what you are doing! Many people out there have no plan! A few do, but do not stick to it.

 
There is a saying: “Everybody is a long term investor until the next bear market.”
 

Don’t be one of them!

If you are an investor, have your goal in front of you during the days like this. Remind yourself about your time horizon for which you are investing! If you are an investor, you are not in the markets for the next 20 days! You are invested for the next 20 years! Have that always in your mind!

And if you are in the market for the next 20 years, then sell offs like this is nothing, it means nothing but it creates a great opportunity to be buying cheaper. Or at least reinvesting your dividends cheaper!

Let me repeat it:

Long term investor – stay invested, do nothing, do not sell, buy more!

But make sure you are buying a good quality stocks, dividend stocks! Do not listen to anyone who says dividend stocks are worthless and that they won’t make you enough money. Those who say this do not understand how dividend stocks work.
 

Here is my dividend stocks watch list. I do not even know which stocks to choose from. All are in a correction mode and great candidates to buy:

 
Watch List
 

I wish the list would stay like this longer so I can keep buying high quality stocks.
 

And what if you are a trader?
 

You too have to have a plan! And strictly follow it. In my last post I wrote about selling options with delta 16 or less and people kept telling me that I am wasting my money, risking too much to make too little.

A few years ago I would agree with them.

Not anymore. I came to realization that I want to make money but I want to make money safely, preserving capital. Capital I used originally to trade and capital I made.

After a week and a half of large losses the S&P 500 entered officially correction.
The market dropped -10.13% today.

And thanks to my delta 16 options I am still alive.

Of course, it is not just the delta which helped me to sustain this carnage but also my money management and strictly investing no more than 50% of my available capital (although today many trade repairs ate much of the capital, I am still near 50% limit). And I am still floating!

Although my “ship” looks like this after a week in the markets:

 
battleship
 

But, if you are still floating, you can repair your ship and continue the journey. How do you keep floating? Stick to your rules to overcome the bad days in the market. Use margin sparingly mainly when the market makes new highs, do not over trade, and do not be greedy! I sometimes struggle with this and later I regret it.

If you follow my blog or Facebook group you know that I was guilty of over trading my accounts. And I paid dearly for that!

As of today, most of my accounts are now back on track and protected. Even with this huge selling, I should start making a progress towards my trading to independence goal.
 

The good thing on all this is that VIX didn’t spike too much (very little gain compared to Monday’s “crash”, higher than yesterday but only by a small margin and definitely not matching Monday or Friday levels) so this leg down looks more like a standard re-test of the previous lows. Usually, VIX will start making lower highs although the market may continue making lower lows but this is a bullish sign for the market.

 
VIX
 

We have officially fulfilled a 10% correction today and although we may see some downward drift smart money will be buying here (and I dare them not to).

There is an analogy to 1987 market when Reagan cut taxes (in 1986) and it propelled the market to all time high after that well into 1987 so we may expect Trump’s tax cut to have a similar effect. If so, we will see this market going higher to ATH one more time before it finally loses steam and possibly reverses into a bear market.

So, now, it is about surviving this turmoil without a big damage (bigger than your account can handle) and later we will see some nice relief and those who remain standing will see nice profits. But, be aware, we are most likely in a final stage of this bull market.

 
As of now, my IRA account lost over $14,000 dollars of paper losses. I didn’t close any of my positions for a loss. I rolled my trades down as much as possible. And i am closing my trades for a profit or they expire worthless. And I fight to keep those trades up and floating. And once this selling is over, and it will be over, the account will once again return up to its original value (provided I will not have to close the trades for a loss).

Stay safe, stay calm no matter how difficult it may be or seem to you. This selling is temporary and it will not last forever.




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Posted by Martin February 04, 2018
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Weekly Results – Feb 03, 2018


Weekly Results
 

With one of the largest selloff in recent few years our Net liquidation values (Net-Liq) got obviously a hit. Great gains (on paper) turned down in a day. But it happened only due to a spike in volatility. As of now many of our trades are still in good shape thanks to trading our 16 delta options. Yes the stocks dropped but many are still above the strike and if the market settles down next week, those trades will be great and many probably close for a profit. There are only about two or three trades which will need attention.
 

However, on the “slump day” we could trade frequently to the downside and we were selling many credit call spreads on SPX bringing in nice profits as the market continued lower. You can review those trades on our Facebook Page.
 

What to do next?
 

I recommend staying cautious and don’t be aggressively bearish nor bullish. We need to see what this market wants to do next. I will be most likely staying aside unless I see a great opportunity and just keep managing the existing trades. I may enter a few short term trades on SPX but I cannot say as of now. I do not think this selling was a beginning of a bear market as there is a lack of catalyst to it, so this may be just a correction or a bit deeper dip.
 




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Posted by Mark Pokorny February 02, 2018
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Five “Bad” Home Investments That Are Actually Good

Five "Bad" Home Investments That Are Actually Good

As a homeowner, have you ever made an investment or upgrade to your property that others seem to question? Your home is your castle to do with what you want, but in making the right upgrades and investment choices for your home, you won’t just enjoy short-term benefits. You’ll be adding to the resale value of your home as well. Some of these upgrade choices that can increase home worth aren’t immediately obvious. Some may even seem counterintuitive. Read on to learn how to pick investments that everyone considers a winner.

 

 · Have Your Home’s Interior Professionally Painted

 

Yes, it’s a good deal cheaper to buy the supplies and paint those rooms yourself, but despite those hardware store commercials that make DIY painting look fun and effortless, most efforts look fairly amateur. And even if rooms are painted in neutral colors, potential buyers can be turned off by the appearance of a home in general by badly painted rooms. Other advantages of working with professional painters include speed, avoiding damage, and getting guidance on paint choices that are easy to maintain and durable.

 

 · Professional Landscaping Services

 

No, you’re not lazy in seeking the services of a professional landscaping company. Regular attention from the pros means a healthy yard that discourages invasions from undesirable plants and prevents erosion. The assistance of landscapers means that planted trees and newly established gardens are more likely to survive and flourish, providing an attractive outdoor eyeful to prospective buyers. It’s a good start to help your home for years to come.

 

 · Installing A Home Security System

 

If you live in a quiet and crime-free neighborhood, there may not seem to be a practical need to install a home security system. But unfortunately, these neighborhoods are very popular with thieves. And in addition to deterring or catching burglars, home security systems have features that detect and report fires as well as summon emergency services for impaired members of the household in an emergency. Some even have added head sensing smoke detectors that can alert you before a fire starts.

 

 · Simple Upgrades

 

If you’re planning to invest in remodeling in order to sell your home, you might as well go big, right? Actually, a 2015 study conducted by Remodeling Magazine revealed that prospective buyers found smaller upgrades more attractive than large ones. So before installing that granite kitchen island, perhaps consider simply repainting those kitchen cabinets instead.

 

 · Professionally Refinished Floors

 

Wall to wall carpeting is so 1980s. And if refinishing floors wasn’t easy, why do those stores rent sanders? But it should be noted that work done with this equipment by DIYers has resulted in everything from badly uneven surfaces to house fires. Not only do professionally done floors look fabulous, they guarantee floor preservation for decades, not to mention protecting the rest of the house.

 

“Bad” home investments are ones that threaten lives or property. They are ones that drain bank accounts without offering returns or pleasure. Otherwise, well-educated homeowners should be willing to boldly explore a variety of investment options for their property.




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Posted by Martin January 30, 2018
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Trade safe and preserve capital


This was an ugly day today. But honestly this is good for the health of this bull market as we were pretty much in a parabolic move and correction is needed. It would be nice and healthy to retreat all the way down to 2700.

 
SPX
 

Sometimes people ask me why I am selling 16 delta puts (or calls in that matter) and not higher delta and collect more premium.

Well, today’s market price action is a perfect answer to that question. In A bull market with a lot of complacency it may pay off to go closer to the fire and collect more premium but in a normal and volatile market, it can burn you alive.

1% or more drops are nothing unusual (recently see 2015 market behavior). If I was selling delta 30 puts, today I would be toasted already while my 16 delta trades are still OK. They are not anything I would be dancing of happiness about but they are still in good shape.

Just a year ago I myself was chasing premiums too. I was trading options against stocks which offered great premiums and I was pretty much at the money ATM all the time. It wasn’t unusual for me to collect $400 per contract or more. I made tons of money. Until one day, I had to give it all up.

I forgot one thing when trading – safety.

You trade to make money, but it is not the goal. The goal is to preserve capital, save the money and not lose them by reckless trading. Remember Buffett? He says – “Never lose money, and second rule, never forget the first rule.” Why should options trading be any different?

If you remember the first rule and preserve your capital when trading, the money will come. And once they come, preserve them.

Chasing premium is like chasing yield. I once did the same mistake as a dividend investor and bought stocks which were paying great yields. Until one day they cut the dividend and I got nothing and lost money on a stock which dropped. High premiums are not necessarily safe as well as high dividend yield.

Stay safe and preserve capital!!




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Posted by Martin January 28, 2018
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Are you a trader or loser? Check for yourself!


I noticed many people searching for a holy grail of trading (or investing) and many fail. I was one of them a few years ago too. In fact, I was a loser even a year ago! And loser not by having losing or winning trades but a loser of how I was approaching the market.

Just recently, I was browsing Amazon (Nasdaq: AMZN) bookstore to see what audible books abut trading I can purchase to listen to when traveling and one thing got my attention about one book: users’ comments.

I always read what other have to say, but this comment literally hit me:

“I’ve read tons of books on trading. There is nothing in this book… no insider secrets, no real strategies, just very, very basic info…“

Here is the point: There is no secret, no wonder strategies, no miraculous ways to become suddenly rich, no wonder oscillators, studies, predictions, insider secrets, or anything which will turn your unsuccessful trading into successful money making machine! Sorry I had to break your day.

 

 · Say Hello to a Loser

 

Hello Loser How do you tell that you are predestined to lose? Look at the list of trait of an unsuccessful trader or investor. If you find a single statement listed below that you personally do or think about then you need to work on your state of mind and break the bad habits. You must work on attaining the right mindset of a trader.

It is easy said than done because we are humans and we have emotions. And we also have certain beliefs and habits. And beliefs and habits are the hardest to change.

If you have any of the habits you are predestining yourself to lose and your trading will never be successful. I can say this with a 100% certainty although you may be successful now as a novice investor or trader. I have seen this happening with recent cryptocurrency mania where people who started investing into Bitcoin six months ago and considered themselves trading gurus. They started writing books on how to invest into Bitcoin and become millionaires. When other warned them that the markets do not work the way they think and the way the Bitcoin acted these people acted angrily or laughing at you. Today, I want to see what those who bought Bitcoin at $19,000 dollars per coin are doing and whether they are still laughing.

At some point a beginner’s luck will be replaced with a sober reality and not so rosy trading days and that will be the time where you can lose all your money. I was myself very successful but I also wiped out my account three times. The first time, when the beginner’s luck ended, the second time when I stubbornly believed I could manage my trades and fight the market. But trading and investing is about your mind! Only your mind. It is a psychology stuff. no secrets, no luck, no skills, no extraordinary knowledge. All you need is basic info of how options work, have a few simple but solid rules about trading and money management (remember Buffett’s rules – rule #1 don’t lose money, rule #2 don’t forget the rule #1) and execute them. It is psychology first, the rest is just mechanics.
 

You are a loser if you do the following:
 

  • Constantly looking for new strategies and secret oscillators.
  • Trying to predict the market next move.
  • Asking people what they think about a certain stock, market, future.
  • Not having a trading / investing plan.
  • Not having a money management in place.
  • Asking others to help you with a losing trade.
  • Trading impulsively or under a sudden pressure caused by a fear of lost opportunity or losing trade.
  • Panicking when the market goes against you.
  • Being overly excited when the market goes in your favor.
  • Adding to a losing trade.
  • Closing winning trades too early.
  • Blaming FED, market makers, big investors, corporations, high frequency traders, company management, or day traders for rigging and manipulating the market.
  • Blaming stocks, market, other traders, company owners for your losing positions.
  • Believing that you do not have enough knowledge to trade successfully.
  • Believing that you need to have enough information to make a proper stock analysis and if a trade fails you blame the analysis.
  • Not knowing your risk in a trade, possible outcomes of every trade an having no plan for those outcomes.
  • The more you think you need to know and learn about the market the more successful you will be.
  • Set your mind on a market or stock behavior and trend unable to change direction although you have a clear signal that the stock has reversed.
  • Ignoring or not recognizing what the market does and tells you and failing to act upon it but rather fighting the market upon your trade conviction.
  • You start feeling like the market, stocks, other traders, investors, market makers are always against you personally and their sole goal is to take your money.
  • After suffering significant loses you hesitate putting on a new trade or invest again.
  • Trading successfully requires luck, a lot of money, and special knowledge which others do not posses.
  • Constantly feeling that you must trade all the time and over trade your account.
  • Changing your attitude based on the market moves – when the trade goes in your favor you feel happy when it goes against you you are depressed.
  • You have or had sleepless nights worrying about your money
  • Not having your trading account separated (physically and mentally) from your other accounts/money/living expenses. Losing money gets you under a panic attack.
  • You feel an urge to have a perfect trade before you place it, perfect analysis, and perfect market conditions.
  • Placing a trade and then looking for posts, articles, and opinions on the website to confirm your trade decisions and views.
  • Looking for reasons and wanting to know the “why” or “what’s going on” about a stock you trade.
     

The list goes on and on. But these are traits I personally suffered from myself before I realized that they many of my beliefs were all false and deceiving me to become a loser trader.

 

 · Say Hello to a Winner

 

Hello Winner To become a winner is a hard work. Trading itself is simple and easy, but being a winner is hard. And that’s what makes trading hard because you are fighting the biggest enemy you ever had – you!

Once you realize that those traits are your enemy along with yourself due to believing to them you will get to a path of becoming a successful trader. And it takes time. I mentioned above that it is very hard to change people’s beliefs and habits. It really is very hard thing to do. You can see this in other people, right? How hard was it to convince your coworker or your friend, or a family member about something you argued about that you knew for 500% that they were wrong? And imagine that they had the same 500% conviction that you were wrong.

The same goes with the market and our trading. We have our own beliefs, views about a market or stock, and our own convictions and we refuse to give them up. We search for more information everywhere to try to find on “what’s going on”.

It doesn’t work that way and it never will. To be a successful trade you must give up those believes and approach the market like a robot.
 

To trade, you do not need:
 

Analysis
Any analysis is about anything what already happened in the past and it may have absolutely no relation to future nor predicting it. It is OK to investigate and see if the company makes money or it is all bogus, whether it pays dividends out of its cash flow or earnings or borrowing, try to assess whether a stock is undervalued or overvalued and that is pretty much all you need. Everything else is a noise. Ballast. BS. It is all past. It all happened and it may never happen again. Do not put your trust and money in believing otherwise.

 
Knowing what’s going on
Nope, you don’t need to know this. Once you find out what’s going on it is usually too late anyway. You can read and search for reasons as amusement but do not trade based on it. some traders trade news but you are not fast enough to find out before everyone else.

 
Others opinion
Run away from opinions of others. Their are biased towards their beliefs and not yours. They are bias towards their strategies and not yours. You can see this on Stocktwits all the time when a day trader fiercely argues about a stock with a position trader both completely ignoring a time frame they both trade in. One is looking at the next ten minutes, the other at the next 10 years.

 
Secret insight or magical oscillator
There is none. Stop wasting your time searching for one.

 
What you definitely need:

 
Trading strategy
Yes you need a plan, a strategy. But there is no magical strategy, miraculous, secret way to riches. It doesn’t exist. But you need a plan to know what you will do. You do not need to know what the market or your stock will do next. You need to know what you will do next. Creating a plan is simple and you must keep it simple. When making a plan think on the following things – how to remove emotions and how to trade mechanically. The plan must look like a manual on assembling a furniture from IKEA. It must be like saying 1, 2, 3, 4, 5,… etc. If you know about programming a bit, then your plans must resemble a simple mathematical and or programming sentences “if then, and if else…”. If you need a guidance visit my Strategy page and read my strategy. It is all I need to know to execute my trades.

 
Money management
This should be a part of your trading strategy. A proper money management will tell you when to trade and how much to trade. There will be times when your trades will not go as planned and you will need to adjust a trade. And the worst thing which can happen to you is not having enough money to do the adjustment. What will you do when you need additional $2,000 dollars to make a trade adjustment and you do not have it because you opened too many trades? You will be closing at a loss.

 
Trading in your comfort zone
You shouldn’t be trading upon emotions so if you see that you do not feel comfortable for any reason such as you are afraid, confused, not sure about the trade, or any reason, do not trade. It can work the other way around too. If you are overly positive, feel extreme happiness about your trading, enthusiastic, and in euphoria of making money you should stay away too. Remember, making money in the market is a business, not your amusement park.
 

Work on your emotions and that you really do not need anything special to trade successfully. Learn the mechanics of options trading, how options make money or lose money, how you open a trade or close it and then set your rules and criteria to trade. The do it. First, trade in a paper account to practice, then trade small trades one at a time to gain confidence and learn how to trade in a comfort zone.

I recommend you to read a good book Trading in the Zone. It is not an easy read but it will help you to attain a proper mind set of a trader. Trust me. It helped me tremendously.
 




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Posted by Martin January 27, 2018
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Weekly Results – Jan 27, 2018


Weekly Results

We decided to eliminate some old and bad trades this week. Trades which were hurting our trading account, with no end on horizon, blocking our cash for trading. We rolled the trades since 2016 and rolled them all the way until 2020. Then, when those trades continued devastating the account we decided to give up and close the trades. There are still a few trades – skeletons in a wardrobe but they seem to be manageable for now. However, this move helped to release cash for trading.




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Posted by Martin January 19, 2018
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Weekly Results – Jan 19, 2018


Weekly Results




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Posted by Martin January 19, 2018
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Consumers are confident and spening; expect the market going higher





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